Vattenfall and Salzgitter sign agreement: Offshore wind for green steel

On August 29, 2024, Salzgitter AG announced a new partnership between the energy company Vattenfall and the steel and technology company Salzgitter AG, aimed at advancing the decarbonization of industrial production processes. This new Power Purchase Agreement (PPA) stipulates that, starting in 2028, fossil-free electricity from the offshore wind farm Nordlicht 1 will be supplied for steel production.

Martijn Hagens, a member of Vattenfall's executive board and head of the Markets division, stated, "This power partnership with Salzgitter AG underscores Vattenfall's long-term strategy to enable a fossil-free life not only for ourselves but also for our suppliers, partners, and customers." He added, "Our goal is to decarbonize entire value chains with our fossil-free electricity, particularly supporting the industry in its green transformation journey."

Gunnar Groebler, CEO of Salzgitter AG, commented, "Through our SALCOS® program, we are already in the midst of transforming steel production towards low-CO2 processes, positioning ourselves as a leader in the steel industry. Green steel requires green energy, and this agreement is a significant step in securing the energy needed for low-carbon production. We are pleased to have Vattenfall as a strong partner and look forward to our collaboration."

The agreement specifies that the Salzgitter Group will receive 75 megawatts of connection capacity from the Nordlicht 1 offshore wind farm over a period of 15 years. The Nordlicht 1 wind farm is currently being developed approximately 85 kilometers north of the island of Borkum and is expected to be completed and connected to the grid in 2028. The Salzgitter Group will then procure around 300 gigawatt-hours of electricity annually for steel production, which is equivalent to the annual electricity consumption of approximately 120,000 households.

"Fossil-free electricity from private supply contracts is highly valued by our customers because it offers competitive costs and guarantees that the electricity comes from renewable sources, with documentation of the type and location of the green power generation," Hagens explained. Vattenfall is constructing and developing the Nordlicht 1 offshore wind farm with 68 wind turbines and a total capacity of 980 megawatts in the German North Sea.

Vattenfall holds a 51 percent stake in Nordlicht 1, while BASF owns 49 percent. Vattenfall plans to use its share of future electricity generation to supply fossil-free electricity to customers in Germany.

Power partnerships provide renewable electricity producers and consumers with investment security, price guarantees, and risk diversification, while allowing for flexible contract terms. Observers anticipate an increasing demand for power purchase agreements between producers and industrial companies in the coming years. According to an analysis by the German Energy Agency (Dena), PPA volumes in Germany could rise to 192 terawatt-hours by 2030, covering a quarter of the country's total electricity demand. For steel production processes in Germany, a secure and competitive supply of clean energy plays a crucial role.

Source and Photo: Salzgitter