RWE and ArcelorMittal weigh green steel production from gigascale wind-to-hydrogen

Partners plan massive build-out of green H2 projects for steel mills powered by North Sea wind, but raise red flag on Germany’s 'negative bidding' push

An ArcelorMittal furnace.Foto: ArcelorMittal

Rachel Parkes

Germany’s RWE and industrial giant ArcelorMittal have pledged to build offshore wind farms linked to hydrogen facilities to support decarbonised steel production, in a move that could advance a new collaborative approach designed to accelerate commercialisation of the green steel value chain.

The two firms intend to build a 70MW green hydrogen pilot project by 2026, with plans to expand to gigawatt scale if public funding is available, according to a memorandum of understanding signed by both. RWE and ArcelorMittal are now actively searching for sites to locate electrolysers to supply the steelmaker’s production facilities in Bremen in northern Germany and Eisenhüttenstadt on the Polish border.

Significantly, the pair are also exploring options to jointly bid for offshore wind farm sites in the North Sea, with a view to building and operating wind farms to supply power to ArcelorMittal’s industrial sites and support green hydrogen production for use in steelmaking. Both the power and hydrogen would be secured via long-term purchase agreements.

The deal would guarantee power offtake for the offshore wind project, potentially making financing cheaper and more accessible. It might also ease the hydrogen projects’ regulatory burden, as electrolysers with dedicated renewables capacity are less likely to fall foul of the EU’s stringent “additionality regulations”, as proposed in a delegated act last month.

Nevertheless, the pair raised a red flag over financing and price risk in Germany, warning that “negative bidding” – proposed by the German government as part of on-going reform to the country’s WindSeeG (Wind Power at Sea act) – would limit access to financing for offshore wind and make it prohibitively expensive.

Negative bidding allows the government to charge developers for the right to develop a project that is in demand. This regulatory framework is already in play in Denmark, where RWE is paying the Danish government €375m ($395m) to develop the Thor offshore wind farm.

“Competitive electricity prices are absolutely necessary, if energy intensive industries such as the steel industry, which operates in a competitive global environment, are to have a future in Germany,” the two companies said in a joint statement.

A recent study into green steel by consultancy McKinsey found that green steel made with hydrogen and other low-carbon technology would command a global average price premium of around 10%.

But the deal would essentially shunt coal out of ArcelorMittal’s steel supply chain, allowing it to move from coal-intensive blast furnaces to electric arc furnaces and direct reduction plants – a game changer for the Luxembourg-based firm’s targets to reduce its European emissions by 35% by 2030. The company also plans to use H₂ to gradually phase out the use of natural gas in its facilities, with implications for the EU’s efforts to reduce its dependence on Russian gas.

There is also an opportunity for RWE to decarbonise its own supply chain by using ArcelorMittal’s low-emissions steel in its renewable electricity plants, supporting its ambition to go climate neutral by 2040.

RWE and ArcelorMittal weigh green steel production from gigascale wind-to-hydrogen

Green steel moves step closer to commercialisation with ‘first of its kind’ hydrogen cavern storage

Cannibalising renewables? | British Steel eyes use of green hydrogen from existing offshore wind farm