Iberdrola, H2 Green Steel partner on $ 2.6 billion sustainable hydrogen production plan

Iberdrol Tower in Bilbao, Spain.

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Spanish energy company Iberdrola and Sweden’s H2 Green Steel will collaborate and develop a large green hydrogen facility, another example of how companies are showing interest in a sector that has been talked about so much.

In an announcement on Thursday, the companies said they would build a 1-gigawatt electrolysis plant to produce clean hydrogen as part of a € 2.3 billion ($ 2.6 billion) project. Funding will come from a combination of equity capital, green project funding, and government funding.

Hydrogen, which has a wide range of uses and can be used in a wide variety of industries, can be produced in a variety of ways.

One method involves the use of electrolysis, separating water into oxygen and hydrogen using an electric current. If the electricity used in this process comes from renewable sources like wind or sun, some call it green or renewable hydrogen.

The idea is that green hydrogen from Iberdrola’s development and H2 Green Steel will be used to produce approximately 2 million tonnes of Direct Reduced Iron, or DRI, each year, which can then be used to make steel.

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The scale of the project is 1 GW: according to the International Energy Agency, the global installed capacity of electrolysers in 2020 was only 0.3 GW.

The Iberdrola and H2 Green Steel development will be located in the Iberian Peninsula – no specific location has been announced yet – and production is slated to begin in 2025 or 2026.

The cell itself will be jointly owned by the two companies. Iberdrola will provide the site with renewable energy and H2 Green Steel will own and operate the direct reduction iron facility, including any downstream steelmaking processes.

The companies said they will also “explore the possibility of jointly locating the Green Steel plant, capable of producing 2.5-5 million tonnes of Green flat products per year, together with the plant.”

In a statement, Aitor Moso, Iberdrola’s commercial director for liberalization, said green hydrogen will become “an important technology in decarbonizing heavy industrial processes such as steelmaking.”

Projects such as the one planned with H2 Green Steel “will help accelerate the commercialization of larger and more sophisticated pots by making green hydrogen more competitive,” Moso said.

Reducing the environmental impact of intensive production processes is a major challenge.

“Among heavy industry, the iron and steel sector is the first in CO2 emissions and second in energy consumption,” says the IEA, adding that the iron and steel sector is responsible for 2.6 gigatons of carbon dioxide emissions per year. …

“The steel sector is currently the largest industrial consumer of coal, providing about 75% of its energy needs,” the report said.

Hydrogen hopes, but obstacles too

Over the past few years, a number of large enterprises have become involved in projects related to environmentally friendly hydrogen.

For example, in November, Fortescue Future Industries, headquartered in Australia, stated that after signing a memorandum of understanding with construction equipment firms JCB and Ryze Hydrogen, it will become the largest supplier of green hydrogen to the UK.

In the same month, it was announced that Norsk Hydro and oil giant Shell would explore the potential of joint projects to produce clean hydrogen.

While the potential of green hydrogen is admirable, there are obstacles to overcome.

In October, the CEO of Siemens Energy spoke about the challenges he believes the sector is facing, telling CNBC that there is no “business case” for this at the moment.

In comments made during the CNBC Forum on Sustainable Futures, Christian Bruch highlighted several areas that need to be addressed in order for green hydrogen to gain traction.

“We need to define the boundary conditions that will make this technology and these cases commercially viable,” Bruch told CNBC’s Steve Sedgwick. “And we obviously need an environment with cheap electricity and, therefore, abundant renewable energy sources available for this.” He argued that this had not happened yet.

A few months earlier, in July, Enel CEO Francesco Starace said that “there is no competition for capital between hydrogen and renewables.”

“Today hydrogen is a niche, and it is a niche that needs to develop into a commercial standard and … a large industry with competitive prices,” Starace said, making it clear that such a shift is likely to take 10 years.

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