H2 Green Steel is a steel company with a difference. While it was launched as a green steel company, H2 Green Steel sees hydrogen as being the key enabler and equally as important as steel, says Hydrogen Business Unit Project Manager Carl Johan Mix. Hydrogen is what will allow the company to meet its decarbonisation goals.
Since the company was founded in 2020 by Vargas Holding, there have been notable changes in the steel industry regarding decarbonisation. Many European players have moved up their targets by 10 or even 15 years. “We see tangible changes in the industry, and that’s excellent news,” Mix says.
Vargas Holding was formed in 2014 to enable transition to a sustainable society and decarbonised industries. The first company it launched, in 2014, was Polarium, a battery backup company for the telecom industry.
As Polarium grew, it became increasingly clear to management that sourcing all the battery cells from Asia was an unsustainable business model for a company headquartered in Sweden.
Vargas Holding contacted Peter Carlsson, former Head of Supply Chain at Tesla Motors, to assess the feasibility of building a greenfield giga-scale lithium-ion battery factory in Europe. And Northvolt was born. Northvolt, situated in the north of Sweden, is now producing its own battery cells and completed its first commercial sale in April 2022.
Volkswagen is one of Northvolt’s principal shareholders and the idea to venture into green steel originated from an aspiration to completely decarbonise the car industry. Steel production accounts for up to 9% of the world’s CO2 emissions, and 14% of Sweden’s.
“The objective became to change the industry urgently, disrupt the technology, and eliminate CO2 emissions,” Mix says. “H2 Green Steel is committed to moving the needle towards a more sustainable future and progressively pushing everyone else with us.”
“The primary goal is not to become the biggest steel producer in Europe but to create pressure to accelerate the transition across the industry.”
The critical component for this transition is green hydrogen. In decarbonising the steel industry, the primary use of green hydrogen is to fuel direct reduced iron (DRI) processes.
In traditional steel making, iron is reduced by heating iron ore in a blast furnace with coal to separate oxygen from the ore, which produces significant CO2 emissions. In green hydrogen steel production, hydrogen reacts similarly with iron but emits H2O—water—as a by-product instead.
“We are primarily targeting the step that emits the most CO2 today,” Mix says.
An existing project, the HYBRIT pilot by LKAB, SSAB, and Vattenfall, provided an indication that the technology worked, and H2 Green Steel was created in 2020. The company started with three employees, testing the feasibility of a large-scale project and ensuring it was a bankable model.
Today the company is building its first factory in Boden, a town in the very North of Sweden and one of Europe’s lowest-energy-cost areas. Green electricity is one of Boden’s biggest enablers and makes up about 90% of the energy mix.
Moreover, the cost of electricity is at a level that helps make DRI-produced steel competitive. The site will host one of the biggest green hydrogen electrolysers, at 800MW, a DRI tower, and a downstream steel mill.
Through this project, H2 Green Steel has managed to raise awareness among regulators and educate the community. The idea is also meant to give the steel industry a new and modern face, with a green, clean, quiet, and hyper-automated factory.
The company’s initial hypothesis was that this endeavour would target car manufacturers exclusively because the auto industry was willing to pay a green premium. As the decarbonisation effort has spread worldwide, H2 Green Steel has widened its scope.
H2 Green Steel currently has a partnership with LTU, the Luleå University of Technology in northern Sweden, to research hydrogen. It has also built industry partnerships with companies including Ovako, another steel producer in Sweden.
Elsewhere, it has a partnership on the Iberian Peninsula with Iberdrola, one of the biggest energy providers in the world and a major utility in Spain and Portugal. The companies plan to build a 1GW electrolyser and DRI tower to enable green steel production.
That project is now in the final feasibility phase and slated for commissioning in 2026.
While H2 Green Steel is likely to remain a relatively small player in the 2-billion-tonne-a-year steel industry, it is growing fast. It is currently raising $4bn—one-third equity and two-thirds debt—to fund the first two phases of its business plan and enable future expansion.
The company also announced production targets last Spring of 2.5 million tonnes in a first phase, 1.5 million tonnes of which has already been pre-sold, and 5 million tonnes in a second phase. The team is also expected to grow considerably, reaching 1,500 employees by 2025.
Mix says the focus now is on the implementation of ongoing projects. However, in the long term the company aspires to become increasingly hydrogen focused— even one of the world’s most knowledgeable players.
Future strategies will remain around hydrogen connected to industrial offtake and large-scale applications. “Whether that’s the steel industry, e-fuels, or green ammonia, the focus is to take green hydrogen to places where it makes sense,” Mix says.
“The idea is to start in geographies that already have access to affordable green energy prices and keep growing as the whole world progressively transitions to renewable energies.
“Our model involves owning and operating our own green hydrogen factory, optimising cost and efficiency through digitisation, and eventually using these capabilities to build and operate for other players.”
H2 Green Steel will be exploring this approach through the Iberdrola partnership. The companies have purposefully oversized green hydrogen electrolyser capacity to use the excess to supply other players with green hydrogen.
The goal is to reproduce the DRI tower-green hydrogen model and progressively become a green hydrogen supplier to the world.