Stegra isn’t the only Swedish steelmaker chasing Big Tech. Last year, the manufacturer SSAB signed an agreement with Amazon Web Services to supply hydrogen-based steel for one of Amazon’s three new data centers in Sweden. SSAB operates the Hybrit pilot plant in Luleå — the world’s first steelmaking facility to use hydrogen at any meaningful scale, though the Stegra project will be the first large-scale plant to use this approach once completed.
Microsoft’s agreement with Stegra arrives at a tenuous time for developers of green hydrogen.
More than a dozen hydrogen projects have been canceled, postponed, or scaled back in recent months owing to soaring production costs and waning demand for the low-carbon and highly expensive fuel, Reuters reported in late July. That includes ArcelorMittal’s hydrogen-based steelmaking initiative in Germany, which the company shelved in June, as well as U.S. green steel projects formerly planned in Ohio and Mississippi.
Stegra, for its part, is seeking to raise additional cash to complete its flagship project in Boden, Sweden, after a government agency denied the company 165 million euros ($193 million) in previously approved grant funding. The Swedish Environmental Protection Agency reportedly objected to the fact that the steel mill will use some fossil gas during a heat-treatment process — though Stegra claims the project could still cut emissions by up to 95% compared to coal-based steelmaking.
Stegra has already secured 6.5 billion euros ($7.6 billion) from private investors for the project, which broke ground in 2022. The company is installing 740 megawatts’ worth of electrolyzers to convert electricity from the region’s hydropower plants and wind farms into hydrogen gas. The hydrogen will be used in the “direct reduction” process to convert iron ore into iron, which will then be transformed into steel using electric arc furnaces.
The sprawling facility, located just south of the Arctic Circle, is expected to produce 2.5 million metric tons of steel by 2028, before ramping up to make 5 million metric tons by 2030. Reunanen said that more than half of the steel produced during the first phase is already covered by offtake contracts with automakers like Mercedes-Benz, Porsche, and Scania, as well major companies including Cargill, Ikea, and now Microsoft.
The tech firm — which previously invested in Stegra through its $1 billion Climate Innovation Fund — is the first company to commit to buying environmental attribute certificates from a steel facility. Microsoft has struck similar deals to help drum up demand for lower-carbon versions of other industrial materials, including with cement startup Fortera and alternative-jet-fuel producers like World Energy.
RMI, a think tank focused on clean energy, said it helped advise Stegra and Microsoft on their deal, and both companies are part of an RMI initiative that’s working to design tools that track, validate, and account for certificates.
“Agreements like this one signal a wider demand pool for lower-carbon steel, expanding the offtake beyond conventional direct steel purchasers and into sectors where steel is a critical yet buried part of the supply chain,” said Claire Dougherty, a senior associate at RMI. She added that the deal “serves as a proof-of-concept for the role that [certificates] can play in getting first-of-a-kind, near-zero steel projects off the ground.”
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