“Pragmatic regulation, not deliberate competitive disadvantages”
March 03, 2026 | Reading time: 11 minutes
Lennart Schümann, an energy strategy and procurement expert at Salzgitter AG, explains what the Group needs on the road to green steelmaking – and how and what policymakers must deliver.
Mr. Schümann, a 95 percent reduction in CO₂ emissions by the mid-2030s: How is that possible?
We’re gradually substituting the energy vectors we use – moving from coal to renewable electricity and green hydrogen, with natural gas as a bridging technology. Instead of the conventional blast furnace route, which involves smelting iron ore with coke, we’ll process iron ore in a hydrogen-fired direct reduction plant in future, avoiding CO2 production.
Where will these new energy vectors come from?
That’s the challenge we face, especially when it comes to hydrogen. We’re likely to need up to 150,000 tons of hydrogen per year for the direct reduction plant. Our 100 MW electrolysis plant is one of the largest in Germany and will supply around 9,000 tons. We’ll have to procure the rest externally – and, for that, we’ll need the hydrogen core network.
The first elements of the network were commissioned in 2025. Salzgitter AG is scheduled to be connected in 2027. Is that realistic?
We expect to have a functional connection in 2029. The first physical connection to the hydrogen connection will be established in 2027, but it won’t lead anywhere to begin with because there won’t be a consistent connection to H2 production plants and feed-in points. Construction of the core network is an incremental process and a complete connection to hydrogen production sites in the north will only be established at a later time. So, to begin with, the network connection won’t link us to external electrolysis plants or import terminals, and won’t assist our hydrogen procurement activities. In any case, it’s also important to draw a distinction between infrastructure – such as the pipeline network – and hydrogen procurement and generation more broadly.
Two realistic options exist to source hydrogen externally.
1. Imports from other countries, via pipeline or by ship.
2. Domestic generation in electrolysis plants, such as those in Wilhelmshaven, Lingen and Emden.
Either way, constructing all of the hydrogen infrastructure presents us with a classic chicken-and-egg dilemma.
What do you mean by that?
We’re going around in circles, in a way. Electrolysis plant operators need two to three years for construction. That means they need to start swiftly to expand their capacity. To do that, they need commitments from industry. Otherwise, they won’t invest, because there’s a risk that their electrolysis plants will go unused. But then, in order to transport the hydrogen, we need the construction of the hydrogen core network to be dependable and, above all, to proceed on schedule so that the electrolysis plants can produce and supply hydrogen as soon as they’re operational.
And you can’t provide these guarantees?
We’re deep in contract negotiations with potential hydrogen suppliers. But, for a functional supply contract, however, we need the transport infrastructure to provide planning security and reliability. Electrolysis capacity won’t help us if the hydrogen is stuck where it is. Neither we nor the hydrogen production plant operators can bear these risks alone. This is where we need more assurances and support from government.
In light of these incalculables, some competitors have already decided to pull the plug. In mid-2025, ArcelorMittal canceled its hydrogen projects in Bremen and Eisenhüttenstadt – despite being awarded €1.3 billion in public funding. Is Salzgitter AG considering pulling out?
No, Salzgitter AG is pursuing its transformation. The implementation of SALCOS® Stage 1 is technology-driven, financially secured and clearly prioritized. We’re aware of the risks – uncertain hydrogen availability, high energy prices and unclear framework conditions. But this clearly shows that we need a regulatory and policy framework that attaches value to sustainable products. And, above all, we need political actors to provide state assurances for infrastructural risks, planning security in terms of energy price compensation and grid charges for electrolysis plants beyond 2029/2030, along with a clear commitment to sustainably produced goods.
Electricity price compensation
The electricity price compensation (Strompreiskompensation – SPK) mechanism will relieve pressure on manufacturing – and especially on energy-intensive industry – with regard to the indirect power production costs arising through the EU Emissions Trading Scheme. At present, the mechanism supports roughly 340 particularly power-intensive companies that compete internationally, helping to offset the competitive disadvantages created by electricity prices.
From entrepreneurial risks on the one hand to state support on the other, what are the guiding lights in your energy procurement decisions?
We take our lead from the energy trilemma: affordability, supply security and sustainability. These three objectives are sometimes conflicting, so we’re constantly forced to balance them. To give an example, sustainability has faded into the background during the energy crisis because the focus has been making sure energy is actually available and affordable. In our SALCOS® program, we’re consciously prioritizing sustainability – but we can’t afford to neglect the two other pillars, either. We want to complete our transformation, and we will – but is has to be responsible and economically viable.
How exactly do we achieve that – with regard to green electricity, for example?
We aim to achieve 100% green electricity throughout the Group by 2030. That’s why we’re concluding long-term power purchase agreements (PPAs) with renewable energy generators. We’re already ranking as one of the world’s largest buyers through PPAs and the number one among steel producers. We intentionally and specifically conclude agreements with different partners to spread the risk. This is supply security in practice, in response to the energy trilemma.
Turning to affordability, is it even possible for green steel from Germany to be competitive under current conditions and with energy prices as high as they are today?
That’s the core challenge. We have tremendously high energy prices in Germany – both in terms of electricity production costs and the grid charges. What’s more, there’s strong pressure from cheap Asian steel imports. US tariff policy is further exacerbating the situation. And, in Europe, we’re grappling with strict regulations: the RFNBO criteria, for example – EU requirements for green hydrogen production – specify that, as from 2028, the electricity used in hydrogen production must come from newly constructed renewable generation facilities and must temporally align with power generation from 2030. This pushes up the costs of green hydrogen produced in Germany and elsewhere in Europe.
RFNBO criteria
The RFNBO criteria define the conditions under which hydrogen and other synthetic fuels are considered “renewable fuels of non-biological origin” and therefore contribute to EU targets. Essentially, these criteria require an entirely new base of power production, demand high greenhouse gas reductions compared to fossil alternatives (at least 70%), and set out requirements on additionality and temporal and spatial correlation between renewable energy generation and fuel production.
Surely these enormous costs for steel producers will mean huge price increases for consumers …
Much less than you’d think. Yes, the transformation is enormously cost-intensive for us – there’s high energy prices, expensive plant and new infrastructure. But steel only accounts for a fraction of the cost of finished products. For instance, a car made with green steel might be around 0.3% to 0.7% more expensive – which, for a mid-range model, is around the price of a decent set of floor mats. Alternatively, consider a washing machine: an appliance made using green steel will cost around €2 more. These scales of increase are negligible. And that’s precisely why it’s worth the effort: the additional cost to the end customer isn’t too high, but the climate impact is tremendous.
If everything goes to plan, what will your work look like by the mid-2030s?
The direct reduction plant will be up and running, we’ll be sourcing hydrogen from the core network and relying on 100% green electricity and producing low-carbon steel. This steel will be deployed to further expand green infrastructure – from pipelines and bridges through to wind turbines operating far out at sea.
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