Salzgitter and Octopus Energy sign solar PPA for green steel production

German steel manufacturer Salzgitter Flachstahl has signed a 10-year power purchase agreement with Octopus Energy Generation.

Under the agreement, Salzgitter Flachstahl, a subsidiary of Salzgitter AG, one of Germany’s leading steel and technology groups, is to be supplied with 126,000MWh of clean energy per year generated from Octopus’ Schiebsdorf solar farm in Brandenburg.

Starting when the project is commissioned later this year, it will both secure more clean electricity and provide a hedge against rising electricity costs for Salzgitter Flachstahl, while underpinning its objective of producing green steel.

Through its SAlzgitter Low CO2-Steelmaking (SALCOS) initiative, which was launched in 2018, the company intends to use green hydrogen produced with renewable energy in its stell production to achieve a 95% reduction in carbon emissions from the conventional production processes.

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“As we work towards our strategic emissions reduction goal, this latest PPA adds another significant source of clean electricity to power our operations, create green hydrogen and ultimately produce greener steel for our customers,” says Ralph Schaper, Head of Salzgitter’s Energy Economy Department.

“Octopus, with its extensive track record in European renewable energy, is an ideal long-term partner for us.”

The deal, which was closed with support from Pexapark, marks the start of an uptick of investment in Germany by Octopus, planned at over €1 billion ($1.1 billlion) by 2027.

Octopus acquired the Schiebsdorf solar farm, the largest in its growing renewable portfolio, last month on behalf of the Sky fund (ORI SCSp) it manages.

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Alex Brierley, co-head of Octopus Energy Generation’s fund management business, said the partnership with Salzgitter is a giant leap towards decarbonising heavy industry and propelling Germany’s clean energy transition.

“Germany’s shift to net zero has many huge opportunities to get involved, and we’re geared up to announce more deals very soon.”

Germany’s renewable energy PPA market is growing in strength. In 2024, Germany is expected to surpass Spain as the top market for PPAs in Europe, driven in part by industrial decarbonisation efforts.