Octopus Energy and Salzgitter Confirm 122MWp Solar PPA for Green Steel Production

Source: www.gulfoilandgas.com 2/21/2024, Location: Europe

Salzgitter Flachstahl GmbH (Salzgitter), a subsidiary of Salzgitter AG, one of Germany’s leading steel and technology groups, and Octopus Energy’s generation arm have signed a long-term Power Purchase Agreement (PPA) to enable the future production of green steel.

The PPA, closed with the support of the advisory team at Pexapark, will see Octopus - which manages a €7bn portfolio of green energy projects - supply Salzgitter with 126,000 MWh of clean electricity generated at the Schiebsdorf solar farm in Brandenburg, Germany, for a period of 10 years.

Starting when the project is commissioned later this year, it will secure more clean electricity for Salzgitter Flachstahl, hedging against rising electricity costs and underpinning its objective of producing green steel. Through its Salzgitter Low CO2 Steelmaking program - SALCOS®, the company intends to use green hydrogen, electrolysed using renewable energy, to achieve a 95% reduction in carbon emissions from conventional steel production processes.

Ralph Schaper, Head of Salzgitter’s Energy Economy Department said: “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. Octopus, with its extensive track record in European renewable energy, is an ideal long-term partner for us.”

The deal comes as Octopus supercharges its green energy activity in Germany, as it plans to channel more than €1 billion into Germany’s clean energy infrastructure by 2027.

Octopus acquired the Schiebsdorf solar farm last month on behalf of the Sky fund (ORI SCSp) it manages. Currently under construction and due to enter operation later this year, it is the largest solar farm in the firm’s growing renewable energy portfolio in Germany and across the globe.

Alex Brierley, co-head of Octopus Energy Generation’s fund management business, said: “This 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.”

Pexapark’s advisory team has hailed the efficiency with which the PPA was negotiated between Octopus and Salzgitter, with the deal concluded in around half the time of a typical PPA of this size and duration. This pointed to the strong commitment from all the involved parties throughout the process.

Ann Cocquyt, Regional Lead for PPA Transactions – Central Western Europe at Pexapark, added: “We are immensely proud of the combined team for closing this PPA in a short timeframe, helping Octopus hit a key project milestone for Schiebsdorf and adding another significant source of clean power for Salzgitter AG. Throughout the negotiations, it was clear that both parties were pulling in the same direction – leading to an efficient, pragmatic and cooperative process.”

The German renewable energy PPA market is going from strength to strength – with solar power in particular rising in prominence. According to Pexapark’s European PPA Market Outlook 2024 report, 3.73GW of PPAs were signed in Germany in 2023, of which 1.77GW (18 deals) were for solar PV projects.

In 2024, Germany is expected to surpass Spain as the top market for PPAs in Europe, driven in part by the sophistication of large industrial energy buyers such as Salzgitter making strides to decarbonise their operations.


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