Italian green hydrogen hub secures €370m in subsidies to decarbonise industry — just as major steel offtaker collapses
Puglia ‘valley’ envisages two plants supplying industrial complex in Taranto, where Acciaierie d’Italia has gone into administration
A green hydrogen hub in southern Italy is in line for €370m ($401m) in subsidies from the Italian government following state-aid approval from the EU last week, but plans to supply a major green-steel hub in the area look to be in jeopardy following the financial collapse of the public-private steel partnership behind it.
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The two electrolysis projects would be located respectively in Brindisi, on the eastern coast of the Puglia region (also recognisable as the “heel” of Italy’s boot shape), and in Taranto, on the opposite side, both powered by 260MW of solar PV capacity.
Saipem, formerly the oilfield services division of Italian oil giant Eni, would operate the 60MW Brindisi plant, which would connect to Taranto via a new hydrogen pipeline built by gas distributor Snam.
It is not clear exactly which of the three partners with equity stakes in the special purpose company behind the Puglia Green Hydrogen Valley — Saipem (10%), energy company Edison (45%), asset manager Sosteneo (40%) or DRI D’Italia (5%) — would be responsible for developing the second green hydrogen plant in Taranto.
ADI is the result of a public-private partnership between Luxembourg-based ArcelorMittal and state-owned Invitalia, which also owns Puglia Green Hydrogen Valley shareholder DRI D’Italia.
Invitalia formed DRI D’Italia last year with the intention of building a DRI facility at ADI’s Taranto plant.
Since then, ADI has fallen into financial difficulties, and discussions between ArcelorMittal and Invitalia to shore up the balance sheet have broken down.
As a result, Invitalia requested that the Italian government place ADI in “extraordinary administration” — a measure ArcelorMittal is disputing — with the government effectively taking over ownership of the plant while rescue talks continue.
Hydrogen in direct-reduced iron production
Green steel producers are planning to use green hydrogen to decarbonise their steel mills, which together account for 7-8% of all global carbon emissions.
Traditionally, iron has been extracted from iron-oxide ore by burning carbon-rich coking coal in a blast furnace, where the fossil fuel produces high-temperature heat while simultaneously removing oxygen from the ore by converting it to carbon dioxide.
This highly polluting method can be replaced with green hydrogen in a direct-reduced iron (DRI) facility, where the H2 reacts with the oxygen to produce steam (H2O) rather than carbon dioxide.
In fact, hydrogen-based DRI is currently the only proven pathway of decarbonising steel production, when paired with an electric arc furnace powered by renewable energy.
Policymakers want producers to eliminate emissions from the sector by using green-hydrogen DRI that is then turned into green steel using renewables-powered electric arc furnaces, but with green H2 costing in excess of €5/kg in Europe, it would result in significantly more expensive steel that will require offtakers to pay a premium.