Germany’s hydrogen economy is moving from strategy papers toward industrial commitments, with EWE and Salzgitter Flachstahl GmbH signing a long-term agreement for the supply of 10,000 tons of green hydrogen annually from 2030.
The contract marks one of the first major commercial arrangements linking renewable hydrogen production with large-scale industrial demand, a critical step in addressing one of the sector’s biggest challenges: creating demand certainty before the market is fully mature.
The agreement connects EWE’s planned 320 MW electrolyzer project in Emden with Salzgitter AG’s SALCOS® (Salzgitter Low CO2 Steelmaking) transformation program. The hydrogen will be transported through Germany’s planned hydrogen core network and represents around 6.5% of Salzgitter’s expected hydrogen demand for its low-carbon steel pathway.
While the deal signals progress, it also highlights the economic and regulatory barriers that continue to slow hydrogen deployment. Both companies emphasized that large-scale projects will require predictable electricity costs, workable certification rules, and investment conditions that allow green hydrogen to compete with fossil-based alternatives.
The steel industry is among the sectors where hydrogen is considered essential for deep decarbonization because conventional production relies heavily on coal-based blast furnaces. Salzgitter’s SALCOS program aims to replace this process with direct reduction technology, where hydrogen can act as a reducing agent instead of coal and coke.
In the initial transition phase, Salzgitter estimates that using natural gas in a direct reduction plant can already reduce CO2 emissions by around 60% compared with traditional blast furnace production. However, achieving near climate-neutral steel production requires replacing natural gas with renewable hydrogen.
The company’s planned hydrogen demand under SALCOS could reach up to 150,000 tons annually. Alongside external supply agreements such as the EWE contract, Salzgitter is developing its own hydrogen production capacity through a 100 MW electrolyzer at its steelworks site, expected to contribute approximately 9,000 tons of hydrogen per year.
The scale difference between demand and current supply commitments illustrates the early stage of the hydrogen market. Industrial consumers require reliable volumes measured in tens or hundreds of thousands of tons, while producers are still developing first commercial-scale facilities.
For EWE, the agreement represents the first major purchase contract linked to its planned hydrogen production facility in Emden. The electrolyzer project forms part of the IPCEI-supported “Clean Hydrogen Coastline” initiative, which aims to establish interconnected hydrogen production, transport, and storage infrastructure in northwest Germany.
The initial supply volume will cover a significant portion of the first expansion phase of the Emden facility, while additional capacity is expected to support other industrial customers.
The structure of the agreement reflects a broader challenge facing the hydrogen industry: producers need long-term buyers to justify investment, while industrial users need supply commitments before converting their operations. Long-term contracts such as the EWE Salzgitter agreement are intended to reduce this uncertainty by creating early market signals.
However, these contracts remain dependent on whether production costs can be reduced enough to compete with conventional energy sources.
One of the most significant obstacles for renewable hydrogen projects in Europe is compliance with the EU’s Renewable Fuels of Non-Biological Origin (RFNBO) rules. These rules define when hydrogen can be classified as renewable, including requirements related to additional renewable electricity generation and the timing and location of electricity sourcing.
Industry representatives argue that current requirements could increase production costs by limiting operational flexibility for electrolyzers.
For hydrogen producers, electricity prices are among the largest cost drivers. Electrolyzers require substantial amounts of electricity, meaning competitiveness depends heavily on access to low-cost renewable power. If electricity procurement rules restrict operating hours or require costly additional renewable generation, hydrogen production costs may remain above fossil alternatives.
EWE and Salzgitter have called for adjustments to electricity sourcing requirements, including more flexible implementation timelines and practical rules that allow projects to scale beyond demonstration phases.
The agreement also reflects a wider strategic debate about Europe’s industrial future. Hydrogen is increasingly viewed not only as a climate tool but also as a way to reduce dependence on imported fossil fuels.
Germany’s hydrogen core network, which is planned to connect production sites, storage facilities, and industrial regions, is expected to play a key role in enabling this market. The network is intended to provide infrastructure for transporting hydrogen from regions with strong renewable energy potential to industrial consumers.
Lower Saxony is positioning itself as a central hub due to its combination of renewable energy resources, ports, industrial sites, and planned hydrogen infrastructure. The region is involved in multiple large-scale hydrogen projects supported through European and national funding mechanisms.
The federal government has allocated €925 million in support for Salzgitter’s industrial conversion and €267 million for EWE’s hydrogen production project in Emden, reflecting the level of public investment required to bridge the gap between current market conditions and commercial viability.
The EWE Salzgitter agreement demonstrates that parts of the hydrogen value chain are beginning to align, but it also exposes the fragility of the current market structure. A single supply contract cannot establish a competitive hydrogen economy; it requires multiple producers, buyers, infrastructure operators, and regulatory systems operating together.
The next phase will depend on whether Germany can move from individual industrial partnerships toward broader market mechanisms. This includes expanding electrolyzer capacity, ensuring access to renewable electricity, developing storage solutions, and creating industrial demand strong enough to support long-term investment.
For sectors such as steel, chemicals, and heavy industry, hydrogen adoption will ultimately depend on economics as much as technology. The agreement between EWE and Salzgitter provides an early example of how industrial decarbonization projects may be structured, but the wider market will depend on whether policy frameworks can turn isolated projects into a scalable supply chain.
