Plans for a gigawatt-scale electrolyser to fuel green steel processing using renewable hydrogen have been unveiled by global giant Iberdrola and a Swedish start-up.

Iberdrola and H2 Green Steel want to build the plant to start production in 2025 or 2026 at an as-yet undisclosed site on the Iberian Peninsula.

Iberdrola will deliver renewable power to a 1GW electrolyser to produce H2 that will in turn fuel reduction of iron ore using a process called DRI (direct reduced iron) that usually relies on gas, producing about two million tonnes of ‘green iron’ annually.

The partners said the project will have a budget of around €2.3bn ($2.6bn) “financed with a combination of public funding, green project financing and equity”.

The two will also explore the potential of locating a major flat-steel production plant alongside the DRI facility.

Steelmaking has long been seen as a crucial target market for decarbonisation through green hydrogen, given the industry’s massive reliance on fossil fuels to achieve the ultra-high temperatures needed for its processes.

A report from analyst group BloombergNEF this week said the steel industry is on the cusp of a ‘titanic pivot’ from coal to green hydrogen – as long as the latter can achieve the steep cost reductions forecast for mid-century, which will largely depend on the availability of abundant, ultra-cheap renewable power.

H2 Green Steel – which counts Spotify billionaire Daniel Ek among its investors – is already working on a separate plan to build a green steel plant in northern Sweden by 2024.

The Swedish group’s CEO Henrik Henriksson said: “Large-scale green hydrogen production will be key to enable the transition of heavy industry towards sustainable operations. By working with a world-class partner, we can initiate our growth journey while reducing the technical risk in our [existing] Boden project. Iberdrola brings invaluable experience, technology and know-how that will be used to take our green steel projects to the next level.”

Several other major hydrogen-based steel initiatives are underway across Europe, including the Hybrit project involving utility Vattenfall, mining company LKAB and steel firm SSAB.

For Iberdrola, the partnership is the latest in a series of moves to position itself as power provider to a range of e-fuels initiatives that already covers several industries.

Millán García-Tola, Iberdrola's global hydrogen director, said: “We are also working with fertiliser producers, oil refineries, transport providers, and even whisky producers. The challenge of achieving net zero demands both vision and action across many industrial sectors.”