Salzgitter Signs Solar and Battery Deal with Zelestra for Low-Carbon Steel
German steel producer Salzgitter is expanding its renewable electricity supply through a new agreement with renewable energy developer Zelestra, adding solar generation and battery storage to the energy portfolio supporting its transition toward lower-carbon steelmaking.
Salzgitter Flachstahl, the largest steelmaking subsidiary of Salzgitter AG, and Zelestra have signed what the companies describe as Germany's largest hybrid solar-plus-storage power purchase agreement to date. The long-term agreement covers two new projects with a combined 147 MW of solar generation capacity and 79 MW of battery power capacity, providing 237 MWh of energy storage.
The projects will be developed in Brandenburg and Thuringia. Zelestra will build, own and operate the hybrid facilities, while Salzgitter Flachstahl will purchase the electricity generated by the solar installations. The steelmaker will also control the operation of the associated battery storage systems.
Together, the solar projects are expected to supply approximately 158 GWh of renewable electricity annually. The batteries will be charged exclusively using surplus electricity from the connected solar installations, according to the companies. This structure allows part of the solar generation to be stored and delivered at times that more closely correspond with Salzgitter's industrial electricity demand.
The storage component is particularly relevant for heavy industrial users, where electricity consumption can remain substantial outside periods of peak renewable generation. By combining generation and storage under the same contract, Salzgitter can increase its access to renewable electricity while gaining greater flexibility over when that electricity is used.
The agreement represents Salzgitter's first hybrid PPA and will also make the company a battery storage operator for the first time. Zelestra, meanwhile, is developing more than 2 GW of solar, wind, hybrid generation and energy storage projects in Germany.
Renewable Electricity Becomes Central to Steel Transformation
The electricity will support Salzgitter's SALCOS, or Salzgitter Low CO2 Steelmaking, transformation program. The project is designed to progressively replace conventional coal-based blast furnace production with direct reduction and electric arc furnace technology.
Under the new production route, iron ore can be reduced using hydrogen rather than relying primarily on carbon from coking coal. The resulting direct reduced iron can then be processed using electric arc furnaces. Both hydrogen production through electrolysis and electric steelmaking require significant amounts of electricity, making access to renewable power an increasingly important part of the economics and emissions profile of low-carbon steel.
Salzgitter says the full SALCOS transformation could reduce CO2 emissions from its steel production by more than 95% compared with its existing production route. The company currently expects the first new production route to begin operating during the first half of 2027.
The first stage of the program includes a direct reduction plant, an electric arc furnace and a 100 MW electrolyzer. Salzgitter has said the electrolyzer is designed to produce approximately 9,000 metric tons of renewable hydrogen annually. The first phase has an overall investment volume of around €2.7 billion.
Government support has also become an important component of the project. Germany's federal government and the state of Lower Saxony originally committed around €1 billion toward the first SALCOS expansion stage. In February 2026, approximately €322 million in additional support was approved following European Commission state aid clearance, bringing total public funding for the stage to around €1.32 billion.
Salzgitter Builds a Broader Renewable Energy Portfolio
The Zelestra agreement forms part of a wider energy procurement strategy rather than representing Salzgitter's only source of renewable electricity.
The company has previously signed several long-term PPAs intended to support its changing electricity requirements. A 10-year agreement with Octopus Energy covers approximately 126 GWh of solar electricity annually from a 122 MWp project in Brandenburg. Salzgitter has also contracted around 71 GWh per year from a photovoltaic project in Saxony-Anhalt.
Other agreements include solar PPAs with Energiekontor covering projects with approximately 113 MW of combined capacity and expected generation of more than 120 GWh annually. These contracts illustrate the scale of electricity procurement required as steelmaking shifts from fossil fuel-intensive processes toward greater direct use of electricity.
Renewable electricity procurement is also closely linked with Salzgitter's hydrogen strategy. In June 2026, the company finalized a long-term agreement with German energy supplier EWE for approximately 10,000 metric tons of renewable hydrogen per year. The hydrogen is intended to support the SALCOS program alongside production from Salzgitter's own electrolyzer.
Storage Could Become Increasingly Important for Industrial PPAs
The addition of battery storage differentiates the Zelestra agreement from conventional renewable PPAs, which primarily establish contractual access to electricity generated by a solar or wind asset.
For industrial facilities with continuous or highly variable power requirements, generation profiles do not necessarily correspond with consumption. Solar output, for example, is concentrated during daylight hours, while steel production can require electricity throughout the day.
Battery storage can reduce part of this mismatch by shifting renewable electricity between periods of generation and consumption. It cannot eliminate longer-term variability or substitute for grid access, but it can increase the operational usefulness of renewable generation and potentially reduce exposure to periods when electricity prices are higher.
For Salzgitter, the agreement therefore adds both renewable generation capacity and flexibility at a time when electricity is becoming more central to its core steelmaking process.
The deal also illustrates a wider change in industrial decarbonization strategies. As sectors such as steel, chemicals and manufacturing electrify processes and increase their use of renewable hydrogen, securing sufficient low-carbon electricity is becoming a strategic procurement issue rather than solely a corporate sustainability measure.
For energy developers, that trend could increase demand for contracts combining renewable generation, battery storage and more flexible electricity delivery structures. For energy-intensive manufacturers, the challenge will increasingly involve not only securing enough renewable electricity, but ensuring that supply can be matched as closely as possible with real industrial operating requirements.
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