Düsseldorf – A PwC study published in early August 2026 fundamentally calls into question Germany’s multi-billion-euro strategy for green steel. According to the study’s calculations, primary steel fails to achieve sustainably competitive costs in any of the scenarios examined for Central Europe. Nevertheless, federal and state governments have pledged approximately €5.9 billion in subsidies to Thyssenkrupp, Salzgitter, and Stahl-Holding Saar. Consequently, high electricity prices and expensive hydrogen threaten the capacity utilization of the new facilities. The repercussions affect taxpayers, employees, and industrial supply chains—even though the decisive cost disadvantages were known prior to the subsidy approvals.
Billions in subsidies despite known cost issues
There was no shortage of warnings. As early as 2021, Fraunhofer researchers noted that Germany lacked sufficient affordable green electricity to produce large quantities of hydrogen. Consequently, domestically produced hydrogen would be comparatively expensive in large volumes. The researchers also pointed to more favorable production conditions in regions of the world with abundant sun and wind. It is precisely this locational disadvantage that forms the core of the PwC calculations.
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In November 2022, the Council of Economic Experts also warned of energy prices that would remain permanently higher than in many other regions of the world. Consequently, state aid should support only those business models that are viable in the long term. By that time, the EU had already approved the first Salzgitter package, worth around one billion euros. Nevertheless, this was followed in 2023 by approximately two billion euros for Thyssenkrupp and up to 2.6 billion euros for the Saarstahl projects. In February 2026, the federal government also increased its funding for Salzgitter by 322 million euros.
Green Steel Loses Out to India and Gulf States
PwC compares blast furnaces and low-CO₂ direct reduction across several global regions through 2045. According to the analysis, Gulf states will be producing low-CO₂ steel about 30 percent more cheaply than Europe as early as 2030. Furthermore, hydrogen-based steel from India could undercut European blast-furnace steel by 15 percent. Only Scandinavia achieves competitive costs for primary steel under favorable assumptions. Consequently, green steel from Germany remains dependent on protective measures, special electricity rates, and other forms of aid.
The technology itself is not the main problem. Direct reduction plants can utilize natural gas initially and hydrogen later on. However, Germany possesses neither consistently cheap electricity nor sufficiently affordable green hydrogen. At the same time, there is a lack of a broad market willing to reliably pay higher steel prices. According to PwC, around half of the European projects have already been halted, scaled back, or postponed.
Policymakers Pass the Bill to Taxpayers
In 2025, ArcelorMittal withdrew its plans for Bremen and Eisenhüttenstadt, citing a lack of economic viability as well as unfavorable energy and market conditions. This resulted in the loss of a funding option worth approximately €1.3 billion before the state had paid out the full amount. Meanwhile, Thyssenkrupp suspended its hydrogen tender because the bids received were too expensive. In contrast, Salzgitter is proceeding with construction, even though the state had to increase funding again in 2026.
Consequently, the €5.9 billion has not yet been entirely lost. However, the commitments are based on assumptions whose flaws were identified by experts at an early stage. If green steel production relies on electricity price supports, hydrogen subsidies, and state-mandated purchase quotas, the need for funding does not end with the construction of the facilities; the state then ends up additionally financing operations and guaranteeing sales. The Federal Court of Auditors has already warned against permanent state subsidization of hydrogen, which is not cost-competitive. Policymakers should therefore have clarified—prior to approving the funds—whether German primary steel production could ever survive without perpetual subsidies.
Author: Blackout News
Sources: Handelsblatt (04.08.26) – PwC (Stand: 05.08.26) – Bundesrechnungshof (28.10.25)