The cost of making hydrogen with electrolyzers powered by certifiably clean electricity is among the biggest challenges to green steel in the U.S. That hurdle is now poised to become even higher as congressional Republicans seek to repeal the Inflation Reduction Act’s 45V tax credit, which aimed to make green hydrogen cost-competitive with the gas-derived version of the fuel. The Senate Finance Committee on Monday released its version of the budget bill, which aligned with the recently passed House version in eliminating the incentive at the end of this year.
That isn’t an issue for Europe’s leading green steel project. Formerly known as H2 Green Steel, the newly renamed Stegra plant benefits from the vast amount of carbon-free energy in Sweden, where the overwhelming majority of power is generated from hydroelectricity, wind turbines, and nuclear reactors.
In the U.S., by contrast, green hydrogen plants hinged on massive projects to construct wind turbines and solar panels that needed to be 70% larger in capacity to make up for the intermittency of the renewables, according to Elizabeth Boatman, a lead consultant at the Michigan-based clean energy consultancy 5 Lakes Energy. A dedicated nuclear reactor to generate the power for electrolysis could do so more efficiently, she said, noting that the availability of underground salt caverns to store hydrogen for later use could also further bring down the cost of projects.
“I don’t think anyone on any side of this thought hydrogen at scale wouldn’t be a barrier,” Boatman said. “The amount of new renewables the company would have to build out, along with transmission infrastructure, was clearly going to be expensive.”
In 2021, the Biden administration set a target of $1 per kilogram of green hydrogen within the next decade. (Last fall, a Florida-based geothermal startup called Magma Power filed patents that claimed it could generate green hydrogen for less than $1 per kilogram. The company did not immediately respond to an inquiry from Canary Media on whether that figure banked on the 45V tax credit.)
If the U.S. managed to achieve a supply at that price, steel made with green hydrogen-powered DRI and an electric arc furnace could come out to $544 per ton, according to a report published last July by Transition Asia, a nonprofit think tank focused on climate research. That’s marginally less than the cost of steel from gas-powered DRI and an electric arc furnace, at $550 per ton, or blast furnace steel at $565 per ton. If the U.S. were to institute even a modest carbon price, it could reach cost parity with coal-fired steel.
But if the 45V tax credit disappears, those numbers will be near-impossible to achieve.
Regardless of cost challenges, Boatman said, “it’s still an attractive solution, not just because of the potential to curb climate-warming emissions but also criteria air pollutants and other hazardous air pollution tied to the production process from a blast furnace with coal.”
The original, low-carbon version of the Cleveland-Cliffs project also has significant potential economic benefits.
The plant overhaul would have spurred $373 million in economic activity around the facility and brought 2,300 jobs to Middletown, according to analysis shared with Canary Media by the Center for Climate and Energy Solutions, a think tank. It’s not clear how a relining project would stack up.
That’s what made the project so significant, not just as a potential climate solution but as a way to revitalize a town in the heart of America’s steelmaking region, said Brad Townsend, the Ohio-based vice president of policy and outreach at the Center for Climate and Energy Solutions.
“Middletown is sort of the quintessential Midwest steel- and paper-making town that is looking for a way to leverage that history and infrastructure and know-how to chart a path forward,” he said. “This project would have done exactly that.”
A correction was made on June 17, 2025: This story originally misstated when the Biden administration set a goal to reduce green hydrogen prices to $1 per kilogram. It set the goal in 2021, not 2022.
