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The dust from the catastrophe that was Northvolt has yet to settle before Sweden is bracing itself for yet another major “green” bankruptcy.
In March, Northvolt, the would-be “green” manufacturer of electric car batteries built on public climate fund money from the EU and Swedish tax payers, declared its insolvency after almost two years of growing scandals and failure. This major setback for the so-called green transition was the largest single bankruptcy in Sweden in over 80 years, and has been compared to the Kreuger Crash of 1932.
Now the bell tolls for Stegra, a purported pioneer of “green” steel – produced with a minimum of carbon emissions, both from the energy sources and from the production process itself.
That was how Stegra, founded as H2 Green Steel in 2020, marketed itself. Its first suitors were, just like in the case with Northvolt, persons with ties to both the political establishment, finance, and the media. Its prospects as a leader in the green transition made it highly sung about in the press, but Stegra long stood in the shadow of Northvolt.
Green steel will end up in the same bin as green batteries
The goal of Stegra is in the same vein as most climate-related projects, to reduce the carbon emission from various stages of production or use of a product. Steel production is a notoriously energy-intensive enterprise, and it naturally has its fair share of pollutants associated with it. At the same time, it is a universally vital material for all modern construction or manufacturing needs. As such it makes sense in the age of climate awareness to capitalise on the possibility of an emission-free steel that can take the global market by storm.
This is supposed to be accomplished by using hydrogen instead of coal and/or natural gas in the process known as reduction, which is how iron ore is purified ahead of the transformation into steel. The ambition of Stegra is also to use hydrogen for its heating processes, and for it all to be enabled by renewable energy sources, such as wind and hydro power. In theory a solid pursuit, but as it turns out, this vision has encountered insurmountable obstacles on its path to realisation.
The green transition in Sweden has been universally heralded by the media and political establishment with disastrous results, as has been documented on this website before in other articles, such as those about the aforementioned battery manufacturer Northvolt. The critics of Stegra and their green steel have largely been the same as the critics of the now bankrupted would-be battery revolutionaries. Economists such as Christian Sandström and Magnus Henrekson have spent large parts of the last few years making themselves known as some of the very few sceptics in the public debate about the business model of these companies, and especially how they use public money, through loans, subsidies, and direct funding through government and the EU.
Sandström, who has analysed the green transition’s industrial failures as part of his documentation of the ongoing “green bubble” in Sweden and Europe, makes the argument that Stegra is extremely overvalued – despite not having produced anything. While the company has a valuation of nearly two thirds of the state-operated (real) steel manufacturer SSAB, its deficits vastly exceed this. The similarities to Northvolt are stunning, and show that there is a systematic failure in how to approach the supposedly necessary green industrial wave in Sweden. Sandström was one of the most notorious critics of Northvolt, and accurately predicted, months ahead, their bankruptcy in March with only a few days of error margin.
This systemic failure is manifested in an inability to set achievable goals for these green companies. The people behind them are rarely routined entrepreneurs, but instead idealistic venture capitalists, looking to tap into the green wave with ideas that might sound good on paper to the average journalist and politician. This is how they managed to sell “green” production and recycling lines for electric vehicle batteries with Northvolt, and it is the same formula for how they sold the idea behind Stegra’s “green” steel. All of these billions of euros, with little or nothing to show for it in terms of production.
Magnus Henrekson has criticised the hydrogen solution that Stegra is placing its bets on as being immensely energy-intensive, much more so than common steel production. The production facility in Boden, northern Sweden (another parallel to Northvolt, which was also intricately linked to the northern town of Skellefteå and its local economy) is estimated by him to, on account of its hydrogen usage, demand so much energy that not only would it indirectly increase emissions, but it would also create an untenable situation for the energy supply in northern Sweden.
Stegra has on top of all that insisted on the hydrogen method, which, after having been introduced on an experimental basis by other steel producers in Europe, is currently being phased out in for example Germany, for economic reasons. While other steel companies need to be economically viable, Stegra does not – it is a project with political attraction that for years has managed to secure public funding in one way or another. Until recently.
Boden heading for the gutter
Northern Sweden, Norrland, has a number of economic problems that makes it susceptible to overpromising entrepreneurs, who lure politicians and local media into dubious projects. A political legacy of entrenched social democracy also creates an unwavering belief in the ability of public investments to create durable systems. If you also mix in venture capitalists you also create the veneer of sustainability, since it resembles a cooperation between the public and private sectors, perhaps supposedly able to avoid the pitfalls that only public or only private enterprises may fall into.
These are the psychological and political reasons behind the green failure in Sweden, but there is also the simple fact that electricity is cheap in Norrland, since this is where much of the power in Sweden is generated. More specifically, renewable energy in the form of hydro power, and in recent years wind power. A variety of flaws with the Swedish electric grid as well as the EU’s single market makes Norrland stand out from the rest of Sweden with how cheap energy is, and this makes this sparsely populated region attractive for new industry establishments – especially for very demanding heavy and technical industries.
The town of Boden, one of many borderline struggling municipalities on the coast, lauded the arrival of Stegra, or H2 Green Steel as it was known in 2020. Now, undergoing a similar development to Northvolt’s locality of choice Skellefteå, the town has accumulated a debt of one billion SEK (100 million euros) due to investments in infrastructure and public services that will now likely never pay off. While Stegra was never as large as Northvolt, which numbered thousands of employees, there are still likely thousands of prospective job opportunities that were promised to Boden but never delivered on.
It remains to see when (and not if) Stegra concedes its insolvency, if this debacle will be the last time Swedish media and politicians have been swindled by green capitalists. Once again the losers are the ordinary honest people and entrepreneurs of Sweden