Interaction between electrified steel production and the north European electricity system

Highlights

• The interactions between a steel industry that applies hydrogen direct reduction (H-DR) and the electricity system are analyzed.

• The availability of low-cost electricity impacts a cost-efficient spatial allocation of the electrified steel production capacity.

• The overcapacity for steel production units and investments in storage systems lead to lower steel production costs.

• The electricity demand from an electrified steel industry in northern Europe is met by wind and solar power.

Abstract

This study investigates the interactions between a steel industry that applies hydrogen direct reduction (H-DR) and the electricity system of northern Europe. We apply a techno-economic optimization model with the aim of achieving net-zero emissions from the electricity and steel sectors in Year 2050. The model minimizes the investment and running costs of electricity and steel production units, while meeting the demands for electricity and steel. The modeling is carried out for a number of scenarios, which differ in the following parameters: (i) cost of using new sites for steel production; (ii) transport costs; (iii) commodities export; (iv) flexibility in operation of a direct reduction (DR) shaft furnace; and (v) location of steel demand. The results reveal that a cost-efficient spatial allocation of the electrified steel production capacity is impacted by the availability of low-cost electricity and can differ from the present - day allocation of steel plants. The modeling results show that the additional electricity demand from an electrified steel industry is met mainly by increased investments in wind and solar power while natural gas - based production of electricity is reduced. Furthermore, it is found to be cost-efficient to invest in overcapacity for steel production units (electrolyzers, DR shaft furnaces and electric arc furnaces) and to invest in storage systems for hydrogen and hot briquetted iron, so that steel production can follow the variations inherent to wind and solar power.