The low-carbon steel industry - Interactions between the hydrogen direct reduction of steel and the electricity system

Abstract: The European steel industry must achieve deep reductions in CO2 emissions to meet the targets set out in the Paris Agreement. Options for reducing CO2 emissions include electrification, carbon capture and storage (CCS) and the use of biomass. The rapid decline in the cost of renewable electricity makes expanded electrification an attractive option for eliminating the dependence of the steel industry on coal. This work investigates how electrification of the steel industry via the use of a hydrogen direct reduction steel-making process can interact with the electricity system towards achieving zero CO2 emissions from both the steel industry and electricity sector. In this work, the concept of techno-economic pathways is used to investigate the potential implementation of CO2 abatement measures over time towards zero-emissions steel production in Sweden. Two different techno-economic optimisation models are used. The first model is used to investigate the impacts of electricity price variations on investments and the operation of steel production. The second model is applied to study the interaction between an electrified steel industry and the future electricity system of northern Europe. The results show that in Sweden, it will be feasible to reach close-to-zero CO2 emissions from steel production by Year 2045 with electrification via a hydrogen direct reduction process. We also show that increased production of hot briquetted iron (HBI) pellets could lead to the decarbonisation of the steel industry outside Sweden, assuming that the exported HBI will be converted via electric arc furnace (EAF) and that the receiving country has a decarbonised electricity generation system. The results also indicate that the cost-optimal design of the steel-making process is strongly dependent upon the electricity system composition. It is found to be cost-efficient to invest in overcapacity in steel production units (electrolyser, direct reduction shaft (DR shaft) furnace and EAF) and in storage units for hydrogen and HBI, to allow operation of the steel production capacity to follow the variations in electricity price. The modelling shows that an electrified steel industry could increase the electricity demand of northern Europe by 11% (by 183 TWh), and that the spatial allocation of the electrified steel production capacity could differ from the current allocation of steel plants. It is found that certain factors, such as the availability of low-cost electricity generation and access to iron ore, significantly influence the allocation of electrified steel plants. The modelling results show that the additional electricity demand from an electrified steel industry is met mainly by increasing outputs from wind and solar power, whereas natural gas-based electricity production is reduced, as compared to an electricity system in Year 2050 without an electrified steel industry