2050 Decarbonisation of the Dutch Steelmaking Industry

Abstract

Since the birth of industrial steelmaking in the Netherlands in 1918, the blast furnace production process has been used and is now capable of producing almost 7 million tonnes of crude steel annually. This level of steel production has brought significant employment and economic growth to the Netherlands, but has come at a cost to the environment. The Dutch steelmaking industry was responsible for producing 12.6 million tonnes of CO2 in 2017, making it the greatest CO2 emitting entity within Dutch industry. A broad range of technologies are being researched aiming to achieve deep decarbonisation of the steel sector. One of the most promising CO2-reducing technologies being developed directly uses electricity for the electrochemical reduction of iron oxide to produce iron, and ultimately steel. However, the high CO2-reduction potential is compromised by inhibiting significantly greater energy costs then other decarbonisation options. By 2050, the electricity system in the Netherlands is expected to be primarily based on renewable energy sources (RESs). The shift towards intermittent sources of electricity is expected to increase the fluctuation and uncertainty of electricity prices. The ability of electricity-based steelmaking technology to operate flexibly, with respect to its production rate, may aid in reducing overall energy costs. By responding to electricity prices, through ramping up and down of production, peak prices can be avoided and low prices can be capitalised on. Alongside the potential cost-saving, this may also serve to increase the integration of RESs. This study analyses the potential of flexible operation of such technology in the Netherlands based on two scenarios of the European electricity system in 2050. Based on these scenarios, it is found that for such technology to benefit from flexible operation, capital costs must inhibit some economies of scale, or be lower than anticipated, for electricity cost savings to outweigh additional capital costs of oversizing the steelmaking technology system. Relative to other European countries, the Netherlands is able to achieve greater electricity cost savings. This is likely due to the expected high penetration of offshore wind in 2050, which helps to provide more consistent periods of low-priced electricity due to its high annual capacity factor relative to other RESs.