Long-term development of the industrial sector – Case study about electrification, fuel switching, and CCS in the USA
Introduction
Climate change is one of the most pressing issues for global society with large ecological and economic impacts (OECD, 2015a). Given this situation, the Paris Agreement calls for dramatic changes in the energy system to limit the global temperature increase to less than 2°C relative to pre-industrial levels (Rogelj et al., 2018; United Nations Framework Convention on Climate Change, 2016)
An extensive shift in the global energy system is necessary and all the energy sectors should find ways to reduce CO2 emissions. The industrial sector accounts for the largest share of global Total Final Energy Consumption (TFEC) among all sectors (37% in 2015 (IEA, 2017a)). Consequently, the mitigation of industrial CO2 emissions has a crucial role in meeting climate targets (Fais et al., 2016). Given a continuously increasing demand for industrial products, the key for industrial decarbonization is decoupling its production from the produced CO2 emissions (IEA, 2017b). Suitable measures for achieving this include energy and material efficiency strategies, such as adoption of best available technologies and improved scrap collection and reprocessing rates (IEA, 2017b; Rogelj et al., 2018; United Nations Climate Change Secretariat, 2018). Other relevant measures are switching to lower-carbon fuels and feedstocks, such as natural gas as substitution for coal, and future adoption of Carbon Capture and Storage (CCS) in industrial processes (IEA, 2017b; Rogelj et al., 2018). In addition, more recent literature suggests increased industrial electrification as a suitable option for decarbonization (IEA, 2017b; Kempener and Saygin, 2014; Lechtenboehmer et al., 2016; Rogelj et al., 2018). This option has received increasing attention due to the possibility of generating electricity from low-carbon energy sources, such as renewables, nuclear energy, and fossil fuels with integrated CCS (Sugiyama, 2012).
Integrated Assessment Models (IAMs) are important tools, showing potential long-term future pathways based on technological developments and policy decisions (Weyant, 2017). Such modelling methods experience a rapid increase in awareness, as only they allow to assess the combined effects of multidimensional variables regarding climate, technology, economy, and policy (Kriegler et al., 2015b; Weyant, 2017). They model the global energy system by quantifying material commodity production, use of services, consumption of energy commodities and feedstocks, and their corresponding impacts on climate change, typically by greenhouse gas emissions, over time (Edenhofer et al., 2014). IAMs mainly consider representations of natural-, climate-, and human systems (e.g. energy and economic) in order to produce energy and greenhouse gas emission pathways in return (Janetos, 2009).
Currently, there is limited literature about IAMs that are suitably focusing on the industrial sector (Iyer et al., 2015; Wesseling et al., 2017). A model comparison by Edelenbosch et al. (2017) has shown that IAMs struggle to have a good characterization of the industrial sector, due to the complexity of the technological options present. Therefore, focusing on one industrial subsector can bring the advantage of a higher level of technological detail in comparison to models that aggregate multiple industrial subsectors.
This paper aims to fill this gap in the literature by presenting a novel modelling framework, the Industrial Sector Module (ISM), which simulates investment decisions in industry and has been developed as part of a novel IAM, the MUSE model (ModUlar energy system Simulation Environment) (García Kerdan et al., 2019; Giarola et al., 2019). In order to demonstrate the investment decision algorithm behind the ISM and the model capabilities, a case study is proposed to simulate the development of the iron and steel subsector in the USA and to assess a potential pathway for the decarbonization of the sector. USA is the country with the highest Gross Domestic Product (GDP), the second most emitting country worldwide and traditionally one of the major steel producing countries ([dataset] World Steel Association, 2018; IEA, 2017a; The World Bank, 2018a).
The case study aims to give insights on how fuel switching, CCS, and industrial electrification could pave the way to the decarbonization of iron and steel. While electrification provides decarbonization potentials for many industrial subsectors, the increasing electrification rate of the iron and steel subsector is expected to have a strong future potential for overall CO2 emission mitigation (IEA, 2017c). This is because this subsector produces the most industrial CO2 emissions (2014: 28%, 2,338Mt CO2) and is moreover expected to experience the strongest increase in electrification rate among the five main industrial subsectors (from 12% in 2014 to 23% in 2050 according to the International Energy Agency's (IEA) 2°C Scenario) ([dataset] IEA, 2017). Iron and steel production can be divided into three sub-processes: ironmaking including raw material preparation, steelmaking for crude steel production, and steel manufacturing (van Wortswinkel and Nijs, 2010). This work is focusing on ironmaking and crude steelmaking, while excluding steel manufacturing into final products. The overall energy demand of the iron and steel sector is taken into account for calibration to IEA Energy Balances ([dataset] IEA, 2016). Global production of crude steel has continuously increased from ∼750Mt steel in the 1990′s up to 1,808Mt steel in 2018 (World Steel Association, 2019a).
The case study projects scenarios of the USA iron and steel industry and illustrates the potential for increased electrification, fuel switching, and adoption of CCS. The potential for CO2 emission mitigation by means of these three measures were explored by simulating potential developments of the industrial sector between 2010 and 2050. Two different scenarios, Base Scenario (BS) and Climate Ambitious Scenario (CAS), were applied in order to compare different potential future pathways.
The remainder of the paper is organized as follows. First, background information about technologies in the iron and steel industry is given, followed by a description of the methodology and a definition of modelling assumptions and data sources. The USA case study is then presented, followed by concluding remarks.
Section snippets
Background: steelmaking
Fig. 1 gives a detailed overview about today's production routes for crude steel. For primary steel production, iron ore is first converted to iron, i.e. hot metal or Direct Reduced Iron (DRI), which is the main feedstock for the following steel production (Yellishetty et al., 2010). Hot metal can be made from iron ore by reduction and subsequent melting of iron oxide in a Blast Furnace (BF) (World Steel Association, 2019c; Worrell et al., 2008). In contrast, DRI is made by Direct Reduction
Methodology: MUSE model framework and case study definition
The methodology is based on a newly developed simulation modelling framework for the investment decisions in industry, the ISM. The model coded in Python is part of the MUSE model. In this section, an overview of the MUSE IAM will be given, followed by the ISM methodology description.
Industrial sector faces increasing demand
The projected demand for industrial material commodities in the USA is reported in Fig. 5. The projected demand is invariant across both scenarios, as it follows the exogenously given factors population and GDP from the SSP2 narrative, which is not sensitive to prices.
The demand for industrial goods increases by 47% between 2010 (420Mt) and 2050 (634Mt), resulting mainly from increasing demand for chemicals (+98%) and iron and steel (+45%). The market share of chemicals increases from 35%
Conclusion
This work has shown the methodology behind the investment decision algorithm in the ISM of MUSE. It has been presented how the ISM can be effectively applied. This lays the foundation for presenting in-depth analyses for the industrial sector in the future.
Industrial decarbonization, via decoupling industrial production from its CO2 emissions, is crucial to mitigate climate change. Multiple measures, such as industrial electrification, fuel switching, and CCS, can be adopted to reach this goal.
Acknowledgement
The authors acknowledge the financial support of the Sustainable Gas Institute, Imperial College London, and of ETH Zurich. Funding for this work is gratefully received from Royal Dutch Shell and the Newton/NERC/FAPESP Sustainable Gas Futures project NE/N018656/1. Note that funding bodies were not involved in the design, implementation or reporting of this study. TJS thanks Innosuisse and the SCCER Heat & Electricity Storage.
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Cited by (0)
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The first two authors, Sandro Luh and Sara Budinis, have contributed in equal measure to the paper.