Green steel and intermittency risk
Green steel and intermittency risk
Can the steel industry decarbonise using variable-output wind and solar?
Decarbonising the steel industry is a monumentally complex undertaking
Electrification will be key to making ‘green’ steel
Electrification-based pathways hold great promise, but there is no silver bullet
The intermittency of renewables is both a help and a hindrance
Disclaimer: all opinions expressed here are mine, not those of my employer
Decarbonising steel will be one of the toughest challenges in the transition to a low-carbon economy. It is vital to achieving a ‘deep’ transition since the steel industry is a major emitter, and because the transition itself will require vast amounts of steel. Wind turbines, solar panels and transmission towers all need steel.
There are many ways to produce ‘green’ steel, and none of them are perfect. Each has its pros and cons, and all will play a role. Carbon capture, hydrogen and electrification will be needed, as well as other technologies and process improvements.
I won’t explain here the many pathways for making green steel because it would require a separate post and others have done a comprehensive job (this report gives a good overview). Instead, I want to focus on two pathways in particular, and the very different ways that renewable energy intermittency affects the technical and economic viability of each one.
Electrification is a major component of steel decarbonisation. Conventional production techniques involve mining and shovelling coking coal into blast furnaces to reduce iron ore into iron – the first and most emissions-intensive step in the steelmaking process. Electrification skips the ironmaking step by recycling scrap back into usable steel, meaning it can significantly reduce the amount of coking coal used in steelmaking rapidly and at scale.
Curse or blessing – or both?
Conventional wisdom holds that switching to electric arc furnaces while the electricity mix simultaneously switches to intermittent renewable power sources is problematic: it increases a steel plant’s exposure to wild price swings during supply-demand mismatches and, in a worst-case scenario, it could result in supply disruption that ruins the steelmaking process.
This perception sustains the popular view that heavy industries such as steel cannot run on renewable energy alone. That certainly holds true today, since wind and solar paired with batteries do not yet meet year-round demand on any major grid network.
But renewable deployment is booming and the smart grids of the future will look very different to today’s centralised networks. There are nuances at play that could mean intermittency is both a curse and a blessing in the quest to ‘green’ the steel industry. Here’s why.
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Steelmaking and demand response
The first green steel pathway to consider here is using renewable energy to power electric arc furnaces (EAFs). EAFs are a mature technology and powering them with wind and solar offers the quickest and cheapest way for many producers to decarbonise.
As mentioned, the biggest emissions saving comes from the ability to skip the energy-intensive ironmaking step of the steel production process. EAFs can run on 100% scrap feedstock so there is no need to mine iron ore, averting the associated environmental damage.
Steel recycling is also an established industrial process, so running EAFs on renewable power is probably the most painless pathway to zero-emissions steel. Either the plant is powered by a dedicated ‘captive’ renewable generation facility, or it buys power from a grid that is steadily decarbonising (or, in all likelihood, it does both).
EAFs have several operational attributes that can be exploited to complement the variability of wind and solar. EAFs run in batches, and these can be scheduled for when electricity is cheaper – when strong winds coincide with low demand, for example. EAFs consume a huge amount of electricity, so power prices are the single biggest operating cost and a major price driver for steel produced from recycled scrap.
An added benefit is that EAFs can change their power consumption very quickly by adjusting their instantaneous melting power rate during operation. This enables very fast demand response, meaning EAFs can provide valuable services to grid operators without impacting the quality or safety of the steelmaking process.
Therefore, the additional cost of electrifying steel with renewable power can be offset against the revenue accrued from providing ancillary services to the grid operator. Adding together income from multiple grid services such as spinning reserve or frequency response is known as ‘revenue stacking’.
The rising value of flexibility
As electricity networks become dominated by renewables, these services will become increasingly valuable to grid operators. Their job is to ensure the most cost- and resource-efficient running of the power network without compromising on reliability or safety. Energy-intensive users with highly flexible consumption patterns will play a key role in achieving that. With the right regulation and incentives, green steel plants could stack handsome revenue streams that help to drive investment into new low-carbon industrial capacity.
So, recycling scrap using electrified furnaces offers a potentially attractive and cost-effective pathway for green steel. But it is certainly no silver bullet. There is a limit to how far this process can be scaled up to meet demand.
Scrap feedstock will never cover more than half of global steel demand. Recycling supply chains will take time to develop in many markets, and certain types of very high specification steel will always require virgin steel hewn from ore that is dug out of the earth’s crust. Even if every kilo of scrap steel were recycled in an electric arc furnace, alternative steelmaking processes would still be needed to drive emissions out of the other 50%-plus of global steel production.
Taking steelmaking to the moon!
One experimental technique shows great promise for scalability and cost reduction. Molten oxide electrolysis (MOE), a fascinating technology derived from NASA’s space exploration programme, is the second green steel pathway I want to discuss here.
MOE was developed to enable lunar colonisation. The process is ingenious, because it allows for the moon’s minerals-rich soil to be mined and processed into three ingredients vital for human survival — oxygen, metals, and silicon — without the need for water. In turn, these outputs could be used to sustain life and provide the materials needs to produce solar PV cells to power lunar bases and operations.
NASA describes the objectives of its lunar MOE research programme as follows:
“The goal of this research effort was to advance the MOE process for the extraction of oxygen for life support and propellant, and silicon and metallic elements for use in fabrication of thin-film solar cells. The Moon is rich in mineral resources, but it is almost devoid of chemical reducing agents; therefore, MOE is chosen for extraction, since the electron is the only practical reducing agent.”
In an MOE cell, an inert anode is immersed in an electrolyte containing iron ore. Then it is electrified. When the cell heats to 1600C, the electrons split the bonds in the iron ore. This process does not require water (hence its suitability for lunar applications) and it works with all iron ore grades (including lunar rocks).
Terrestrial applications of MOE
Here on Earth, MOE is being commercialised as a green steel solution by Boston Metal, a Boston-based start-up that last month closed a $120 million Series C fundraising round led by multinational steel company ArcelorMittal.
MOE is expensive compared to other green steel pathways but holds great potential for cost reduction. BNEF estimates that using zero-emissions electricity to power an MOE steelmaking operation would yield a levelised cost of steel (LCOS) of almost $1,300 per tonne of crude steel. This is roughly 40% more than the second most expensive option (using a conventional blast furnace with carbon capture and direct air capture).
However, the LCOS of MOE paired with clean electricity could drop precipitously to ~$550/t by 2050, which would place it among the cheapest options for green steel at that time; cheaper, in fact, than recycled steel in renewable-powered EAFs.
MOE and intermittency
Pairing MOE with renewables is problematic. The molten electrolytic process requires a constant supply of power, and outages can severely impair the ability of a smelter to restart. It could even destroy the equipment and write off a multi-billion-dollar investment.
MOE will need a constant, reliable baseload clean power supply. Nuclear and large-scale hydro would be a good fit here. Alternatively, the MOE steel plant could sign a special type of power purchase agreement (PPA) with a utility that aggregates various types of intermittent clean generation from across its portfolio, and supply 24/7 firm clean power.
Structuring this type of PPA will be tricky since it is unlikely to be 100% renewable if using existing portfolio options for continuous supply (i.e. gas-fired backup). Alternatively, if the PPA is backed by sufficient battery storage capacity to cover both daily and year-round seasonal variations in generation, the price will be correspondingly higher. This would add to the LCOS of MOE and undermine this technology’s cost reduction potential.
The electricity/steel nexus
Decarbonising steel is fiendishly complex, and the shift to renewable power sources adds another dimension to the complexity. The transition that is well underway on power grids across Europe, North America and other regions will likely play a role in determining the preferred pathway for producing green steel.
A high-level view is that Europe’s unwavering commitment to a future powered by wind, solar and battery storage will push it towards flexible steelmaking processes that can ramp up and down in response to minute-by-minute price signals. Renewables could turn Europe into a mecca for zero-emissions steel recycling using electric arc furnaces.
Regions with abundant hydro could leverage this firm clean power resource to energise the molten oxide electrolytic production of green steel. One country that springs to mind is Brazil, and in fact that is exactly where Boston Metal is establishing its first overseas metals business. Since Brazil’s prowess in hydropower is already well established, might it steal a march on Europe in the race to scale up green steel?
Seb Kennedy | Energy Flux | 9th February 2023
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