“Winter is coming, the steel price is rising,” says the popular wisdom of 2070. One may ask, what is the connection here? Yet this is no surprise. To achieve carbon neutrality, the steel industry will radically change by 2050–2070. Supply chains will also change and the role of electricity will increase.
The International Energy Agency (IEA) expects the traditional BF-BOF technology to disappear in 30–50 years. It will be replaced with hydrogen-based DRI (direct reduced iron). The structure of the primary cost of DRI steel considerably differs from that produced in the traditional BF-BOF route. In traditional technologies, raw materials accounted for a lion’s share in the primary cost, whereas in DRI-based production, electricity costs are on the top.
The University of Cambridge Institute for Sustainability Leadership estimates electricity costs at 35–45% of the total cost of hydrogen-based DRI. This will require approximately 3.5 MWh of electricity per ton of steel. This is 15 times more than the traditional technology. Electricity will automatically become the most sensitive cost factor. Specifically, an increase in prices from €40 to €60 per MWh will prompt a 17% increase in the steel cost.
This will have the following effects:
In general, an increase in electricity consumption is a flagship element of greening. Apart from DRI, the development of scrap-based EAF steelmaking will also foster electricity consumption. Yet, this is typical not only for the steel industry, but also for other carbon-intensive sectors.
Those who have access to cheap electricity will have an advantage. This is not a brand new idea, but it takes on new shapes in terms of decarbonization.
Global changes are taking place in the energy sector as well. Conditions may well be created when electricity prices will considerably differ in different regions. That means the energy sector development will be either beneficial or detrimental to the local economy.
The article was originally posted here.
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