Transformation of Europe's energy-intensive industry sites: A model-based assessment of diffusion dynamics

Abstract

Producing climate neutrally in energy-intensive industries necessitates new and extended infrastructures for hydrogen, CO2, and electricity. Strategic energy planning requires a high level of spatial resolution, including individual industrial sites. Current models used to evaluate industry transition pathways commonly have limited spatial detail. Combining individual investment decisions with a site-specific spatial resolution contributes to closing the research gap on the spatial and temporal dynamics of industry transition scenarios. In summary, there is a need for spatial high-resolution results to inform decision makers about strategic energy planning, for example, establishing new hydrogen and CO2 infra-structures.This thesis focuses on possible diffusion pathways for hydrogen-based industry production with site-specific spatial resolution. Hydrogen-based process options for the energy-intensive industry branches are parameterised to calculate site-specific hydrogen potentials. On that basis, a site-specific open source framework is established to model energy-intensive industries according to their properties. For each existing production unit at the industrial sites, the modelled investment decision among alternative processes is dependent on calculated cost comparisons. Scenario-specific input assumptions influence the cost calculations. The most sensitive parameters for investment decisions in the model are regulations, such as prices for CO2 certificates, as well as projections of energy prices, and the availability of hydrogen infrastructure. The timing of the investment decision is determined by the age and reinvestment cycles of the production units.The model is applied to assess transformation pathways dependent on hydrogen infra-structure for the entire large-scale production of primary steel, ammonia, methanol, and high-value chemicals in the EU27+3, analysing 158 plants at 96 sites. Sensitivities are calculated for varying prices of hydrogen and CO2 certificates, four variations each. The results show that there is at least one investment window for all plants, while only about one third may have a second investment opportunity before 2050. In addition, more than 30% show reinvestment needs before 2030. Natural gas-based direct reduction of iron ore can play a key role and serve as a bridging option in the transition to the use of green hydrogen for primary steel production. For basic chemicals, especially those where the carbon from fossil feedstocks is embedded within the product, hydrogen prices of 60 €/MWh or below are required for cost-competitiveness of green hydrogen path-ways, as carbon prices have only limited effects (scope 1 emissions). The total technical potential for hydrogen use is more than 1000 TWh/yr. Considering current plant ages, reinvestment cycles, infrastructure access, and techno-economic limitations within the 16 sensitivites, hydrogen demand is reduced to 64-507 TWh/yr not considering relocation of value chains.