Hydrogen and Synthetic Natural Gas for decarbonizing steel hot rolling mills: Economic viability under dynamic electricity pricing

Abstract

Ambitious climate goals, such as those outlined in the European Union's Green Deal, necessitate significant action from the industrial sector to mitigate carbon dioxide (CO₂) emissions. Decarbonizing the steel processing industry, a major emitter of greenhouse gases, is particularly challenging due to its reliance on high-temperature processes like hot rolling, which currently depend on natural gas. This study conducts an economic assessment of hydrogen and synthetic natural gas (SNG) on-site production for a steel hot rolling plant, focusing on identifying the most cost-effective electrolysis technology and evaluating the impact of dynamic electricity prices. Using a mixed-integer linear programming (MILP) optimization model, we analyze various scenarios by minimizing net present value (NPV) and calculating the levelised cost of energy (LCOE). Our findings indicate that alkaline water electrolysis (AEL) is most cost-effective for electricity prices below 0.13 €/kWh, while solid oxide electrolysis (SOEC) is preferable above this threshold due to higher efficiency and heat integration. In case of dynamic prices, on-site production with storage can lead to significant savings, with a 42% reduction in LCOE at an average electricity price of 0.2 €/kWh compared to constant pricing. Optimal system design varies with pricing structure, with dynamic prices resulting in larger capacities for electrolysis and hydrogen storage. On-site hydrogen production is more cost-effective than pipeline supply at electricity prices of around 0.1 €/kWh, and more economical than truck delivery at electricity prices of around 0.25 €/kWh. Although SNG systems avoid hydrogen storage costs, they are not more cost-effective than hydrogen in any scenario. However, alternative fuels have the potential to drastically reduce emissions and on-site production makes it possible to exploit fluctuations in the grid.