The European Steel Industry’s Critical Path to Coping with the Energy Crisis

The European region is currently in the grip of an energy crisis triggered by a number of factors, mainly in the form of rising fuel and electricity prices.

Between 2020-2021, the Northern Hemisphere saw an unusually harsh winter. This ultimately caused demand for natural gas to skyrocket in Europe, while at the same time natural gas exports from the United States declined. At the same time, the drought in Latin America has led to a sharp drop in power generation from hydroelectric power plants, fuelling the consumption of indigenous natural gas and thus reducing fuel exports from the region.

In addition, the impact of the Russian-Ukrainian conflict has led to a significant reduction in Russian fuel supplies, further contributing to an unprecedented supply-demand imbalance, as Russia accounts for nearly 30 per cent of the gas and 20 percent of the oil consumed in the EU and the UK. In this scenario, all sectors have been hit to some extent. Steel production in the European region recovered slightly after the lifting of the ban on the prevention and control of the new Crown pneumonia outbreak in 2021, but production was again reduced in 2022.

According to data from the European Steel Association (ESA), the European basic industry is subject to competition from countries outside the European Union, which are not affected by unstable fuel and electricity prices and have different objectives in terms of climate change measures. Against this backdrop, the crisis is leading directly to a large number of steel mill closures and mass layoffs as a result of production cutbacks.

In order to respond positively to the crisis, the steel industry, as an energy-intensive industry, must change its current face. While producing the same quantity and quality of products, steel companies should turn to reducing their consumption of resources and generating lower emissions.

Short-term and long-term perspectives

The energy crisis can only be resolved through immediate, multidisciplinary efforts that include a variety of short-, medium- and long-term measures. As a short-term measure, flexibility should be enhanced in the use and supply of raw materials, a move that would benefit the industry by temporarily circumventing gas shortages and raw material price volatility. However, in the long run, this could be detrimental to the fundamental interests of the industry as a whole.

If alternative fuels other than natural gas are used, the change in feedstock mix may reduce processing efficiency and quality, even though it could help stabilise the volatility of conventional raw material prices. Renegotiating with the downstream steel-consuming industry to provide for price fluctuations rather than fixed prices could help to temporarily improve profitability.

Long-term measures include shifting the energy mix to more renewable sources and increasing decentralised energy generation, actions that must be supported by the political and economic spheres. Specifically, energy storage systems need to be introduced so that energy can be supplied from renewable sources when needed. Another key issue is a radical change in production methods, for example, the use of cleaner fuels, such as hydrogen, to produce green steel.

According to energy consultancy Wood Mackenzie, producing green steel by 2050 will require 52 million tonnes of green hydrogen, 2,000 gigawatts of renewable energy (67 percent of current energy demand), and 47,000 million tonnes of CCUS (Carbon Capture Utilisation and Sequestration), which is equivalent to 5.5 times the amount of high-grade iron ore and twice the amount of scrap steel currently available.

In order to achieve the net-zero target by 2050, this represents an investment opportunity of $1.4 trillion across the value chain. Significant production figures are not expected to be reached until after the mid-2130s, due to the limited availability of hydrogen globally on an industrial scale. Therefore, additional practical measures must be taken to achieve the global net-zero goal.

Scunthorpe Steelworks View

Digitisation is the key to energy efficiency

Typically, improving the energy efficiency of a production process is a large and cumbersome task that leads to increased costs and equipment replacement. In reality, it is possible to significantly improve the energy efficiency of a plant or production process with a relatively low investment of time and money. An example is the treatment of tail gas from the steelmaking process in integrated plants, a by-product gas that can be used as a fuel in the steel production process.

However, the treatment of this gas throughout the process is not straightforward and involves multiple decisions and variables, which is why, despite the huge optimisation potential of this task, there are also shortcomings in terms of predictability, intermittent availability and various technical limitations. Internal energy efficiency can be maximised by taking proactive and effective initiatives such as minimising combustion in the stack and reducing natural gas consumption.

As an immediate action, digitisation helps to improve energy efficiency while accelerating all other measures. Digitisation can produce positive results in the short, medium and long term. Data provided by McKinsey & Company shows that more than 80 per cent of companies in the global metallurgical industry have made digitisation their number one priority, and that with the help of artificial intelligence, digitisation is a technological tool that can transform data into knowledge and guide the implementation of decisions along the entire value chain.

Software solutions pave the way to lower energy costs

The goal may be clear, but the road to achieving it is convoluted and complex. Digitisation, and software solutions in particular, will play a crucial role in this context, but where will they play a role and what is the starting point?

The steel industry is known to produce large gaseous by-products such as Coke Oven Gas (COG), Blast Furnace Gas (BFG), and Converter Gas (BOFG), which contain large amounts of chemical and thermal energy. If these gaseous by-products are burned to generate electricity, the potential power generation is typically higher than the energy consumed by the plant, and if they are used as fuel for the plant’s internal processes, external fuel purchases can be greatly reduced or even eliminated. This is certainly a promising concept that offers a wider range of possibilities in these times of unstable natural gas supplies and prices. The entire process can be optimised to achieve higher levels of energy efficiency.

However, despite the seemingly bright outlook, achieving these goals is not an easy task, and such opportunities for improvement are accompanied by significant difficulties, a problem that is particularly complex because it involves a large amount of data and variables from different areas that are interdependent but not fully integrated. For example, when using steelmaking tail gas as a process fuel, it may be difficult to synchronise the timing between gas production and consumption due to the limited capacity of the gas engine. Due to this and many other factors and constraints, such gas by-products are currently only flared to exhaustion, and additional natural gas and other fuels have to be procured to meet production requirements.

When dealing with such a large number of objectives, variables, constraints and uncertainties, it is difficult to find the best possible solution without AI tools. We are currently in the age of industrial digitisation, in which software plays a crucial role. In order to truly realise more efficient, cost-effective and sustainable processes, steel companies should take immediate and practical action.

Digital solutions help to significantly improve energy efficiency along the entire process chain. This integrated solution can cover several areas, including energy, resource and sustainability management. While optimising the energy performance of production systems, energy-related costs, raw material consumption and even carbon, greenhouse gas and waste emissions are reduced.

Investment in energy efficiency projects has become a priority for large companies as energy efficiency improvements make businesses greener and more competitive, and the importance of digitisation and choosing the right software solutions cannot be overstated.

Five Steps to Improve Energy Efficiency

(1) Integrate information from many different areas of the plant. This means not only a centralised source of information, but also integrating and centralising the management of various KPIs to ensure that the company’s objectives from different areas and organisational levels remain largely aligned.

(2) Comprehensive collection of production data and deployment of models for predicting, simulating and optimising gas flows with a view to achieving the best possible use of steel by-product gases and other fuels.

(3) Analysing process variability and identifying the optimal set of each operating state to ultimately achieve optimal conditions.

(4) Accurately identify leaks and instrumentation failures in the distribution network and attempt to predict mismatches between energy and resource processes.

(5) Keep track of all gaseous and fine particulate emissions at each process step, down to the final product.

Article source: World Metal Guide