Modelling the transformation of energy-intensive industries based on site-specific investment decisions

Abstract

The transition towards climate-neutral industry is a challenge, particularly for heavy industries like steel and basic chemicals. Existing models for assessing industrial transformation often lack spatial resolution and fail to capture individual investment decisions. Consequently, the spatial interplay between industry transformation, energy availability, infrastructure availability, and the dynamics of discrete investments is inadequately addressed. Here we present a site-specific approach that considers individual industrial sites to simulate discrete investment decisions. The investment decision is modelled as a discrete choice among alternative technologies with their total cost of ownership as the main decision criterion. Process costs depend on the scenario-specific assumptions, such as energy carrier prices, policy instruments and local infrastructures. The age of production units and their reinvestment cycles are considered the main restrictions on the dynamics of the transition. The results provide high spatial resolution to capture the spatial and temporal dynamics of industry transition under varying process and policy assumptions. The presented model and its results can be coupled with energy system models to assess the implications of site-specific industry transition on energy system related research questions. We conduct an exemplary case study for a transformation pathway of the European primary steel production.