The Implications of the Basic Materials Industry Electrification on the Cost of Hydrogen

Abstract

This work applies techno-economic optimisation modelling to investigate how electrification of the basic material industry (ammonia, cement, plastics, and steel) impacts hydrogen production costs when considering flexibility options for the electrified industry. The context of the work is a zero-carbon emissions energy system of the EU, including future electricity demands from transport, heat, and industry. The modelling results show that in the future electricity system, the lowest hydrogen production cost is the outcome of the production with full flexibility, i.e., the flexibility of time and location, and flexibility of CO2 utilisation. Among the flexibility options, flexibility in time, i.e., the ability to follow electricity price variations, gives the largest reduction in hydrogen production costs in comparison to the scenarios without industrial flexibility options. With flexibility in location, it is possible to utilise solar power sites and remote areas for wind sites to satisfy electricity demand from industry. The difference in hydrogen production cost between scenarios with different combinations of flexibility options decreases with the size of the hydrogen demand. The decreased value of industrial flexibility when electricity demand from industry grows is due to the reduced access to sites with good conditions for VRE and some regions invest in nuclear power which benefits less from the industrial flexibility options. Still, even with the electrification of all ammonia, cement, steel and plastics production in the EU, there remains a value in industrial flexibility options.