Decarbonization strategies for steel production with uncertainty in hydrogen direct reduction

Abstract

The steel industry remains difficult to decarbonize because of its high dependence on coal. This industry plans to use hydrogen instead of coal via hydrogen direct reduction. Although this technology reduces steel emissions significantly, considerable uncertainty remains. This study aimed to explore how internal and external uncertainties in hydrogen direct reduction affect uncertainties in steel decarbonization using an energy system model and Monte Carlo simulation. This study assumed that the investment cost of hydrogen direct reduction, hydrogen price, and emission coefficient of hydrogen are uncertain. The uncertainty in hydrogen prices was the most important factor affecting hydrogen use, emissions, and emission reduction costs. Moreover, the probability of steel emissions deviating from their target level was highest when hydrogen price was uncertain. This study contributes to the development of strategies for steel decarbonization and assists policymakers in probabilistic decision making with uncertainty regarding hydrogen direct reduction. Policymakers should understand the relationship between the steel, power, and hydrogen sectors and manage external uncertainties in the power and hydrogen sectors because steel decarbonization largely depends on renewable electricity and electrolyzer costs.