High technical and temporal resolution integrated energy system modelling of industrial decarbonisation

Abstract

• We provide a state-of-the-art industrial representation of activities and processes in integrated energy system analysis optimisation (IESA-Opt), an integrated energy system model of the Netherlands. • The results of this study demonstrate that it is feasible for an energy system to have a fully bio-based, hydrogen-based, fully electrified, and retrofitted industry with a completely decarbonised energy system. • Allowing an optimal technological mix can yield, at minimum, a 10% cheaper transition. • The role of technology adoption in the substantial reductions in overnight investment costs of green industrial technologies is limited due to the high fuel cost shares in the levelled production costs of industrial goods. • Based on current (2022) energy prices, the energy transition becomes cost-effective. Owing to the complexity of the sector, industrial activities are often represented with limited technological resolution in integrated energy system models. In this study, we enriched the technological description of industrial activities in the integrated energy system analysis optimisation (IESA-Opt) model, a peer-reviewed energy system optimisation model that can simultaneously provide optimal capacity planning for the hourly operation of all integrated sectors. We used this enriched model to analyse the industrial decarbonisation of the Netherlands for four key activities: high-value chemicals, hydrocarbons, ammonia, and steel production. The analyses performed comprised 1) exploring optimality in a reference scenario; 2) exploring the feasibility and implications of four extreme industrial cases with different technological archetypes, namely a bio-based industry, a hydrogen-based industry, a fully electrified industry, and retrofitting of current assets into carbon capture utilisation and storage; and 3) performing sensitivity analyses on key topics such as imported biomass, hydrogen, and natural gas prices, carbon storage potentials, technological learning, and the demand for olefins. The results of this study show that it is feasible for the energy system to have a fully bio-based, hydrogen-based, fully electrified, and retrofitted industry to achieve full decarbonisation while allowing for an optimal technological mix to yield at least a 10% cheaper transition. We also show that owing to the high predominance of the fuel component in the levelled cost of industrial products, substantial reductions in overnight investment costs of green technologies have a limited effect on their adoption. Finally, we reveal that based on the current (2022) energy prices, the energy transition is cost-effective, and fossil fuels can be fully displaced from industry and the national mix by 2050.