Abstract
With the move to a hydrogen-based primary steel production envisioned for the near future in Europe, existing regional industrial clusters loose major assets. Such a restructuring of industries may result in a new geographical distribution of the steel industry and also to another quality of vertical integration at sites. Both implications could turn out as drivers or barriers to invest in new technologies and are thus important in respect to vertical integration of sites and to regional policy. This paper describes an approach to model production stock invest for the steel industries in North-Western Europe. Current spatial structures are reproduced with capacity, technical and energy efficiency data on the level of single facilities like blast furnaces. With the model developed both investments in specific technologies and at specific production sites can be modelled. The model is used to simulate different possible future scenarios. The case with a clear move to hydrogen-based production is compared to a reference scenario without technological shift. The scenarios show that existing trends like movement of production to the coast may be accelerated by the new technology but that sites in the hinterland can also adapt to a hydrogen economy. Possible effects of business cycles or a circular economy on regional value chains are explored with a Monte-Carlo analysis.
Highlights
Achieving a climate neutral economy by 2050 or earlier is the target of certain national governments and the EU Commission
Presentation of relevant technologies and integration Three main drivers of site location are identified that shape the geographical analysis and the model structure described in section 2.2: The first one is existing assets, a second one is transportation costs for the raw materials and the third one is financial benefits by vertical integration
With its ability to simulate spatial reorganisation of the production chain it represents a new model kind in this research field that can feed into discussions about regional affectedness of the transformation towards a climate neutral steel industry in Europe
Summary
Achieving a climate neutral economy by 2050 or earlier is the target of certain national governments and the EU Commission. The steel industry in particular, face specific technological and economic challenges in this process (Davis et al, 2018) In their broad analysis of several heavy industries, Bataille et al (2018) differentiate between three main technical strategies to achieve climate neutrality: (1) the use of sustainable biomass; (2) carbon capture and storage (CCS); and (3) the use of renewable electricity. These three technical strategies are complemented by energy and material efficiency strategies to reduce steel use and to increase secondary production aiming at a more circular economy. The analysis shows that moving from today’s predominant coal-based route to a hydrogen-based route changes the potential for the reuse of existing assets and financial integration benefits and transport costs are likely to gain in importance at the expense of the value of existing assets, which are today the main driver for location
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