Economic Evaluation of Electricity and Hydrogen-Based Steel Production Pathways: Leveraging Market Dynamics and Grid Congestion Mitigation through Demand Side Flexibility

In a context of increasing decarbonisation efforts, the iron and steel industry faces its critical turning point due to its traditionally high energy consumption. As the industry aligns with the global shift towards electrification and Renewable Energy (RE) integration, it becomes a key player in providing Demand-Side Flexibility (DSF) to the energy system, enhancing the integration of intermittent RE and grid stability. This paper examines the economic implications of an electricity and hydrogen based steel production plant from an inflexible to a flexible operation regime. Additionally, the impact of inflexible operation on grid congestion is analysed. Our findings highlight significant operational cost savings, particularly in the scenario with H2 and DRI storage, achieving reduction up to 132.7 €/t steel compared to the inflexible operational regime, translating into a substantial 62.3% saving in annual operating costs. Furthermore, a method is implemented that enables additional flexible capacity, feasible for individual plants, and offered in the Redispatch market. It is observed that 80-88% of the total flexibility offered is accepted in the market. This research points towards the need for supportive policies to compensate for the additional cost borne by steel plants for grid mitigation support, emphasising the role of DSF in achieving climate goals.