Climate Change: Eurofer Explanatory Paper Benchmarking And Energy Flows - May 2010

The following explanations look at the energy demands of steel making from iron ore only and do not focus on aspects of metallurgical carbon use. With this analysis Eurofer wants to contribute to the understanding of why the carbon based approach Eurofer proposed for benchmarking of ore based steel production is justified.

For illustrative purposes Annex I depicts an energy balance of a hypothetical product from an ore based steel making site. This balance was put together by expert judgement and BREF data and should indicatively illustrate the energy needs and the respective sourcing, which are described in this paper.

Energy flows in ore based steel making

On a steel making site based on iron ore, carbon is put to the so called “cascadic use”:

• First, the carbon is used metallurgically to extract iron from iron ore;
• Then, the resulting waste gases (into which the majority of the carbon needed for the extraction of the iron is transformed) are captured and used for direct firing of certain processes (coke battery underfiring, cowper operations);
• The remaining waste gases (roughly representing 45% of all the energy contained in all waste gases) will be converted into steam
• and electricity. This last stage of energy conversion is governed by the steam consumption of the site with electricity being a “by-product” to exploit the energy content of any remaining waste gases.

The cascadic use makes such a site largely energy self sufficient except for the last element in the cascadic chain, which is electricity. Even when using waste gases in the most efficient way, i.e. optimizing electricity production, a fully integrated steel site can not expect to become self-sufficient also for its electricity needs.

For technical reasons solid fuel (most importantly coke breeze for sintering) or natural gas (or the roughly equivalent coke oven gas used in reheating furnaces) are indispensable for some processes and thus a site cannot go below a certain natural gas intake (and solid fuel).

Substituting electricity use by steam is a hypothetical possibility but this is less energy efficient and would negatively impact on the competitiveness of the site.

It is further important to mention that waste gases can not be stored longer than a few minutes and thus need to be put to use immediately. If they do not serve to produce steam or electricity, they need to be flared.

It follows from the above that a site that wants to use its waste gases in the most energy efficient way, will use part of these for the production of electricity and that any additional waste gas recovered will also have to be converted into electricity.

It is of utmost importance to understand that the CO2 emitted by waste gas combustion for electricity production is solely caused by the steel production (the first step of the “cascadic use “ of carbon – see above) and cannot be avoided by not producing electricity (see Annex II). On the positive side this also means that the production of electricity from these gases does not generate additional CO2.

As a consequence of putting waste gases up for electricity and steam production in CHPs, roughly 50% of all CO2 emitted by ore based steel production is discharged not directly from the steel making installations but from the stacks of CHP installations operating on waste gases.

Another aspect of the “cascadic carbon use” affects the energy balance and the effects of heat recovery. The net balance of heat of a benchmark for ore based steel making does not contain any information on the efficiency of the process. The process efficiency is rather governed by the amount of carbon used. In e.g. a chemical plant the amount of heat recovered from a process can feed directly back into the process and thus reduce the consumption of primary fuel. This is not the case for the metallurgical reactions of ore based steel making, which need a certain minimum carbon input, independently if sensible heat will be recovered or not. For example the blast furnace will need the same amount of coke independently if the sensible heat from basic oxygen furnace gas will be recovered as steam or not.

Waste gases and heat, steam or electricity produced from these cannot fully substitute commercially produced energies as their market access conditions are different compared to those for energy produced from commercial fuels. The first have to be produced in line with the availability of recovery potentials (= supply driven) the latter can be produced in line with market demand (= demand driven). The same is true for heat recovered in production processes.

General consequences for a benchmarking system

Eurofer has elaborated its benchmark system taking into account the characteristics referred to above, on the one hand, and the requirements of the EU ETS Directive, on the other hand.

Indeed, the EU ETS Directive:

• Sets forth the cost effective and economically efficient reduction of CO2 as its only objective (ETSD Article 1 “Subject Matter”);
• Requires benchmarks to be elaborated in a way that incentivizes reduction of CO2 allowances and energy efficient techniques;
• Requires benchmarks to be simple and product based;
• Allows free allowances for electricity produced from waste gases: therewith, the EU ETS recognizes the special nature of steel waste gases that are inherently part of the steel making process and, unlike commercial fuels, delivered to a buyer market.

In order to ensure full compliance with these objectives, the Eurofer benchmarking proposal only looks at the primary carbon inputs. A different, energy based approach, whereby energy flows (steam, heat, electricity or compressed air) are taken into account

• would run against the EU ETS Directive because it would encourage operators to use more carbon than needed in the process to produce more waste gases;
• would also be more complex and
• would not allow to compile historically data sufficiently comparable and reliable for benchmarking due to the highly different site layouts and energy management monitoring systems.

Such an energy approach may serve other sector quite well but is not providing the most simple implementation strategy for the Emissions Trading Directive and applied to ore based steel making would disadvantage this industry without any environmental benefit.

Negative effects of an energy based benchmarking system on ore based steel making

DG CLIMA proposes to subject ore based steel production to a partial or full energy based approach for benchmarking which also would not allow free allocation for all unavoidable CO2 released from unavoidable waste gases used for electricity production.

As set out above, such energy based approach is not in line with the EU ETS Directive and causes great complexity for bringing into practice:

• Conflict with the text of EU ETS: Imposing a CO2 cost on recovery of waste gases for electricity production would discourage such recovery and incentivize non- efficient uses which runs foul of the very objective of the EU ETS Directive which consists in promoting GHG emissions “in a cost-effective and economically effective manner” (Article 1) and the “energy efficient recovery of waste gases” (Article 10a.1).
• Practical difficulties: The use of heat derived from waste gases would have to be subject to waste gas specific benchmarks (most waste gases can not achieve the same conversion efficiencies as natural gas). These waste gas specific benchmark values however are impossible to construct fairly and technically sound as waste gases are usually combusted as a mix which is highly variant and each analysis will result in different achievable efficiencies.
• Technical difficulties: Since the net balance of heat of a benchmark for ore based steel making does not contain any information on the efficiency of the process (like it is the case in a chemical plant), setting the benchmark value by an energy balance will not identify best performance both in terms of CO2 and energy.
• Data problems: The different plant layouts make it impossible to derive generally valid system boundaries for the flows of secondary energy within a site. At least for historical steel production this does not allow the compilation of comparable data sets (if data would be available at all).

Annex I: Indicative energy balance of ore based steel making

Annex II: Roots of CO2 emissions in production processes