The transition of the European iron and steel industry (ISI) towards low-carbon manufacturing is crucial for the European Union (EU)’s 2050 climate neutrality objective. One emerging solution is electrification by using hydrogen (H₂) as iron ore reductant, which increases specific electricity use per tonne of steel up to 35 times compared to the conventional, most adopted coal-based technology. This study develops three scenarios, encompassing a moderate to an accelerated ISI transition, to evaluate the impact of the ISI decarbonisation on the power system CO₂ emissions, generation mix and volume, and marginal prices in 2030. The study first estimates future electricity and H₂ demand by considering country-specific technologies deployment and energy intensities. Then, these estimates serves as input to the model METIS to simulate European power system operations through a unit commitment and economic dispatch problem. The study shows that the power system can accommodate a transition of the ISI that substitutes 28% of the coal-based production with low carbon technologies, mainly based on H₂. This leads to a 25% reduction in direct CO₂ emissions and a demand increase of 20 TWh of electricity and 40 TWh_HHV of H₂. Furthermore, a 50% reduction in indirect power system emissions is achieved, compared to 2018, thanks to the substantial renewable power capacity deployment foreseen in the coming years. The study also demonstrates that a reduction of indirect CO₂ emissions by over 85% can be achieved by deploying 1.2 and 2.7 GW of renewable power generators, and 200 and 400 MW of electrolyser capacity for each million tonne of steel produced annually with low-carbon technologies. Additional renewable capacity that ensures green steel production is also key to maintaining stable electricity prices.

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The decarbonisation of the iron and steel industry is expected to significantly increase its electricity consumption due to higher levels of electrification and the partial shift to hydrogen as iron reductant. With its batch processes, this industry offers large potential for the application of demand response strategies to achieve electricity cost savings. Previous research has primarily focused on investigating the demand response potential for currently operating manufacturing processes and partly for future low-carbon processes. This study aims to consolidate this knowledge and apply it to a modelling analysis that investigates the demand response potential of two new low-carbon technologies: the hydrogen-based direct reduction of iron with electric arc furnace technology (H2-DRI-EAF) and the blast furnace basic oxygen furnace technology retrofitted with carbon capture (BF-BOF-CCUS). A cost optimisation approach is applied to plant configurations with varying parameters relevant for flexibility, such as electrolyser and storage sizes, and in the context of future electricity prices. Multiple price profiles are selected to encompass uncertainties on the development of the power system. The potential for a H2-DRI-EAF plant is 3–27 times higher than for a BF-BOF-CCUS, with electricity costs savings potentials of 35% and 3%, respectively. The study finds that electricity prices have the most significant impact on the profitability of investing in electrolyser overcapacities, which enable operating costs reduction. Therefore, the profitability of these investments are strongly dependent on future power system configurations.@en