South Africa s iron and steel industry An evaluation of energy and greenhouse gas emission reduction potentials in Gauteng Province

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1 South Africa s iron and steel industry An evaluation of energy and greenhouse gas emission reduction potentials in Gauteng Province Thomas Haasz, Jan Tomaschek, Uli Fahl Institute for Energy Economics and the Rational Use of Energy (IER), University of Stuttgart 16th IUAPPA World Clean Air Conference, Cape Town,

2 Agenda Overview of the iron and steel industry Final energy consumption and GHG emissions International comparison using indices Best practice technologies GHG emission abatement costs Sensitivity analysis Conclusion 2

3 The Iron and Steel industry The iron and steel industry is worldwide one of the most energyintensive industries (Xu and Cang 2010) Sector metals, metal products, machinery and equipment in Gauteng province consumed 15% of FEC in Gauteng (117.1 PJ) in 2007 whereof 73% can be attributed to iron and steel making 34% of total FEC in industry have been consumed by the sector metals Total GHG emissions in industry were 59 Mt CO 2 eq in 2007 (49% of Gauteng s total GHG emissions) 18 Mt CO 2 eq have been emitted by the sector metals in 2007 Aim: Establish a GHG emission concept based on TIMES-GEECO 3

4 Main steelmaking routes primary steel making route coke iron ore secondary steel making route direct reduction route blast furnace (BF) pig iron open hearth furnace (OHF) scrap Direct reduced iron basic oxygen furnace (BOF) electric arc furnace (EAF) liquid steel casting (continuous /ingots /thin slab) finishing rolling (hot and cold) Own illustration based on Worrell et al. (1997) 4

5 Primary steel works in South Africa Source: SAISI (2012b) 5

6 Crude steel production [Mt] South Africa s crude steel production and global share % 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% South Africa's crude steel production Gauteng's crude steel production South Africa's share of the worldwide crude steel production Source: SAISI (2012a), IISI (2000) and World Steel Association (2011) 6

7 Final energy consumption and GHG emissions of the iron and steel industry in South Africa and Gauteng province FEC of the iron and steel sector in South Africa:195 PJ Source: IEA (2010) FEC of the iron and steel sector in Gauteng province: 86 PJ Total GHG emissions of the iron and steel industry in South Africa were 31.7 Mt CO 2 eq in 2007 i. Emissions are mainly due to the use of electricity (41%) and coal (56%) GHG emissions of iron and steel in Gauteng were 12.1 Mt CO 2 eq in 2007 i. 52% can be attributed to the use of electricity 7

8 Average power plant efficiencies, specific primary and final energy consumption IEA data does not include information on electricity consumption in the iron and steel sector for India. Therefore, SEC p and SEC f are equal. generated electricity η = PEC elc Source: 1:IEA (2010) and 2:World Steel Association (2011) 8

9 International comparison of iron and steelmaking indices Source: 2: IISI (2000) and 3: World Steel Association (2011) 9

10 Potentials for energy efficiency in Gauteng, South Africa How much energy and GHG emissions could be saved, if best practice technologies would be applied in Gauteng? For the analysis best practice SECs based on Worrell et al. (2008) are used. BF BOF EAF DRI EAF Average SEC f Baseline [GJ/t] Option 1 [GJ/t] Option 2 [GJ/t]

11 Final energy consumption [PJ] Technical potential of best practice technologies in Gauteng: FEC Baseline Option 1 Option 2 Option 1 & shift in Option 2 & shift in product mix product mix Coal Natural Gas Electricity Replacement of current technologies with BAT, combined with structural change BAT: reduction of FEC by 29% (Option 1) and 40% (Option 2) Structural change assumes an increase of EAF to 50% on crude steel production Structural change: reduction of FEC by 49% (Option 1) and 59% (Option 2) 11

12 GHG emissions [Mt CO₂ eq] Technical potential of best practice technologies in Gauteng: GHG emissions Baseline Option 1 Option 2 Option 1 & shift in Option 2 & shift in product mix product mix Coal Natural Gas Electricity Replacement of current technologies with BAT, combined with structural change BAT: reduction of GHG by 45% (Option 1) and 53% (Option 2) Structural change assumes an increase of EAF to 50% on crude steel production Structural change: reduction of GHG by 56% (Option 1) and 64% (Option 2) 12

13 Assumptions for the assessment of GHG emissions abatement costs BF 1 BOF 1 EAF 1 DRI 1 TSC 2 Investment cost [ZAR 2007 /t] high 2, ,444 1,739 low 1, ,414 1,739 coal natural gas electricity Energy carrier price [ZAR 2007 /TJ] 7,696 80, ,428 Interest rate: 15% (Beer et al. 2009) Technical lifetime [a]: 20 Exchange rates: ZAR 2000 /US$ 2000 = (Federal Reserve 2004), ZAR 2008 /US$ 2008 = (Federal Reserve 2012) Consumer price index (CPI) (Stats SA 2012):CPI 2007 /CPI 2000 =1.4347, CPI 2007 /CPI 2008 = IEA ETSAP 2010; 2 U.S. Environmental Protection Agency

14 GHG abatement costs [ZAR 2007 /tco 2 eq] GHG abatement costs of emission reduction measures within the analysis Option1 Option2 Option1 & product shift Option2 & product shift Under reference assumptions only Option 2 would not be economically viable Option 1, Option 1 and 2 with a shift in the product mix are no regret options -> GHG emission reductions are possible at negative GHG abatement costs Only Option 2 has positive GHG abatement cost (15 ZAR 2007 /tco 2 eq) 14

15 Sensitivity analysis Configurations of steel plants vary -> Costs differ from facility to facility Parameter variation for investment costs and energy carrier prices Aim: show a likely bandwidth of GHG abatement costs Variation of -50% to +50% for investment costs and energy carrier prices 15

16 GHG abatement costs [ZAR 2007 /tco 2 eq] GHG abatement costs [ZAR 2007 /tco 2 eq] Sensitivity analysis: results I Option % -25% 0% 25% 50% Parameter variation Constant energy carrier price Constant investment costs Option 1 & product shift % -25% 0% 25% 50% Parameter variation Constant energy carrier price Constant investment costs BAT are more sensitive to fluctuations of energy carrier prices than variations in investment costs Significant reductions of energy carrier prices would make the mitigation measures financially unattractive For Option 1 an increase of investment costs by 50% would lead to GHG mitigation costs of 21 ZAR 2007 /tco 2 eq 16

17 GHG abatement costs [ZAR 2007 /tco 2 eq] GHG abatement costs [ZAR 2007 /tco 2 eq] Sensitivity analysis: results II Option % -25% 0% 25% 50% Parameter variation Constant energy carrier price Constant investment costs Option 2 & product shift % -25% 0% 25% 50% Parameter variation Constant energy carrier price Constant investment costs BAT are more sensitive to fluctuations of energy carrier prices than variations in investment costs Option 2 is more sensitive to variations of either investment costs or energy carrier prices Significant higher investment costs of a drop in energy carrier prices would make Option 2 and Option 2 with a shift in the product mix financially unattractive (GHG abatement costs > 80 ZAR 2007 /tco 2 eq) ) 17

18 Conclusion Data (un)availability is an important factor for an assessment of industry in South Africa. South Africa s SEC is among the highest of countries within the analysis. Besides applied technologies, the product mix also has a significant impact on SEC of the iron and steel industry. Considerable potential to reduce the specific energy consumption and GHG emissions exist for Gauteng s iron and steel industry. The investment in BAT would be economically viable for most options under reference assumptions. BAT implementation incentives: i. Voluntary industry commitment ii. iii. Information and advice Tax on GHG emissions or an emission trading scheme Side effects: i. Security of supply (e.g. load shedding, black outs) ii. Remain competitive in a global market 18

19 Thank you! 19

20 Sources Beer, J.; Worrell, E.; Blok, K.: Future Technologies for Energy-Efficient Iron and Steel Making. In: Annu. Rev. Energy Environment, 23 (1998), p ETSAP: Technology Brief IO2 Iron and Steel Eskom: Annual report Available at: Eskom: Eskom power stations Available at: Federal Reserve: Foreign Exchange Rates - G.5A (Annual) Available at: Federal Reserve: Foreign Exchange Rates - G.5A (Annual) Available at: IEA: World energy balances, IEA World Energy Statistics and Balances (database) IISI: International Iron and Steel Institute Steel Statistical Yearbook Brussels: Committee on Economic Studies. (2000). Available at: /document/Steel%20statisitical%20yearbook% pdf Platts: UDI World Electric Power Plants Database. The McGraw-Hill Companies Available at: SAISI: South African Iron & Steel Institute Iron and crude steel production in South Africa. 2012a. Availabale at: SAISI: South African Iron & Steel Institute Primary Steel Plants. 2012b. Available at: Sapia: South African Petroleum Industry Association 2009 Annual Report Available at: Statistics South Africa: Consumer Price Index (Base 2000=100) terminated December Available at: U.S. Environmental Protection Agency: Available and Emerging Technologies for Reducing Greenhouse Gas Emissions from the Iron and Steel Available at: World Steel Association: Steel Statistical Yearbook Brussels: worldsteel Committee on Economic Studies. (2011). Available at: /document/Steel%20statistical%20yearbook% pdf. Worrell, E., Price, L., Martin, N., Farla, J., Schaeffer, R.: Energy intensity in the iron and steel industry: a comparison of physical and economic indicators. In: Energy Policy, 25 (1997), p Worrell, E., Neelis, M., Price, L., Galitsky, C., Nan, Z.: World Best Practice Energy Intensity Values for Selected Industrial Sectors. Berkeley: Lawrence Berkeley National Laboratory. (2008). Available at: Xu, C., Cang, D.: A Brief overview of Low CO Emission Technologies for Iron and Steel Making. In: Journal of Iron and Steel Reseach, International, 17, (2010), p