Utilising Forest Biomass in Iron and Steel Production

LICENTIATE T H E SIS

Department of Engineering Sciences and Mathematics

Division of Energy Science Chinedu Maureen Nwachukwu

ISSN 1402-1757 Utilising forest biomass in iron ISBN 978-91-7790-761-9 (print) ISBN 978-91-7790-762-6 (pdf) and steel production Luleå University of Technology 2021 Investigating supply chain and competition aspects Utilising forest biomass in iron and steel production

Chinedu Maureen Nwachukwu

Energy Engineering

135067 LTU_Nwachukwu.indd Alla sidor 2021-03-12 08:10

Utilising forest biomass in iron and steel production Investigating supply chain and competition aspects

Chinedu Maureen Nwachukwu

Licentiate Thesis

Division of Energy Science

Department of Engineering Sciences and Mathematics

Lulea University of Technology

April 2021

Printed by Luleå University of Technology, Graphic Production 2021

ISSN 1402-1757 ISBN 978-91-7790-761-9 (print) ISBN 978-91-7790-762-6 (pdf)

Luleå 2021 www.ltu.se

For my family past, present, and future

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Preface

The research work presented in this thesis was carried out at the Division of Energy Science, Luleå University of Technology, Sweden, during the period 2017 - 2020. The studies were carried out under the BioMetInd project, partly financed by the Swedish Energy Agency and Bio4Energy, a strategic research environment appointed by the Swedish government.

The thesis provides an overview of forest biomass utilisation in the Swedish iron and steel industry from a supply chain perspective. Results also highlight the biomass competition between the iron and steel industry and the forest industry and stationary energy sectors. Findings from the studies are detailed in the three appended papers.

Acknowledgements

I am grateful to my principal supervisor, Associate Professor Elisabeth Wetterlund, for her support and trust rendered to me since the start of my PhD studies. My gratitude goes to my co-supervisors, Professor Andrea Toffolo and Dr. Chuan Wang, for their patience and assistance.

I also thank Professor Carl-Erik Grip for the conversations on steelmaking in Sweden and for providing print and online resources to motivate and guide me at the start of my studies. The discussions and encouragement are appreciated.

I would also like to appreciate Elias Olofsson for the opportunity to work together and for all the help rendered while grasping micro-economic concepts related to the Swedish forest sector.

I would like to thank my colleagues and all staff at the subject of Energy Engineering for providing a thriving and open work environment.

Special thanks to my dear friends, my ‘fellows’, who have proven that laughter is truly the best medicine.

My gratitude goes to my family, who have always supported me in all my endeavours. I am grateful for the foundation; this is another win for us. Stephen, your kind support even while juggling several tasks is deeply appreciated. Chikamara, your cheerful disposition, innocent advice, and wonder have been a blessing to me. I still have, and cherish, your drawing illustrating my research work. Thank you!

Above all, I am grateful to God for His constant grace and mercies.

Chinedu Maureen Nwachukwu Luleå, March 2021

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Abstract

The work presented in this thesis explores the internal and external aspects surrounding the use of forest biomass in iron and steel production in Sweden. Bio-products produced via thermo-chemical conversion are considered suitable alternatives to fossil energy and reductants used in existing processes in the iron and steel industry (ISI). However, since the steel production chain is energy intensive, large quantities of raw forest biomass assortments will be required before conversion into the desired bio-products that can substitute fossil products currently used in steel production. A full system analysis of value chains of suitable bio-products is, therefore, a requirement that has been lacking since it sheds insight into the main aspects of fossil substitution in the ISI, such as availability and supply of forest biomass, material and energy-efficient upgrading, and bio-products distribution. External aspects for consideration include broader implications of large biomass utilisation in iron and steel production on other existing biomass users such as the forest industry and stationary energy sectors. The main objective of this thesis is to investigate opportunities to utilise forest biomass in the ISI while simultaneously addressing competing demand for biomass from other sectors. The work consists of three papers that address the main objective via different research questions. Process integration techniques are applied with a biomass supply chain model to evaluate the production and distribution of biomass-based fuels and reductants and quantify the possible extent for CO2 emissions reduction in the ISI. Competition effects on regional biomass markets are analysed by linking a partial equilibrium forest model to the biomass supply chain model. Economic implications for forest biomass use in the ISI are quantified for both the ISI and forest sector industries. Results from the studies conclude that the maximum possible use of alternative fuels and reductants from forest biomass can achieve a 43% reduction in CO2 emissions, although at an increased energy cost of 27% for the ISI compared to the fossil use. Effective policies such as the combined use of substitution mandates and carbon emission fees are suggested, bearing in mind the relatively high costs for alternative energy use in the ISI. Effects on forest industries, such as increased feedstock costs from increased feedstock competition, may prompt individual forest industries to experience negative economic impacts that come at a disadvantage to society at large.

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List of Appended Papers

I. Nwachukwu C.M, Toffolo A., Wetterlund E. Biomass-based gas use in Swedish iron and steel industry - Supply chain and process integration considerations. Renewable Energy, Volume 146, 2020, Pages 2797-2811, ISSN 0960- 1481

Nwachukwu planned the investigation, developed the methodology with support from Wetterlund, gathered process data, conducted the analysis in collaboration with Toffolo, and wrote most of the paper under the supervision of the co-authors.

II. Nwachukwu C.M., Wang C., Wetterlund E.

Exploring the role of forest biomass in abating fossil CO2 emissions in the iron and steel industry – the case of Sweden. Applied Energy, 2021. https://doi.org/10.1016/j.apenergy.2021.116558

Nwachukwu contributed to modifying an existing model developed by Wetterlund, participated in data collection and validation with Wang, carried out model runs, result analysis, wrote the paper and incorporated suggested revisions from the co-authors.

III. Nwachukwu C.M., Olofsson, E., Lundmark, R., Wetterlund E. Evaluating fuel switching options in the ISI under increased competition for forest biomass. Manuscript to be submitted

Nwachukwu planned an external collaboration for a model linking study, developed the methodology with Olofsson using two existing models, carried out result analysis and interpretation, and wrote most of the paper with input from Olofsson.

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Full papers presented in Conferences (not included in thesis)

1. Nwachukwu C.M., Toffolo A., Wang C., Grip C-E., Wetterlund E. (2018). Systems analysis of sawmill by-products gasification towards a bio-based steel production. Paper presented at the ECOS 2018 - Proceedings of the 31st International Conference on Efficiency, Cost, Optimisation, Simulation and Environmental Impact of Energy Systems, ECOS 2018; Guimaraes; Portugal; 17 June 2018 - 21 June 2018. (peer-reviewed)

2. Wang C., Suopajärvi H., Ng K., Nwachukwu C.M., Wetterlund E.

Research development on utilising biomass in the blast furnace for CO2 emission reduction: Experiences from Nordic countries and Canada. Paper presented at the 8th International Congress on Science and Technology of Ironmaking (ICSTI 2018) at Vienna, Austria; September 2018. (peer-reviewed)

3. Nwachukwu C.M., Wang C., Toffolo A., Wetterlund E. (2020). Use of biomass in steelmaking and its effects for forest industries. Paper in Proceedings of the 33rd International Conference on Efficiency, Cost, Optimisation, Simulation and Environmental Impact of Energy Systems, ECOS 2020, Pages 1883 – 1894, Osaka – Japan, 29 June – 3 July 2020. (peer-reviewed)

Other conference contributions

4. Optimising biomass utilisation in iron and steel production. Nwachukwu C.M., Wang C., Toffolo A., Wetterlund E. Oral presentation at EUBCE 2020 e-event (peer-reviewed)

5. Impact of carbon prices on fuel switching in the iron and steel industry. Nwachukwu C.M., Wang C., Toffolo A., Wetterlund E. Oral presentation and extended abstract at eceee digital event Industrial Efficiency 2020, Gothenburg. (peer-reviewed)

6. Perspectives of using biomass to reduce fossil CO2 emission in the Swedish steel industry. Wang C., Nwachukwu C.M., Sandberg E., Lundgren J., Wetterlund E. Accepted for Oral presentation at the ESTAD 2021 conference (peer-reviewed)

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Table of Contents

1 Introduction ...... 1 1.1 Aims and objectives ...... 3 2 Forest biomass utilisation in the Iron and Steel Industry ...... 5 2.1 Biomass applications ...... 5 2.2 Brief description of Swedish ISI ...... 7 2.3 Selected options and applications for biomass utilisation ...... 8 2.3.1 Biomass conversion technologies ...... 10 3 Research Methods ...... 13 3.1 Process integration ...... 13 3.2 Supply chain modelling & optimisation ...... 13 3.3 Model linking...... 14 3.4 Techno-economic evaluation ...... 15 4 Results and Discussion ...... 17 4.1 Value chain analysis ...... 17

4.2 Biomass strategies for CO2 mitigation in the ISI ...... 19 4.3 Impacts of competition on biomass markets ...... 21 4.4 Economic implications ...... 25 5 Conclusions and further work ...... 29 6 References ...... 31

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1 Introduction

Iron and steel production forms one of the industrial sectors vital to modern society, be it in terms of economic growth, provision of infrastructure, buildings, and daily-use items. The use of steel as a material is increasing; according to projections by the Worldsteel association (2020), steel consumption will increase by an estimated 20% compared to current levels by 2050. While having a significant impact on global society, iron and steel production have an enormous energy use resulting in negative environmental impact. An energy and carbon intensive industry, iron and steel production accounts for 8% of global energy use and 7% of global fossil CO2 emissions (IEA, 2020). Efforts to decrease energy and carbon intensity during steel production have been documented and include best practices to reduce coke consumption through the use of pulverised coal, natural gas, oil, and waste plastics (Ahmed, 2018; IEAGHG, 2013; Luis et al., 2012).

However, in line with the goals of the Paris Agreement where direct CO2 emissions from the iron and steel industry (ISI) must fall by over 50% by 2050 (IEA, 2020), further efforts are required to achieve decarbonisation in the ISI. Technologies such as the use of hydrogen and electricity can result in zero emissions during iron making (Abdul Quader et al., 2016), although this requires a complete breakaway from current processes that depend on fossil fuels and reductants. Carbon capture and storage/utilisation may be used to capture tail end emissions, but this technology option comes at a huge investment cost that has delayed deployment (Leeson et al., 2017). Switching to biomass as a source of fuel and reductant is another strategy that allows for existing processes while reducing fossil CO2 emissions. Within the context of metallurgical applications, forest biomass is well suited due to its homogenous composition, low moisture content, and ash content in comparison with other types of biomass (Babich and Senk, 2013; Suopajärvi et al., 2013). Utilising forest biomass as the main biomass resource can be assumed to be carbon neutral if feedstock assortments are residues from harvesting operations and forest industries, as indicated in the EU RED II directive (European Commission, 2018).

Energy requirement to produce crude steel varies across production routes, the average energy intensity being 19 GJ/ton of crude steel (IEA, 2020). Using biomass-based alternatives, therefore, implies replacing significant amounts of fossil energy. This prompts crucial analysis into the availability and sourcing of raw forest biomass, upgrading and conversion of raw biomass, and distribution of final biomass-based products to individual ISI plants. Figure 1 illustrates the stepwise supply chain relevant to biomass utilisation in the ISI. A few studies in the literature have focused on limited aspects of the supply chain in Figure 1. In contrast, a full analysis of the value chains of suitable biomass-based products (bio-products) such as charcoal should be considered a central aspect in setting the stage for full or partial substitution of fossil energy with biomass in the ISI.

Figure 1: Supply chain aspects of biomass utilisation in the ISI

Focusing on the entire system, technological, economic, environmental, and social aspects to utilising forest biomass needs to be evaluated on an individual national and/or regional basis since solutions will vary (Babich and Senk, 2013). Figure 2 shows several aspects that occur on different system levels and interact to certain extents to influence fossil energy substitution with biomass. At the plant-process level (or micro level), the technical feasibility of biomass in process applications and quality of biomass-based products is the focus, and at the industry level, a guaranteed long- term supply of biomass resources. Efficient use of scarce resources may necessitate innovation and cooperation within and outside the industry (meso level). However, competition of resources may lead to unanticipated market effects for biomass users and will thus require policies on a national level (macro level) to ensure that all aspects of the system are in balance. This thesis explores some of these system interactions that are crucial to the implementation of forest biomass utilisation in the ISI.

Figure 2: A systems perspective of biomass utilisation in the ISI as envisaged at plant level, industry sector level, and national level

1.1 Aims and objectives

The work done in this thesis explores the internal and external aspects surrounding the use of forest biomass in iron and steel production in Sweden. The overall aim is to investigate the opportunities to use forest biomass as a CO2 mitigation strategy in the ISI while at the same time considering competing demand for forest biomass by other existing users in the system. Specific objectives of this thesis are to:

1. analyse value chains for production and distribution of biomass-based fuels and reductants to the ISI in terms of supply chain options and process integration,

2. quantify the possible extent for fossil CO2 reduction in the ISI based on different strategies to facilitate increased biomass utilisation, 3. identify biomass market effects from the increased competition when biomass-based fuels and reductants are introduced for application in the ISI, 4. quantify economic implications of biomass utilisation for the ISI and existing biomass users

The research scope covers these objectives systematically, with the appended papers addressing the interactions that occur on a plant level, industry level, and inter-industry level, as illustrated in Figure 3. Paper I assesses fuel switching options based on a bottom-up analysis of value chains for bio-based gas production at a plant site. Paper II considers the utilisation of bio-products in the ISI (on a national level) parallel to existing biomass use in other industries. Paper III furthers the analysis by focusing on the market effects arising from the competing use of biomass. All papers evaluate the economic implications accordingly.

Figure 3: Research scope addressing biomass utilisation in the ISI with different system perspectives as studied in the appended papers.

2 Forest biomass utilisation in the Iron and Steel Industry

This section provides a brief review of forest biomass application in the ISI. The following sub- sections highlight studies from the literature, an overview of the Swedish ISI and the selected options for biomass utilisation included in this thesis.

2.1 Biomass applications

Current production of steel is typically carried out via three main routes. Figure 4 presents the main production routes for crude steel: Blast furnace – Basic Oxygen Furnace (BF-BOF), Direct Reduction – Electric Arc Furnace (DR-EAF), and the scrap-based Electric Arc Furnace (EAF), which represents secondary steel production.

Figure 4: Global steel making routes (Worldsteel Association, 2014)

Fossil energy carriers are used as reducing agents and fuels to provide heat for metal extraction and throughout the several stages of steel production depicted in Figure 4. Historically, as cited in (Babich and Senk, 2013), biomass in the form of charcoal was the main energy source for iron production in the bloomery hearth mill, bloomery furnace, and the blast furnace before the use of coal became a more economical substitute for large scale iron and steel production. Small BFs in Brazil still use charcoal as the main energy and reductant.

Possibilities to use biomass in iron and steel production has been researched extensively in the literature. Babich and Senk (2013) evaluate how woody biomass can be re-introduced into the industry, taking into account geographic factors (country), economics, and technological considerations that concern the chemical, mechanical and physical qualities of the biomass product. Utilisation of biomass-based reductants and fuels has been modelled or demonstrated in: iron ore pellets production (Bäckström et al., 2015; Carvalho et al., 2015), ore-based steelmaking (Buergler and Donato, 2009; Hanrot et al., 2009), heating furnaces (Gunarathne et al., 2016), scrap-

5 based steel production (Bianco et al., 2013). Comprehensive reviews have been carried out to highlight opportunities and challenges for biomass as a substitute in the ISI, for examples see (Mousa et al., 2016; Suopajärvi et al., 2018, 2017; Wei et al., 2017). Quality of biomass-based solid fuels is shown to be the main factor determining their suitability, while biomass availability, competition, and spatial variability are seen to have economic drawbacks for the ISI and raise concerns for sustainable practices. A strength-weakness-opportunities-threats (SWOT) matrix in Figure 5 summarises the discussion so far in the literature.

Figure 5: A SWOT matrix addressing drawbacks and merits of potential biomass utilisation in iron- and steelmaking based on a review of the literature.

Nonetheless, the potential role of biomass in the decarbonisation of the ISI is significant. Estimates of CO2 reduction potential when fossil energy and materials are partially or fully replaced with bio- products are reported in the literature, although much of the previous research focus has been on replacing coal and coke in the BF, see (Feliciano-Bruzual, 2014; Johansson, 2013; Mandova et al., 2018; Sert et al., 2008; Wang et al., 2015).

Raw forest biomass cannot be used directly as a fuel in the production of metals due to the risk of ash-related problems such as listed in (Niska et al., 2013). Technological conversions are required to upgrade the raw woody feedstock into a product that resembles the desired properties of fossil fuels and reductants – mainly coal, coke, natural gas, LPG, and oil. Biomass upgrading into useful products and raw materials can be achieved via bio-chemical and thermo-chemical processes, although the type of bio-product desired – solid, liquid, or gaseous – determines what conversion process will be applicable and the type of biomass feedstock required based on its characteristics and properties (McKendry, 2002a). Forest products are the main biomass resource considered in this research, and thus their thermo-chemical conversion is further investigated in this work since their lower moisture content makes them economically suitable for thermo-chemical conversion (McKendry, 2002b).

2.2 Brief description of Swedish ISI

Iron and steel production in Sweden begins with mining activities to extract iron ore that will be processed into iron ore pellets for use as a raw material in the blast furnace and shaft/tunnel furnace (sponge iron plant). Iron ore mining occurs in the northernmost locations of Sweden, which has 60% of iron ore reserves in Europe. The mined iron ore is crushed and undergoes a separation process known as ore dressing, where the gangue is separated from the iron ore. The ‘dressed ore,’ or concentrate as it is called, is then agglomerated into pellets based on a specific composition, size and strength in grate kilns or rotary kilns located close to the mines. This pelletising process is the most energy intensive process. However, the magnetite composition of the iron ore provides about 70% of the required energy due to the highly exothermic nature of the magnetite oxidation, and the rest come from coal and fuel oils (LKAB, 2014).

Reduction of iron ore pellets to hot metal or ‘pig iron’ in the BF is carried out using coke and coal as energy carriers and reducing agents. There are three BFs located at two different integrated plant sites in Sweden. The produced hot metal is converted to steel in the BOF. The BF-BOF process is responsible for around 3 Mtonnes of crude steel produced in Sweden. Reduction of iron ore fines to produce sponge iron in a tunnel furnace is carried out in Sweden via a unique process known as the Höganäs process. This process yields spongy-like solid iron metal, which is further processed into iron/steel powders (Höganäs AB, 2013). Coke, coal, and natural gas are the fossil reductants and fuel employed in the process which is carried out in the southernmost plant. Sponge iron production in Sweden is estimated at 0.1 Mtonnes, according to the WorldSteel Association (2019). A large share of the produced sponge iron is crushed before undergoing annealing to become iron powder, while the remaining quantity (if any) is melted in an EAF together with scrap steel and undergoes atomisation to become steel powders and other metal powders. Secondary steel production via the EAF route accounts for about 1.8 Mtonnes of steel produced in Sweden. There are thirteen EAF plants mainly concentrated in the mid-south, and many of these plants are coupled with auxiliary processing works. Further processing of crude steel results in long products, slabs, and hot rolled coils and other special products.

Figure 6 provides a geographic representation of the Swedish ISI. Taking 2018 as the reference year, the total production of crude steel was estimated to be 4.7 Mtonnes (WorldSteel Association, 2019). Collective demand for fossil energy and reductants at all ISI plants is 20.6 TWh, in the form of fuel oils, gas, and coal.

Figure 6: Geographic location of Swedish ISI plants included in this thesis. Several auxiliary processing and secondary steelworks are co-located with the integrated steel plants and sponge iron plant (Paper II).

2.3 Selected options and applications for biomass utilisation

For the work presented in this thesis, options to utilise biomass are depicted in Figure 7. The bio- products considered as suitable substitutes are charcoal, product gas1, and SNG, each with its own replacement ratios. Substitution potentials used in the studies are based on experimental and previous studies from the literature (see Table 1).

1 In Paper I, product gas was referred to as bio-syngas. 8

Table 1: Substitution of fossil energy in the different process units across the entire iron and steel production chain. Substitution potential in % refers to the extent the fossil energy can be substituted with a bio-product.

Process unit Fossil fuel used Bio-product as Substitution Ref. substitute potential

Pelletising Coal Charcoal 0 -100% (Bäckström et al., kilns Light and Heavy L-SNG or product 0 - 100% 2015; Suopajärvi et fuel oils gas al., 2017)

Coke ovens Coking coal Charcoal 0 - 5% (Mousa et al., 2016; Ng et al., 2011)

Pulverised coal Charcoal 0 - 100% (Wang et al., 2015) Blast furnace Top-charged coke Lump charcoal 6% (Sert et al., 2008)

EAF Coal Charcoal 0 - 100% (Bianco et al., 2013) Coke Charcoal 0 - 100%

Sponge Iron Coal Charcoal 0 - 100% (Höganäs AB, Process 2013) Coke Charcoal 0 - 100%

NG L-SNG or product 0 - 100% gas

Auxiliary LNG, LPG, NG L-SNG or product 0 - 100% (Johansson, 2013; works and gas Johansson and processes Söderström, 2011)

Replacement ratios for fossil fuel gases were assumed to be on a 1:1 energy basis using either product gas or SNG. Charcoal as a replacement for all solid fossil energy and reductants – coal, coking coal, and coke – varied depending on the process. Coke and coal used in the EAF and pulverised coal in the BF were replaced with charcoal on a 1:1 energy basis. The assumption here is that the charcoal product was of similar quality to coke and coal. On-site coke production in coke ovens at the integrated steel plants was assumed to use a maximum of 5% charcoal replacing the raw material (coking coal). Partial replacement of top-charged coal in Paper II was assumed to be at a maximum of 6%, based on an experimental study which concluded that charging charcoal at a rate of 20kg/ton per hot metal decreases the thermal reserve zone temperature as well as a decrease in coke rate by 30kg (Sert et al., 2008).

Figure 7: Selected options for fossil fuel and reductant substitution. Finished products range from rolled coils, long products, slabs, and metal powders used in the powder metallurgy industry. Diagram modified from Paper II to show additional processing for products from powder metallurgy.

2.3.1 Biomass conversion technologies

Utilising forest biomass in the desired form for metallurgical application is made possible via thermo-chemical conversion technologies. The two main technologies considered in this thesis are slow pyrolysis for charcoal production and biomass gasification for the production of product gas and synthetic natural gas (SNG). The text below provides a brief overview of the technology processes included in this work.

2.3.1.1 Biomass gasification Gasification technologies were considered in all three papers, with process and heat integration for product gas and bio-SNG performed in Paper I to evaluate the energetic and cost performance of either gas fuel production.

Based on (Amovic et al., 2014), a multi-stage gasification process was selected for the production of product gas. The process includes biomass drying, pyrolysis, and gasification in three separate stages and has a 78% conversion efficiency on an energy basis. Process data used to obtain energy and mass balances were obtained from studies carried out by Amovic et al. (2014) and Gunarathne et al. (2016). Production was limited to the ISI plant sites, and integrated production was assumed. Heat required for the conversion process was provided by recovering excess high-temperature heat from the ISI plant.

The use of bio-SNG as a substitute was studied in compressed state, grid transported and liquefied state. In Paper I, direct gasification via a bubbling fluidised bed gasifier was employed. In papers

II-III, a gasification concept from (Ahlström et al., 2017) was applied. In all cases of bio-SNG production, integration with sawmills was the selected option. Details on the processes are found in the appended papers.

Feedstock as input in both gasification cases was limited to harvesting residues, pulpwood, and by- products from sawmills.

2.3.1.2 Slow pyrolysis Slow pyrolysis at a temperature of 500°C was considered for production of metallurgical grade charcoal, i.e., with a carbon content of at least 80%. This technology option was included in Papers II and III. Since the biomass input influences the quality of the charcoal output, feedstock choices were limited to assortments with low ash content and low moisture, such as from stemwood (i.e., pulpwood and by-products from sawmilling, with the exclusion of bark) and refined wood pellets.

Process data for charcoal production via slow pyrolysis was based on the works of (Leme et al., 2018; Roberts et al., 2010). Production process was assumed to be carried out in rectangular kilns as described by Leme et al. (2018), which includes utilising pyrolysis gases for the co-generation of electricity. Charcoal yield was estimated to be 35% on a mass basis and 56% on an energy basis.

Host industry selection was allowed for either sawmills or ISI plants. Integrated production of charcoal was allowed at either host industry.

3 Research Methods

A systems perspective was applied to achieve the research objectives presented in section 1.1. Starting with a plant level study to investigate which value chains were economically and energetically beneficial (Paper I), to conducting a national scale study exploring CO2 benefits (Paper II) as well as the interaction between the ISI and competing sectors (Paper III), each paper shows a methodological progression as the system perspectives and levels advance. Whilst there are several issues to be considered under the topic of biomass utilisation in the ISI, the primary investigation here is focused on how to utilise biomass in the ISI whilst simultaneously addressing competing demand from other sectors. The research is carried out as a case study for Sweden. Based on the aim of this thesis, four main methods have been applied. Each method is briefly presented here, and more details on the methodology or approach used for each analysis are found in the appended papers.

3.1 Process integration

The assumed integration of all biomass conversion technologies used in this thesis with either sawmill or ISI processes was based on the concept of process integration. All three papers consider integration, but material and heat integration are explicitly applied in a more detailed approach in Paper I, while Papers II and III take a simplified approach. Material integration is based on the use of sawmill by-products at the sawmill, acting as the host industry, as input feedstock for biomass gasification. Heat integration was performed using Pinch Analysis to estimate the heat recovery potentials for the product gas and bio-SNG production process. Additional heating or cooling requirements were also determined using Pinch analysis. In the two value chains studied in Paper I, the production process was modelled and simulated by static mass and energy balances using an Excel spreadsheet with process data from reference studies. Surplus heat recovered after cascading the heat flows from the processes were utilised for steam or/and power (co)generation via a condensing steam cycle.

Representation of the multi-stage gasification technology in Papers II and III was based on the process integration results for value chain 1 in Paper I. Process integration concepts used for the production of L-SNG was based on the results from (Ahlström et al., 2017). Material integration for charcoal production was assumed when the production was co-located (integrated) with sawmills since available sawmill by-products could be used as feedstock.

3.2 Supply chain modelling & optimisation

Modelling the supply of forest biomass assortments from source locations and of final bio-products from production plants to demand sites is central to analysing biomass utilisation in the ISI and evaluating the opportunities and barriers. Paper I includes supply chain modelling involving a single ISI plant, while Papers II and III apply supply chain optimisation modelling on a national level. One benefit of this method is that it can indicate the least cost mix of location for bio- production and technology choices. The method is also relevant in identifying which supply chains and bio-product types benefit the ISI, based on regional competition for biomass assortments used in other industries. 13

Supply chain design for the systems studied in Paper I was spatially conducted using the ArcGIS software, with the resulting transportation distance used to determine supply chain costs – biomass prices, transportation costs for feedstock and distribution of a gas bio-product. Input data on biomass availability in sawmills was obtained from (Swedish Forest Industry Federation (SFIF), 2015). The use of a spatially explicit cost optimisation model in Papers II and III scaled up the analysis performed in Paper I as more biomass feedstock sources were included, and all ISI plants were set as bio-product demand sites to optimise supply chain logistics. Optimisation models can simultaneously consider several variables and parameters and as well include spatial components when it comes to feedstock cost, demand, and supply. The model, BeWhere Sweden, is a mixed- integer linear programming problem written in General Algebraic Model Systems (GAMS) and solved using CPLEX. Although the model was originally developed to study biofuel production for the transport sector in Sweden (see (de Jong et al., 2017; Pettersson et al., 2015; Wetterlund et al., 2013)), it has been further developed to study biomass utilisation in the ISI. The model’s objective is to minimise total costs associated with bio-production and bio-product distribution for the studied system while at the same time satisfying biomass demand in other existing sectors. The model’s framework and assumptions can be found in (Pettersson et al., 2015; Wetterlund et al., 2013).

Data representing the availability and demand of biomass resources are explicitly modelled with their quantities obtained or estimated from open national data and statistics. Details of the spatial distribution of modelled resources are found in Paper II. Biomass assortments for bio-production via the thermo-chemical process (section 2.3.1) were explicitly represented based on the bottom-up estimation of the energy requirement at individual ISI plants. Transport options for bio-SNG produced in Paper I were based on two post-treatment technologies. Bio-SNG compressed at 250 bar was either transported in composite vessels on trucks or injected into the transmission grid (located only in the south-west of Sweden). Liquefaction of bio-SNG was the second option for post-treatment that allowed for distribution via trucks. In Papers II and III, three transport modes were permitted for transporting biomass assortment and distributing the bio-products to the demand ISI plants – road (truck), rail (train), and waterway (boat). Transportation of biomass assortments for input as feedstock to produce product gas in Paper I was assumed to be via truck.

3.3 Model linking

Utilisation of forest biomass in iron and steel production will bring about economic impacts on regional biomass markets due to the increased demand for available forest assortments. In Paper III, the interdependency between the forest sector, which is an existing user of biomass and a provider of industrial by-products, and the ISI was explored. Increased competition for forest biomass (which has been primarily left unaddressed) will likely impact the practicability and affordability of the ISI using biomass. To explore likely implications that may arise from the introduction of the ISI as a large user of biomass, such as changes in feedstock prices and re- allocation of feedstock use in forest sector industries, a soft-linking approach between the techno- economic supply chain model described above and an existing economic forest sector model was employed.

The Swedish County Forest Sector Model (SCFSM) is a static partial equilibrium (PE) model that can be used to model and identify endogenous biomass price impacts from changes in biomass 14 supply and demand. Here, the resulting biomass prices were used as input to BeWhere Sweden. The objective of SCFSM is to maximise the economic welfare in all regions based on a number of constraints, as detailed in (E. Olofsson, 2018). Regional economic welfare is achieved by maximising the sum of all regional consumer and producer surpluses (Samuelson, 1952; Takayama and Judge, 1964). The SCFSM2 is implemented with the GAMS software and solved using the CONOPT solver.

With the soft-linking method, BeWhere Sweden and SCFSM were run separately and dependent on inputs and outputs from each other. The main connection points were production volumes and related biomass demand in competing industry (forest industry and stationary energy sector), regional biomass price factors, imports, biomass quantities used in bio-production, plant localisations, and bio-product demand in the ISI plants. A schema representing the iterative procedure used in soft-linking the two models is provided in Figure 8, with details of the procedure given in Paper III. As BeWhere Sweden has a more detailed geographic scope than the SCFSM, input data common to both models were aggregated to regional (county) levels in SCFSM.

Figure 8: Schema showing the soft-linking process between the two models. Coloured dashed lines represent the iterative procedure where output from one model serves as input in the other. Exogenous input to models is represented with the black boxes and lines (Paper III).

3.4 Techno-economic evaluation

All three papers encompassed techno-economic evaluations for the studied systems, and details are given in the respective paper. Paper I calculated the fuel costs per value chain configuration. The

2 The model was developed at the Division of Social Sciences in Luleå University of Technology 15 fuel cost was derived as a function of the total system cost, including all plant investment costs, supply chain costs, and net electricity use. Paper II had a total bio-product cost as one of its performance indicators, which was calculated per MWh of bio-product produced in each scenario run. Here, the cost components, in addition to that included in Paper I, consist of policy instruments such as green electricity certificates. Additionally, the marginal costs of using biomass in the ISI were calculated while taking into account the carbon price associated with individual fossil fuels. Paper III evaluated the supply costs for competing industries based on new price development and the bio-product costs for the ISI. Similar to Paper II, the marginal costs for using biomass were also calculated.

Input data for calculating investment costs for all biomass conversion technologies were estimated using data from the literature. All plant and equipment costs were scaled to the monetary value for the reference year 2018 using the Chemical Engineering Plant Cost Index (CEPCI). Capital costs were discounted using an annuity factor of 0.1, corresponding to an economic lifetime of 20 years at an 8% discount rate.

4 Results and Discussion

This section briefly summarises the work carried out in the appended papers and synthesises some of the results in connection with the objectives of this thesis. Detailed findings are presented in the respective papers.

4.1 Value chain analysis

Analysis of biomass supply, transportation, and thermo-chemical conversion to the desired bio- product was conducted on a plant level in Paper I and extended to a national level in Paper II. Paper I focuses on how production and distribution of final gas bio-products to ISI plants can be carried out. The possibility of omitting the bio-product distribution stage if raw biomass assortments undergo upgrading and conversion on-site at the demand ISI plant is contemplated. To appraise the possibility, a comparative study was designed at the plant level. As fossil gas fuel substitution in the Swedish ISI should be considered with relative ease due to the comparatively low demand used in several auxiliary processes (e.g., heat treatments), the value chain configuration of two biomass-based gases that can substitute heating fuels used in an annealing furnace were evaluated. Figure 9 illustrates the considered integration of the processes, with one option of production on-site the ISI plant and the second option of external production at a sawmill and then bio-product distribution to the ISI plant.

At the plant level (Paper I), the evaluation of product gas and bio-SNG value chains in terms of process and heat integration, supply chain costs, and economic performance was the focus. Even though both gases are suitable substitutes, utilisation of either gas would require different technologies and supply chain options. Natural gas demand at the subject annealing plant was 96 GWh. Biomass feedstock input was restricted to sawdust from sawmills within a 250 km radius of the annealing plant.

biomass supply biomass supply Bio-syngas Bio-SNG Sawmill Sawmill production production biomass as fuel biomass as fuel

Iron bio-SNG supply powder plant Iron powder plant

Figure 9: Integrating production of (a) bio-syngas at an ISI plant facility, and (b) bio-SNG with sawmill process (Paper I)

Results from the supply chain modelling suggest a trade-off when transporting either sawdust or bio-SNG (see Figure 10). Bio-SNG transport was considered either as compressed (C-SNG) or liquefied (L-SNG). Transporting sawdust over distances shorter than 400 km provides the lowest cost per MWh of biomass. Beyond 400 km, transporting bio-SNG in liquefied and compressed form in trucks is more cost-efficient. This trade-off is relevant when considering other steel plants 17 that may have higher gas demands or in regions where there is low availability of feedstock within proximity of the steel plant.

C-SNG 20

L-SNG 15 Sawdust

€/MWh 10 Grid injection Case study plant 5

0 0 100 200 300 400 500 600 700 Transport distance (km) Figure 10: Supply costs for biomass or bio-based gas demand at ISI plant facility. Grey dashed lines indicate the transport distance from the subject plant location. (Paper I)

140

120

100

80 Electricity input Transportation 60 Biomass O&M 40

Capital €/MWh gas produced gas €/MWh 20 Electricity output Net FPC 0

-20 Bio-syngas C-SNG L-SNG Grid-injected Value Chain 1 Value Chain 2

Figure 11: Total fuel production (inclusive of supply costs) calculated for the two value chains. (Paper I)

Analysis from the process modelling shows the value chain of product gas to be more efficient in terms of total energy output compared to that of bio-SNG. Excess heat availability from steel plant processes reduces value chain costs, making it more cost-efficient since additional biomass to provide heating needs for integrated processes is not required (see Figure 11). Knowledge of total

18 investment costs calculated for each value chain considered increases decision-making ability for steel plants that are considering switching to bio-based gas fuels. Sensitivity analysis showed biomass prices, proximity to biomass availability, transport costs, and plant capital to be the main factors influencing high production costs, which may be an economic barrier to biomass utilisation in the ISI. Supply chain optimisation in Papers II and III indicate that localising charcoal production at large ISI plants is preferred over sawmills, suggesting the significance of bio-product demand as a determining cost factor as well. Paper I draws attention to such issues associated with biomass use that were further explored in Papers II and III.

4.2 Biomass strategies for CO2 mitigation in the ISI

The approach taken in Paper I is further extended in Paper II. Paper II looks at the supply chain aspects of biomass utilisation on a broader system level – namely, the entire ISI in Sweden. Focus is on the potential extent of CO2 mitigation when switching to biomass-based fuels and reductants. Integrated production of charcoal at sawmills or ISI plant is considered here in addition to the two gas fuels already investigated in Paper I. Biomass supply is optimised to match each ISI plant demand for fuel and reductant substitution using the spatially explicit BeWhere Sweden model. The model optimises localisation and integration of plants for bio-production technologies within the two host industries. To investigate how biomass utilisation can be further facilitated, the application of two strategies was carried out – the use of substitution mandates and the use of a carbon pricing policy such as the European Union Emissions Trading System (EU-ETS) CO2 price. Fixed mandates for substitution were set to be at least 25%, 50%, 75%, and 100%, which represents the maximum substitution of fossil energy across all ISI plants. Three scenarios were also constructed as part of a scenario analysis to explore the influence of energy market prices and carbon pricing policies.

Results from the model runs showed that the influence of carbon prices was minimal compared to the substitution mandates (see Figure 12). While the maximum bio-product use is 9.8 TWh, corresponding to a 43% reduction in CO2 emissions, implementing CO2 prices as a policy instrument results in lower CO2 reduction (36%) even at a high CO2 price of 200 €/tonCO2. Even though the argument for high CO2 price levels as a strategy to push away from fossils persists in the literature (e.g. in Suopajärvi and Fabritius (2013)), results from this study corroborates another argument that the very high price levels may be infeasible due to its impact on the cost of steel production (Mandova et al., 2018). Economic implications from using biomass in iron and steel production will result in additional energy costs for the ISI even at the reference CO2 price. Thus, with higher CO2 prices, the costs will be economically unattractive for the ISI.

Figure 12: Bio-product utilisation and CO2 reduction when using (a) substitution targets at the top and (b) CO2 prices at the bottom (Paper II)

In the constructed scenarios where fossil energy prices are lower and CO2 prices are gradually increased, the extent of bio-product utilisation to achieve CO2 reduction is improved only with substitution targets. Low fossil energy prices pose barriers to switching to biomass, especially when no other incentives are present. Implementing substitution mandates together with penalties for

CO2 emissions counters such barriers posed by cheap fossil energy.

Amongst the bio-product options, L-SNG appears the least in the model solutions since it has the highest production costs. On the contrary, product gas appears as the gas fuel of choice due to its least cost and its technology configuration to the ISI plants. This result corresponds to findings in Paper I that product gas provides ease in fuel switching options for the ISI. With tighter substitution

20 constraints as explored with the scenario analysis, flexibility in the decentralised production and delivery of L-SNG at sawmills lead to higher utilisation than product gas. The analysis here suggests that the choice of host industry is equally an essential factor to consider, as was done in Paper I.

4.3 Impacts of competition on biomass markets

Paper III explores the relationship between the biomass markets and the options to use biomass in the ISI. In Paper II, the maximum technically feasible use of bio-products is at 9.8 TWh which corresponds to 17 TWh of raw biomass demand. So, while this full substitution option brings about the largest CO2 reduction possible in the current steel technology landscape, it increases the competition of already limited biomass resources. By how much the increased competition will affect the biomass market and the ability of the ISI to use biomass as a substitution towards reduced

CO2 emissions has not been previously quantified nor explored in the literature. Similarly, the effects on supply costs and resource allocation for the existing biomass users by the large-scale introduction of biomass to the ISI have not been well explored previously. Paper III now explores these competition effects by soft-linking BeWhere Sweden and SCFSM.

Three substitution scenarios at the ISI were developed to show full (All_bio-products scenario) or partial transition (Charcoal scenario and Gas-fuels scenario) to biomass utilisation. All three scenarios were modelled based on the iterative process described in section 3.3. The iterations from each substitution scenario represent a dynamic biomass market with changing feedstock prices resulting from competing biomass use in the ISI. A reference scenario without bio-production for the ISI, indicative of a business-as-usual case with static (exogenous) biomass prices, is the starting point when comparing feedstock allocation in the forest and district heating industries.

Figure 13 shows the biomass price developments for six main biomass assortments. Iteration_0 represents the initial introduction of bio-production for the ISI but where static exogenous biomass prices are used, like in the reference scenario. Large-scale use of biomass (i.e., All_bio-products scenario) results in significant price spikes compared to the other two substitution scenarios. Price volatility for pellets is more pronounced than for other assortments in the three substitution scenarios. This results from increased demand for sawmill by-products used for pellet production coupled with increasing demand for pellets as a final good. Depending on the type of bio-product produced, the price impacts for some assortments are relatively higher when the assortment is used as a feedstock for bio-production. Sawlogs are not used as input feedstock for charcoal production, although in the Charcoal scenario, sawlogs experience increasing prices. This is linked to the increasing use of sawlogs in the pulp industry to satisfy their feedstock demand. Endogenous regional price developments for the different biomass assortments results in re-allocation of feedstock use in the competing industries.

Figure 14 shows the allocation of biomass resources across the competing sectors in the reference scenario when there is no bio-production for the ISI. The resulting re-allocation of biomass feedstock assortments for competing industries is shown in Figure 15 for the three substitution scenarios having bio-production for ISI utilisation. In comparing the two figures, biomass assortments used in bio-production undergo competition depending on the scenario. This

21 competition for assortments leads to regional price developments, which together result in feedstock re-allocation, especially for the pulp industry, district heating sector, and sawmills.

Figure 13: Average price developments observed regionally in BeWhere Sweden for different biomass assortments in the three fossil substitution scenarios. (Paper III).

Figure 14: Feedstock use by competing industries in the Reference scenario (BAU). Saw = sawlog demand, Saw_ene = sawmill energy demand, PoP = pulp mill fibre demand, PoP_ene = pulp and paper mill external energy demand, DH = unrefined plus refined biomass demand for district heating, pellets = pellets industry demand. (Paper III)

Confirming the results from (Olofsson, 2019), forest industries affected by the introduction of large- scale biomass use for the ISI will have to adjust their production. In the SCFSM model, endogenously determined biomass imports from foreign markets can avoid regional feedstock shortage. However, indirect emissions coming from long supply chains may negate the goal of CO2 mitigation in the affected industries.

Figure 15: Feedstock use in competing industries and for bio-production in the three substitution scenarios. Bio-prod = feedstock demand for bio-production. (Paper III)

4.4 Economic implications

The economic implications of using biomass were evaluated for the three bio-products substituting fossil energy and reductants. From Papers II and III, Charcoal and product gas were found to be economically favourable compared to L-SNG. In Paper II, bio-product costs were quantified for five substitution levels using reference energy prices in the BeWhere Sweden model (see Figure 16). The bio-product costs comprise fuel production and supply costs. With no substitution level enforced (No fixed targets), product gas is the only bio-product appearing in the solution, thus indicating that it has lower costs than the fossil counterpart. Thus, results from Paper II indicate that 1.5 TWh of product gas (from Figure 12) can be substituted at several plants with the overall system costs lower than in the business-as-usual (i.e., fossil) case. This suggests that the replacement of expensive fuel oils outweighs the costs of integrated production at the ISI plant.

Figure 16: Total cost of each bio-product as utilised in the varying substitution levels

Compared to fossil use, increased costs for bio-products fall within the range of 2 to 37 €/MWh. This corresponds to increased fuel costs for the ISI by 27% when substituting at the maximum level, as shown in Figure 17. When allowing for dynamic biomass prices in Paper III, an average increase of 35% in fuel costs is reported in the All_bio-products scenario. Thus, biomass price impacts resulting from increased competition for feedstock assortment will come at a higher cost to the ISI.

In Paper II, additional scenario analysis hints that as future demand for biomass as a CO2 mitigation strategy increases, biomass utilisation may not be an economically viable option for the ISI.

Figure 17: Marginal increase/decrease in fuel costs for the ISI relative to the BAU case. (Paper II)

Supply costs for competing industries with an existing biomass demand are affected by introducing the ISI as a user of biomass, as illustrated in Figure 18. This follows from the regional price development for biomass assortments in Figure 13. The pulp industry, district heating sector, and sawmill industry incur higher supply costs in the three scenarios. The type of bio-production influences supply costs for these competing industries. The utilisation of bio-based gas fuels has the least economic impact on the competing industries.

Figure 18: Supply costs for competing industries when exogenous and endogenous biomass prices are used as input to BeWhere Sweden. (Paper III).

5 Conclusions and further work

Utilising forest biomass is one strategy that has been considered a short to medium term pathway to decarbonising the iron and steel industry (ISI). System analysis into this strategy has been limited in the literature. Such analysis sheds light on the key factors that should aid decision and policy making on decarbonisation pathways for the ISI. This thesis explored interacting factors across the entire extent of implementing forest biomass utilisation in the Swedish ISI, with key consideration for process integration, supply chain aspects, and competing biomass demand from the forest industry and stationary energy sectors.

The result analysis shows that a trade-off of factors determines bio-product costs. Integrating the production of bio-products with ISI and sawmill processes benefit from excess heat availability and proximity to biomass supply sources. Feedstock costs related to regional biomass competition affect plant localisation, costs-efficiency of bio-product chains, and the corresponding technology pathways, which are all crucial to achieving lower supply costs. Localising bio-production plants close to available biomass sources reduces costs for biomass supply. However, feedstock assortments may vary in quantity, depending on the technology configuration, which increases the supply chain costs.

Transition to cleaner steel production via biomass is possible, although a maximum of 43% of the fossil CO2 emissions from the Swedish ISI can be reduced after accounting for supply chain emissions. This is due to the technical feasibility, which limits bio-product use in the ISI to 9.6

TWh. Even as analysis carried out show that CO2 prices are not necessarily effective in increasing the use of more bio-products in the ISI, implementing substitution mandates may necessitate accompanying policies to support the ISI towards a rapid transition away from fossil energy.

The research outcomes suggest that switching to product gas in auxiliary plants is a low hanging fruit for an easy transition to cleaner gas fuels. Substituting with charcoal achieves high CO2 reduction in the ISI due to the dominant use of coal and coke. However, charcoal production results in more severe competition with pulp industries and district heating plants for similar feedstock assortments. Implementing fossil energy substitution with the three bio-products, although resulting in lower CO2 emissions for the ISI, will significantly impact the biomass markets due to increased feedstock competition for bio-production. The resulting regional price impacts from large-scale forest biomass implementation in the ISI leads to increased supply costs for forest industries in general and reduces the economic feasibility of biomass utilisation in the ISI. Increasing feedstock prices result in feedstock re-allocation for pulp industries, sawmills, and district heating plants. These industries have significant economic and societal value, so changes in their production or raw materials will be at a disadvantage. Therefore, a more comprehensive policy governing biomass utilisation in the ISI will need to consider such unwanted market effects.

A limitation in this study was implementing a single technology for producing biomass alternatives to coal and coke. Increasing feedstock options that can be processed via other technologies could reduce competition effects between forest industries and bio-production for the ISI. More so, the bio-production technologies included in this thesis may require a few more years to be fully commercialised, and plant localisations within the host industries investigated will require long term planning. Thus, further focus on more technological options, such as hydrothermal carbonisation and other biomass types, will provide a clearer picture of the techno-economics of 29 broader biomass use in the ISI. As a recommendation for future work, developing a broader methodology to assess more technological options of biomass utilisation properly will be required. In addition, the inclusion of other industry sectors in the biomass supply chain analysis will benefit efforts to develop policies that account for potential trade-offs and synergies on a broader system level, e.g., direct and indirect CO2 mitigation effects and economic impacts on a national scale. Future work can also explore what roles biomass can play in aiding the scale-up of breakthrough technologies such as iron ore reduction via hydrogen.

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LICENTIATE T H E SIS

Department of Engineering Sciences and Mathematics

Division of Energy Science Chinedu Maureen Nwachukwu

Chinedu Maureen Nwachukwu

Energy Engineering

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