1UniversityofEdinburghBusinessSchoolNorthChinaElectricPowerUniversityUK-China(Guangdong)CCUSCentreMarch2020BHPIronandSteelSectorCCSProjectUnlockingthePotentialofCCSinChina’sSteelSector2TABLEOFCONTENTSAbouttheReport_________________________________________________3Disclaimer______________________________________________________4TheTeam______________________________________________________5Background_____________________________________________________8OurFindingsataGlance_________________________________________10Technologiesforlow-carbonsteelproductioninChina___________________________10Howtofinancealarge-scaleCCUSdemonstrationprojectinthesteelsector?________13AssessmentofoverallGHGemissionsfromaCCUS-fittedsteelplant_______________16TheeconomicsofCO2captureinaChinesesteelplant__________________________17TheEmissionTradingScheme(ETS)asanincentiveforCCSinthesteelsector______18CCUSbusinessmodels___________________________________________________19CreatingaSpecialPurposeVehicle(SPV)forsteelCCUSprojects_________________21Feasibilityofafull-scaleFOAKCCS-EORprojectinthesteelsector________________22Techno-economicanalysesofCCUSinaChinesesteelplant_____________________23Least-costoptimisationmodelofsource-sinkmatchingofafull-chainCCUScluster____24Costestimationofalarge-scalefull-chainCCUSprojectinthesteelindustry_________25MakingsteelplantsCCS-ready_____________________________________________26CommunicationApp-“SteelMAC”___________________________________________27StakeholderEngagement–Workshops______________________________29EnableCarbonCaptureandStorageinChina'sSteelSector______________________29FinancingCarbonCaptureandStorageinChina________________________________29BHPIndustryCarbonCaptureandStorageProjectPeerReviewWorkshop__________31IronandSteelCCUSTechnologyandBusinessModel___________________________323AbouttheReportOverthepastdecade,carboncapture(utilisation)andstorage(CC(U)S)hasattractedincreasingattentiongloballyasanimportanttechnologicaloptionforclimatechangemitigation.Asthelargestgreenhousegasemitterintheworld,Chinaaimstodrasticallyreduceitsgreenhousegasemissions.Thiscanbeachievedeitherbyreplacingitsusageofcoalwithenergysuppliesfromrenewableenergyandnuclearpower,orbyinstallingdemonstration-sizefollowedbylarge-scaleCC(U)Stechnologies.Atpresent,andgiventhemagnitudeofcoaldependenceoftheChineseeconomyandthecountry'slackofalternativeenergyresources,itislikelythattheChinesewillmakesubstantialeffortstodevelopCC(U)Sandcontinuerelyingonfossil-fuel-basedgenerationbeforetakingthemoredrasticstepofphasingoutcoalaltogetherfromitsenergymixoverthenextfewdecades.Emissionsfromtheiron/steelindustryisestimatedataround6.5%ofoverallglobalCO2emissions.Asthesteelproductionprocessfeaturesmultiplesubstantialemissionsourcepoints,anyeffectiveCC(U)Sstrategyinthesectorneedstoaddressthecomplextechnologicalandeconomicissuesposedbythesector.Furthermore,theapplicationofCC(U)Stolarge-scaleindustrialfacilitiesisreflectedintheconstructionoflarge-scaledemonstrationplantsasabridgetofullcommercialdeployment.Thepace,orientationandscaleofCC(U)Sdeploymentwillmainlydependonengineeringadvancesandtheevolutionofcomparativecosts.ResearchonCC(U)Sisdevelopingontwofronts:analysisofhowsocietiesareengagingwithCC(U)Sasamitigationoption,andexplorationofbasictechnologydevelopmentsformitigationandhowthesealignwiththeneedsoftheclimateandenvironmentalpolicycommunity.Cuttingacrossbothofthesethemesisathree-wayfocusonCC(U)Sandtheemergenceoflong-termclimateandenergystrategies;regulation,policyinstrumentsandpublicacceptance;andtheinternationalpoliticsofCC(U)Sindevelopingcountries.Thiscollaborativeresearchproject,fundedbyBHP,seekstobuildonthesedevelopmentsbyfocusinginparticularonthedevelopmentandevaluationofinnovativeandsustainabletechnologyandbusinesssolutionsforCC(U)SinChina’siron/steelsector,asChinarepresentsanimportantcasestudyforthedevelopmentanddeploymentofCC(U)Stechnologies.InJune2016,BHPandPekingUniversity(PKU)announcedathree-yearUS$7.4mresearchcollaborationtounlockthepotentialofCC(U)SforsteelproductioninChina.TheUniversityofEdinburghBusinessSchool(UEBS)jointedtheprojectinNovember2017tosupportPKUGuanghuaSchoolofManagementinthedeliveryofthebusinesscase/economicsstrandoftheworkprogramme.NorthChinaElectricPowerUniversity(NCEPU)andtheUK-ChinaGuangdongCCUSCentre(GDCCUSC)furtherjoinedthecollaborationasanadditionalsourceoftechnicalandacademicexpertiseinCC(U)S.Thetwo-yearresearchproject,endedNovember2019,comprisedof13workingpackages,deliveringafeasibilitystudyforafirst-of-a-kindCO2captureprojectinthesteelsector.Thesummariesoftheworkingpackagesareoutlinedinthisreport.Torequestaccesstoorafullcopyoftheworkingpackage(s),pleaseemailtheprojectteamatccus@business-school.ed.ac.ukorvisitusathttp://financing-ccs.business-school.ed.ac.uk/4DisclaimerUnlessstatedotherwise,copyrighttothispublicationandofthesummarisedreportsisownedbytheUniversityofEdinburghBusinessSchool,NorthChinaElectricPowerUniversity(NCEPU),andtheUK-China(Guangdong)CCUSCentre.Apartfromanyusepermittedbylaw,nopartofthispublicationmaybereproducedwithoutthewrittenpermissionofallparties.Theinstitutions’researchershavetriedtomakeinformationinthispublicationasaccurateaspossible.However,itdoesnotguaranteethattheinformationinthispublicationisentirelyreliable,accurateorcomplete.Therefore,theinformationinthispublicationshouldnotbesolelyrelieduponwhenmakinginvestmentorcommercialdecisions.TheUniversityofEdinburghBusinessSchoolhasnoresponsibilityforthepersistenceoraccuracyofURLstoanyexternalorthird-partyinternetwebsitesreferredtointhispublicationanddoesnotguaranteethatanycontentonsuchwebsitesis,orwillremain,accurateorappropriate.Tothemaximumextentpermitted,theUniversityofEdinburghBusinessSchool,itsemployeesandadvisersacceptnoliability(includingfornegligence)foranyuseorrelianceontheinformationinthispublication,includinganycommercialorinvestmentdecisionsmadeonthebasisofinformationprovidedinthispublication.Forenquiriespleasecontactusonccus@business-school.ed.ac.uk5TheTeamUniversityofEdinburghBusinessSchoolDRLIANGXIPROFLINQIANGUODRFRANCISCOASCUISeniorLecturerinEnergyFinance&Co-director(Research)ofCentreforBusinessandClimateChange,UniversityofEdinburghBusinessSchoolSecretaryGeneral,UK-China(Guangdong)CCUSCentreXiLiangisUEBS’sPrincipalInvestigatoroftheBHPCCSIndustryProject,responsibleforprojectorganization,scholarlyoutputs,evaluationofpotentialeconomicincentivesandfinancialperformanceofaniron/steelCCSproject,analysisoftherequirementsforCCSreadinessinthesteelsector,exploringotherlow-carbonapproachestodecarbonisingthesector,andundertakingnationalandinternationalconsultationswithindustrystakeholders.ProfessorialFellowUniversityofEdinburghBusinessSchoolProfLINresponsiblefordevelopinga100ktpafeasibilitystudyforasteelCCSdemonstrationprojectinChina.ProfLINisalsoresponsibleforrevisingprojectoutputsforpublicationandassistingtheprojectincreatingtheadvisoryboard.ProfLinisalsothePIforNorthChinaElectricPowerUniversity.SeniorLecturerinBusinessandClimateChangeUniversityofEdinburghBusinessSchoolFranciscoisaCo-InvestigatorontheBHPCCSIndustryProjectatUEBS,responsibleforaworkpackagethatundertakesaconsequentialGHGemissionsimpactanalysisofaniron/steelCCSprojectandforpeer-reviewallscholarlyoutputsarisingfromtheproject.6PROFESSORRICHARDHARRISONDRMATTHEWBRANDERDRKATHIKAESEHAGEChairinEntrepreneurship&InnovationUniversityofEdinburghBusinessSchoolRichardisalsoaCo-InvestigatorontheBHPCCSIndustryProjectatUEBS,overseeinginnovationandbusinessmodeldevelopmentstrategiesforafirst-of-a-kindsteelCCS-EORproject.SeniorLecturerinCarbonAccountingandDirectorofMScCarbonFinanceCo-Director(Teaching),CentreforBusinessandClimateChangeUniversityofEdinburghBusinessSchoolMatthewisaCo-InvestigatorontheBHPCCSIndustryProjectatUEBS,responsibleforaworkpackagethatundertakesaconsequentialGHGemissionsimpactanalysisofaniron/steelCCSproject.LecturerinClimateChangeandBusinessStrategy,Co-Director(Engagement)forCentreforBusinessandClimateChange,UniversityofEdinburghBusinessSchoolKathiisaCo-InvestigatorontheBHPCCSIndustryProjectatUEBS,responsiblefordevelopinganonlineknowledgesharingplatform/toolforemissionreductionsoptionsintheiron/steelsector.DRJIANGMENGFEIMRHASANMUSLEMANIMSAYESHASODHAResearchFellowUniversityofEdinburghBusinessSchoolMengfeiisresponsibleforresearchandprojectmanagementinBHPCCSinIronandSteelSectorinChinaProject.DoctoralResearcherUniversityofEdinburghBusinessSchoolHasanisaResearchAssistantontheBHPCCSIndustryProjectatUEBS.BusinessDevelopmentManagerUniversityofEdinburghBusinessSchoolAyeshaissupportingglobalindustryengagementandimpactfortheBHPproject.7NorthChinaElectricPowerUniversity(NCEPU)PROFZHANGYIMEIMSWUQIANDeputyDean,SuzhouResearchInstituteNorthChinaElectricityPowerUniversityYimeileadsandsupervisesthefourworkingpackagesofNCEPU.Researcher,NorthChinaElectricPowerUniversityWUQianisresponsiblefordatacollectionandreportwritingforeconomicassessmentintheIronandSteelsectorinChina.UK-ChinaCCUS(Guangdong)CentreMSRENLIHUAMSCHENXIAOLUMRLIUMUXINChiefDesignOfficerUK-China(Guangdong)CCUSCentreLihuaisresponsibleforCCS-Readyresearch,andreviewoflow-carbontechnologiesintheIronandSteelprocess.LihuaisthePIforBHPprojectinUK-China(Guangdong)CCUSCentre.AssistanttoSecretaryGeneralandOfficeDirectorUK-China(Guangdong)CCUSCentreCHENXiaoluisassistingthesecretarygeneralincommunicatingwithstakeholdersincompaniesanddesigninstitutesinGuangdong.CentreInnovationManagementDirector,UK-China(Guangdong)CCUSDoctoralResearcher(CCS),UniversityofEdinburghBusinessSchoolMuxincontributestosourcesinkmatchanalysisandoutputmanagementforBHPproject.8BackgroundCarbonCaptureandStorage(CCS)isatechnologythatcapturecarbondioxideemissionsfromemittingsourcessuchaspowerplants,steelplantsandchemicalplants,andpermanentlystoresitundergroundpreventingitfromre-enteringintotheatmosphere.Asofyet,therearenolarge-scaleapplicationsofthetechnologyinChina,withlarge-scaleprojectsmainlyexistinginNorway,theUnitedStatesandafewothercountries.In2010,asynthesisreportbytheUnitedNationsIndustrialDevelopmentOrganisation(UNIDO)acknowledgedthattheapplicationofCCStoenergy-intensiveindustrialsectorswasanareawhichhad‘sofarnotbeenthefocusanddiscussionsandthereforemuchattentionneedstobepaidtotheapplicationofCCStoindustrialsourcesifthefullpotentialofCCSistobeunlocked’.1Thebusinesscaseforandhencethevaluebroughtaboutby(early)deploymentofCC(U)Shasbeenhighlightedintermsofthesignificantcostreductionsthatitbringsaboutinoveralldecarbonisationandtowardssocietyovertime.TheInternationalEnergyAgency(IEA)estimatesthattheexclusionofCCSasacarbonmitigationtoolforthepowersectorwouldincreasecostsofemissionsmitigationbyaroundUS$2trillionby2050–a70%increaseinmitigationcostsifalternatives,includingrenewables,wereinsteademployedoverthetimeperiod.2TheInternationalPanelonClimateChange(IPCC)furtherreportsthatitwouldbe138%moreexpensivetodecarboniseenergy-intensivesectorswithoutCC(U)Sinthemix.3Fromanindustrialsubsector’sperspective,ElementEnergypointedoutthatthelikelihoodofsuccessfulCC(U)Simplementationisafactorof1)whetherthesubsectorproducespureCO2,and2)whetherthesubsectorissubjecttostrongglobalcompetition–therelevanceofthelattermanifestinginwhethercostscouldbeultimatelypassedontoconsumers.4Moreover,unlesscomplementaryinternationalenvironmentalpoliciesareinplace,sectorsproducingglobalcommoditiesareatriskof‘carbonleakage’,i.e.whereproductionfromnon-CCSretrofittedplantsinastatemayshiftoverseas,leadingtofailureinmitigatingoverallemissionsfromthesectorglobally.Fortheseindustries,someofwhichmightnotbeabletoabsorbCC(U)Scostsduetolowprofitmargins,alternativefinancingmechanismsandincentivesmustbeinplaceifnoadditionalrevenueisgeneratedfromcapturingcarbon(e.g.throughproductsales).Inthisproject,thecaseforprioritisingtheimplementationofCC(U)Stechnologieswithinthesteelsectorinparticularoverotherindustrialsubsectors(e.g.cement,crackers,chemicals,ammoniaandhydrogen,etc.)isherepresented.Secondonlytothecementsector,thesteelsectorisoneofthelargestindustrialsubsectorsbyemissions.5Althoughthecementsectorfeaturesamuchhigheroverallpotentialforcarbonabatement–3xhigher–thanitssteelcounterpart6,thereisavaryingimpactthattheimplementationofcarboncapturetechnologywouldhaveonproductioncostsinbothsectors.IntheUK,forinstance,whilethelevelisedcostofabatement(LCoA)withinbothsectorsfallsintherange50-60£/tCO26,therelativeimpactofimplementingcarboncapturetechnologyontheproductioncostofcementisestimatedtobesignificantlyhigher(+73%)thanonthatofsteel(+19%).4ItwillgenerallybemoreexpensivetocaptureCO2fromsectorswhereproductsexhibitlowmarketpricesandfeaturehighercarbonintensity(e.g.cement),andviceversa.Thecombinationofahighabatementpotentialwithlowimpacton1DeConinck,H.,Mikunda,T.,Gielen,D.,Nussbaumer,P.,&ShchreckB.(2010).CarbonCaptureandStorageinIndustrialApplications,TechnologySynthesisReport.2InternationalEnergyAgency(IEA)(2016).20yearsofcarboncaptureandstorage–Acceleratingfuturedevelopment.3InternationalPanelonClimateChange(IPCC)(2014).ClimateChange2014:SynthesisReport.ContributionofWorkingGroupsI,IIandIIItotheFifthAssessmentReportoftheIntergovernmentalPanelonClimateChange.IPCC,Geneva,Switzerland.4ElementEnergy(2018).Industrialcarboncapturebusinessmodels:ReportfortheDepartmentforBusiness,EnergyandIndustrialStrategy5WorldSteelAssociation(WSA)(2019).Climatechangemitigation–factsheet.6ElementEnergy(2014).DemonstratingCO2captureintheUKcement,chemicals,ironandsteelandoilrefiningsectorsby2025:ATechno-economicStudy.DECCandBIS.9productioncostmakesaclearcase,atleastatpresent,forfocusingonCC(U)Sapplicationsinthesteelsector.TheEuropeanUltra-LowCO2Steel-Making(ULCOS)consortiumhasbeenrecentlyactivelypushingforadeepcutinemissionsfromthesteelindustry,withanultimateaimofreducingemissionsbyover50%fromtoday’sbestavailablesteelmakingroutes.7ULCOShasselectedarangeofeffectivetechnologiesforfurtherdevelopment,allofwhichwhencombinedwithCCS,canmeetitsreductiontargetinlinewithrecentinstitutionaldevelopments.8Theonlyotherlarge-scaleexperienceofthesteelindustrywithCCSistheEmiratesSteelIndustryCCSProject.However,resultsfromthelatterarenotindicativeoftheglobalstatus,andhencefutureprospects,ofCCSdevelopmentwithintheindustry,ascarboniscapturedfromafacilitythatutilisesaDirectReducedIron(DRI)routetosteelmaking–theleastadoptedroutetosteelmakingworldwide.9Manyoftheprocessesinvolvedinsteelmakingareenergyintensive,suchastheextractionofironintheblastfurnacewhichrequireshightemperaturesandcokeforreduction.Expectedemissionsfromeachofthelargestintegratediron/steelblastfurnaceplantsareintherangeof5-8MtCO2/yr.10TherearelikelytobemultiplesourcesofCO2foreachsite,whichincreasesthecomplexityofcarboncaptureimplementation.Asidefromthetechnicalcomplexityinvolved,amyriadofotherchallengesfacingindustrialCCShavebeenwidelyacknowledged.Thisproject’sreports–summarisedinthefollowingsections–explorepolitical,technicalandeconomicchallengesofimplementingCC(U)SinthesteelsectorandhowcurrentCC(U)Sbusinessmodelsinthepowerandindustrialsectorshaveattemptedtoaddressthesechallenges.7Steelmaking(2015).Ultra-lowcarbondioxidesteelmaking:Consortiumoverview.8Todorut,A.V.,Cirtina,D.,&Cirtina,L.M.(2017).CO2abatementintheironandsteelindustry-thecaseforcarboncaptureandstorage(CCS).Metalurgija,56(1-2),pp.259-261.9GlobalCCSInstitute(2016).TheGlobalStatusofCCS.SpecialReport:IntroducingIndustrialCarbonCaptureandStorage.Melbourne,Australia.10He,K.,&Wang,L.(2017).Areviewofenergyuseandenergy-efficienttechnologiesfortheironandsteelindustry.RenewableandSustainableEnergyReviews,70,1022-1039.10OurFindingsataGlanceWereviewedexistinglow-carbontechnologyoptionsforthesteelsector,excludingfuelswitchingandcarboncaptureandstorage.Thisincludedcompilingacomprehensivelistofenergy-efficientandcarbonabatementtechnologiesfordifferentsteelmakingprocesses,includingdataontheircapitalcosts,operationandmaintenancecosts,energy-savingcapacity,carbonabatementcapacityandthecurrentshareoftheirapplicationsinthesteelindustry.Thecarbonabatementcostsandpotentialsfortheselectedtechnicaloptions(totalof41)arebasedonabottom-up‘MarginalAbatementCostCurve(MACC)’model,showninFigure1.TheMarginalAbatementCostCurveassessesthecost-effectivenessofthesetechnologiesaswellastheircarbonabatementpotentialsintheChinesesteelindustry.TheMACcurveassumesadiscountrateof15%overtheperiod2010-2030.Ofthetechnologicaloptionsassessed,37technologieswereeithertechnically-oreconomically-applicabletotheChinesesteelindustry,wheretheshareoftechnologiesappliedexceeding10%andwhere5technologieshavealreadybeenfully-adoptedbythesteelindustryinChina:•29technologiesarefuel-savingoptions,•17technologiesareelectricity-savingoptions,where•5technologiescansavebothfuelandelectricity;theseincludeContinuousCasting,ThinSlabCasting,AnnealingLineHeatRecovery,PreventativeMaintenance,EnergyMonitoringandManagementSystemsandCogeneration.Thecumulativecarbondioxideemissionsreductionfromallselectedabatementoptionswas668KgCO2/tce,orputdifferently,ifalltheaforementionedabatementoptionswereadopted,theywouldresultina43.2%reductioninemissionspertonneofsteelproducedfromthecurrentaveragelevelsinChina.TheresultsoftheimplementationrateincomparisonwiththemarginalabatementcostsareshowninFigure2.Forthepurposesofourresearch,wheretheimplementationrateofatechnologyexceeds50%,thetechnologyisassumedtobematurelypromoted.Seventechnologies,includingEccentricBottomTapping,LT-PRofConverterGas,HeatRecoveryfromtheSinterCooler,CoalMoistureControl(CMC),RecoveryofBOFGasandSensibleHeat,Combined-cyclePowerPlant(CCPP)andContinuousAnnealing,havebothapooreconomicefficiencyandalowerthan50%implementationratewhichposesmajorobstaclestotheiruniversalpromotion.Another9non-cost-effectivetechnologies,includingPreheatingofSinterPlant,WasteHeatRecoveryinHotRollingandCasting,FurnacesInsulation,CDQ,SteamUseReduction,AnnealingLineHeatRecovery,andFlueGasMonitoringandControl,ontheotherhand,havehighimplementationrates(i.e.over50%),amongstwhichPreheatingofSinteringPlanthasbeenfully-adoptedinthesteelindustry.Technologiesforlow-carbonsteelproductioninChina11Figure1.AMarginalAbatementcostcurve(MACC)fortheChinesesteelindustryinChina.Top-pressureRecoveryTurbinesContinuousCastingTwinShellDirectCurrentArcFurnacesEAFProcessOptimizationScrapPreheatingDirectCurrentArcFurnacesFoamySlagPracticesOxygen-fuelBurnersUHPTransformerAutomatedMonitoringandTargetingSystemCogenerationThinSlabCastingEfficientLabelPreheatingInjectionofPulverizedCoalinBFto200kg/tHotMetalEnergyMonitoringandManagementSystemsUseofWasteSinteringFuelsBlastFurnaceControlRecuperativeBurnersRecuperatingonthehotblaststoveFlueGasWasteHeatRecoveryProcessControlinHotStripMillPreventativeMaintenanceWastePlasticInjectionintoBlastFurnaceSinteringProcessControlImprovementHotFurnaceSystematicEnergySavingBlastFurnaceWasteGasRecoveryPreheatingofSinteringPlantCCPPHotRollingandHotChargingofCastingBilletFlueGasMonitoringandControlContinuousAnnealingHeatRecoveryfromSinterCoolerRecoveryofBOFGasandSensibleHeatAnnealingLineHeatRecoverySteamUseReduction(pickingline)CokeDryQuenching(CDQ)EccentricBottomTappingLT-PRofConverterGasWasteHeatRecoveryinHotRollingandCastingFurnacesInsulationCoalMoistureControl(CMC)-50-40-30-20-1001020300100200300400500600700Marginalabatementcost(yuan/kgCO2)CumulativeCO2abatementpotentialkgCO2/tce12Figure2.Technologiesdistributionbyimplementationrateandmarginalabatementcost.-50.00-40.00-30.00-20.00-10.000.0010.0020.0030.000102030405060708090100Implementationrate(%)MarginalabatementcostNinetechnologiesboastgoodeconomicefficiencyalbeitwithalowimplementationrateandarethusworthyoffurtherpromotion.Inaddition,16cost-effectivetechnologiesarebeingsuccessfullypromotedatscale,ofwhich4technologies(ThinSlabCasting,ContinuousCasting,EfficientLabelPreheatingandUseofWasteSinteringFuels)havebeenthoroughlyimplemented.Mostofthese16technologiesfocusonsavingenergyintheproductionprocess,whileonlytwotechnologyoptionsfocusonwasteenergysavings.Whilethisindicatesthatenergy-savingmeasuresforthesteelproductionprocessinChinaarebetterpromotedthanwasteenergysavingtechnologies,someofthelattermayfeaturehigheconomicefficiency.OnereasonforthiscouldbethatpastandexistingnationalpoliciesormeasuresonindustriesissuedbyChineseGovernmenthadfocusedonprocessstructureimprovementandprocessoptimisation.However,sincethepublicationofthe11thFiveYearPlan,theGovernmenthasrealiseditsshortfallsinsupportingwasteenergyrecyclingandreusebecauseoftechnicalandeconomiclimitations.Thecumulativecarbonabatementpotentialofthe25mostcost-effectivetechnologiesisaround570kgCO2/tce,representinga36.9%reductioninaverageCO2emissionspertonneofsteelproduced.Whileoverhalfoftheselectedtechnologiespromotedbythe12thFiveYearPlanremaincost-ineffective,theycouldbecomecost-effectivetechnologiesgivenfutureincreasesinenergyandcarbonpricescombinedwithtargetedpolicyinterventionsintheChinesesteelindustry.13Thesteelsectoremitsapproximately6.5%ofglobalanthropogenicgreenhousegasemissionsandsince2012,China’ssteelplantshavecontributedapproximatelyhalfofglobalsteelproduction.CarbonCapture,UtilisationandStorage(CCUS)technologyisatechnically-viablewaytodecarbonisesteelplantswithminormodificationstoexistingprocesses.However,thetechnologyiscostlyandthereisalackofsufficientincentivestofinanceCCUSinthesteelsectoratalargescale.Ourworkexploresoptionsforfinancinglarge-scaleCarbonCapture,UtilisationandStoragedemonstrationprojectsintheChinesesteelsector.CostofCO2avoidanceOurresearchreviewed17largeChinesesteelplantsownedbythreelargesteelgroups,HBIS,BaowuSteelandShougangGroup,whichproducedacombinedtotalof128milliontonnesofcrudesteelin2017,accountingfor15%and7%oftheChineseandglobalsteelproduction,respectively.Ofthereviewedplants,13canberetrofittedwithmatureamineseparationtechnologiestocaptureemissionsfromtheirblastfurnaces(BF).ThecostsofcapturingCO2atuptoa60%scaleatmajorBF-BasicOxygenFurnace(BF-BOF)steelplantswereestimatedusinganexperiencecurvemodel.Wefoundthat:•13steelplantscontribute218megatonneperannum(Mtpa)ofcarbondioxideemissionswhiletheother4plants(consideredunlikelytoberetrofittable)areestimatedtoemit39Mtpa;•89MtpaofCO2couldbecapturedfromthese13steelplants,leadingtopermanentstorageofanestimated74MtpaofCO2;•ThecostofCO2avoidancerangesfromCNY175toCNY435pertonneofCO2(USD25-62)for7plantswhichfeatureanopportunityforEORwithinanaccessibledistance.ThecostrangesfromCNY313toCNY585pertonneofCO2(USD45-84)for13plantswithproximitytosalineformationstoragesites,equivalenttoaweightedaveragecostofCNY356pertonneofCO2(USD51);and•74milliontonnesofcarbondioxideperannum(i.e.34%oftheseplants’totalemissions)couldbeavoidedatatotalcostofaroundCNY26billion(USD3.7billion).IfEORopportunitiesat7plantswithinareasonabledistanceofonshoreoilfieldsareexploited,thecostcouldbereducedbyapproximately18%toCNY21.7billion(USD3.1billion).FinancialincentivesforsteelCCUSWeconductedacomprehensivereviewofexistingeconomicincentivesforCCUSprojectsinternationally–withafocusontheUnitedStates,CanadaandNorway–whereamajorityofthecurrently-operatingandin-constructionprojectsarelocated.WealsoreviewedcurrentCCUSsupportingpoliciesandfinancialincentivesforpilotinglarge-scaleCCUSapplicationsinChina.Bybuildinganexperiencecurvemodelbasedon13Chineserepresentativeretrofittablesteelplants,wefoundthat74milliontonnesofcarbondioxideperannum(i.e.34%oftheseplants’totalemissions)couldbeavoidedatatotalcostofaroundCNY26billion(USD3.7billion)withaweightedaverageHowtofinancealarge-scaleCCUSdemonstrationprojectinthesteelsector?14costofCNY356(USD51)pertonneofCO2.Buildingonthis,weidentifiedpotentialeconomicincentives,includingvariousfinancialsourcessuchasR&Dgrants,supportfrominternationalandmultilateraldonors,andsteelfirms’owncapital,allofwhicharerequiredtoenablelarge-scaleCCUSdemonstrationprojectsintheChinesesteelsector.Reviewingtheeconomicincentiveswhichhavedriveninvestmentsinlarge-scaleintegratedCCUSprojects(LSIPs)internationallyand–intheabsenceofanyLSIPsinChina–investmentsinCCUSpilotprojectsinthecountry,wefoundthat:•ClimatepoliciesandcarbonpricingarecurrentlynotthemaindriversforLSIPs:13outof17operationalprojectsintheworldarepredominantlydrivenbythebenefitsgeneratedfromtheuseofthecapturedcarbondioxideforenhancedoilrecovery(EOR);•PilotprojectsinChinaaredrivenbyabroaderrangeofdrivers,fromEORtotechnologicallearningandsocialresponsibility;•AlthoughChinahasbeenpilotingemissionstradingschemes(ETS)withanationalETShavingalsobeenlaunchedin2017,theiron/steelsectoristhusfarnotcoveredwithinthenationalETS.Itisalsoworthnotingthatcurrentcarbonprices(approximatelyCNY3-60pertonneCO2)remaininsufficienttoincentivisedeploymentofLSIPsinChina;•TheChineseGovernmentrecognisedtheurgentneedtodevelopandimplementCCUStechnology.Since2011,fourtargetedpoliciesfordevelopingandimplementingCCUShavebeenreleasedbytheMinistryofScienceandTechnology,alongwithmorethan10otherrelevantenergyandclimatechangepoliciessince2006;and•TheChineseGovernmenthasprovidedoverCNY3billion(USD430million)toanumberofCCUSresearch,developmentanddemonstrationprojectsthroughnationalscience-technologyplansincludingtheNationalBasicResearchProgram(973Program),theNationalHigh-TechnologyProgram(863Program)andtheNationalScienceandTechnologySupportPlanduringthe11thFive-YearPlan(2006-2011).OnlyoneprojecthowevertargetedCCUSintheChineseiron/steelsector.FinancialstreamsforsteelCCUSWealsoidentifiedpotentialsourcesoffinanceforCCUSinChina’ssteelsectorandanalysedtheirfeasibilitybasedonpreliminaryfeedbackfromgovernmentandindustrystakeholders.Thesesourcesarecategorisedinto:privatefinancingmechanisms,publicfinancingmechanismsandmarket-basedmechanisms.Weconcludedthat:•Implementingacooperativetechnologystrategycouldpotentiallybeaprimarydriverfordevelopinglarge-scaleCCUSprojects.MostexistinglargeChinesesteelcompanieshavevertically-integratedstructureswhichnormallyincludeanR&Dandengineeringdesigninstitute,thustheinterestsoftheseinstitutesmayinfluencethecorporatestrategyofthesteelgiantsinChina;15•UtilisingtheCO2capturedfromsteelplantstoincreasedomesticoilproductionnotonlyprovidesadditionaleconomicbenefitsbutalsoaddressesChineseconcernsoveroildependency.Still,EORcannotreliablybetheonlymechanismforincentivisingalarge-scalesteelCCSplantconsideringuncertaintiesindemandandtherelatively-highercapturecostsforsteelplantscomparedtocapturefromotherprocessessuchasgasprocessingorhydrogenproduction;•Grantsandloansbyvendorsareoftentargetedatlarge-scaleprojectsandvendor-financingcouldbeanimportantmechanismtosupportlarge-scalesteelCO2capturedemonstrationprojects;•FinancialsupportfromtheChineselocalgovernments(provincialormunicipal)toCCUSisuncertainwhileinternationalCCUSinitiativescanprovidealimitedbutsignificantsourceoffundingforalarge-scaleCCUSdemonstrationinChina,albeitwithapossiblelongleadtime;•CarbonpricingthroughemissionstradingisnotlikelytobeamaindriverforCCUSinChinainthenearfuture;and•CombiningdifferentfinancialsourcessuchasR&Dgrants,supportfrominternationalandmultilateraldonors,andsteelfirms’owncapitalisrequiredtoenablelarge-scaleCCUSdemonstrationprojectsinthesteelsectorinChina.16Theprimarymotivationforimplementingcarboncapture(utilisation)andstoragetechnologyisitsroleasaCO2abatementtechnology,anditisthereforehighlyimportanttoassesstheGHGemissionscausedbytheintroductionofCC(U)S.Onemethodofassessinglifecycleemissions,dubbedan‘attributional’lifecycleassessment,isacommonlyusedmethodforassessingtheenvironmentalimpactsoftechnologies,howeveritdoesnotnecessarilycapturethetotalsystem-widechangeinemissionscausedbyadecisionorintervention.AconsequentialGHGassessmentmethod,ontheotherhand,aimstoquantifythetotalsystem-widechangeinemissionscausedbyanactionorintervention.WithalackofexistingconsequentialstudiesforCC(U)Stechnologies,thisresearchprovidedaninitialscopingstudyforthesystem-widechangeinemissionscausedbytheimplementationofcarboncapture,utilisationandstorageforasteelplantinChina.TheGHGProtocol’sPolicyandActionStandard1wasadoptedasthemainconsequentialGHGaccountingmethodologyhere,complementedbyfurtherguidancefromtheconsequentialLCAliterature1,1.ThePolicyandActionStandardincorporatesatransparent‘baseline’and‘intervention’scenariostructure,andallowsfortheexplicitmodellingofGHGemissions/removalsovertime.Itisalsobroadlyconsistentwiththeinternationalproject-levelcarbonaccountingframeworkestablishedundertheUnitedNationsFrameworkConventiononClimateChange,knownastheCleanDevelopmentMechanism(CDM).Inbrief,thePolicyandActionStandardframeworkmethodologyinvolvesthefollowingsteps:Figure3.Illustrationofthestructureofthebaseline-and-creditmethod.AssessmentofoverallGHGemissionsfromaCCUS-fittedsteelplantBaselinescenarioDecisionscenarioReductionachievedbydecisionEmissions(tCO2e)Time(years)Step1.Definingtheaction/interventionstudied;Step2.MappingthecausalchaintoidentifythemainGHGsources/sinksthatchangeasaresultoftheaction/interventionstudied;Step3.ModellingtheGHGemissions/removalsinthebaselinescenario(i.e.thescenariomostlikelytooccurintheabsenceoftheaction/intervention);Step4.ModellingtheGHGemissions/removalsintheinterventionscenario;Step5.Subtractingtheinterventionscenarioemissions/removalsfromthebaselineemissions/removalstocalculatethechangeinemissions/removalscausedbytheaction/intervention.Thismethodisoftenreferredtoasthe‘baseline-and-credit’method,andtheoverallstructureofthemethodisillustratedinFigure3.17Ourworkincludedatechno-economicanalysisofahypotheticalfirst-of-its-kind(FOAK)CO2capture,transportandstorageprojectatcommercialscaleinamodernChinesesteelplant.Asthemostcommoncapturetechnology,weassumedtheuseofaminetechnologytocapturetherelatively-highconcentrationofCO2emissionsintheproductionprocess.WeusedtheAdvancedSystemforProcessEngineering(ASPEN)todefinethetechnicalconfigurationoftheproject,combinedwithafinancialmodel.Theanalysisshowsthat:•ThecostofCO2avoidanceforthemodelled0.5milliontonne/yearcapacityCO2captureproject,withoffshorepipelinetransportandstorageinasalineformationisestimatedataroundCNY442/tCO2(i.e.USD63/tCO2);•Assumingthattheprojectrunsat90%capacity(i.e.0.45MtCO2/year)over25years,theprojectwouldcaptureatotalof11.25MtCO2.However,thisispartiallyoffsetbyemissionsfromincreasedenergyconsumptionforrunningtheCCSprocess,wherenetemissionswouldbereducedby0.40MtCO2/year,oratotalof9.93MtCO2overitslifetime;•Whenthecostoftheprojectisapportionedonlytotheamountofsteelassociatedwith9.93MtCO2(i.e.2.6%oftotalsteelproduction),theadditionalcostofproductionisaroundCNY730–orUSD104–pertonneofsteelproduced.However,asthiscasestudyassumesthatonlyaminoramountofCO2iscaptured,ifthecostofCCSwerespreadovertheplant’sentireproductionoutput,theadditionalcostpertonneoftotalsteelproductionbecomesonlyaroundCNY19(USD2.7)/tonne;•ThecostofCO2avoidanceissensitivetoanumberofassumptions,includingthediscountrateandthecostofCO2transportationandstorage.Thediscountrateofthecaptureprojectisassumedtobe12%,takingintoaccountthecostofcapitalofBaowuSteelandthespecificriskoftheCO2captureproject.Iftheprojectwereconsideredamoderateriskinvestmentandaccordinglyappliesan8%discountrate,thecostofCO2avoidance(i.e.theabatementcost)isreducedfromaroundCNY442/tCO2(USD63/t)toCNY407/tCO2(USD58/t).TheassumedcostforT&Scouldbefurtherloweredweretheprojecttoshareinfrastructurewithotherlargestationaryemissionsources;and•WhileadditionalcostsofCCSinthiscasestudyaremoderateandthereisafurthersignificantpotentialtoreduceitthroughlearningandupscaling,uncertaintiesindemandandsupplyofsteelmightdeterthesteelsectorfrombearingtheadditionalcostsforsuchprojects,unlesssomeformofexternalsupportorinternalbenefitisguaranteed.WesuggestthatthenextstepofappliedresearchinvestigatesacombinationofgovernmentandbusinessinnovationoptionsthatcouldprovidethenecessaryfinancialsupportforFOAKdemonstrationprojects.TheeconomicsofCO2captureinaChinesesteelplant18Anemissionstradingscheme(ETS)isamarket-basedmechanismthatcanhelpachieveemissionreductiontargetsinacost-effectiveway.OurresearchexploredthreepotentialoptionsforincentivisingCCSintheChinesesteelsectorviaanemissionstradinginstrument:•AfirstoptionistotreattheCO2storedthroughCCSas‘notemitted’asfarasETScomplianceisconcerned,sothatcoveredCCS-fittedsteelplantsareabletoachieveemissionreductionsatthetimeofperformance,henceeffectivelygeneratingrevenuebysellingspareallowances(ornothavingtopurchaseallowances)inthemarket;•Asecondoptiontakesaproject-basedbaseline-and-creditapproach,whereentitiescoveredbythenationalETScanpurchaseoffsetcreditsfromCCS-fittedsteelplantsandusethosecreditstomeettheirETScomplianceobligations;and•AthirdoptionistousetherevenuegeneratedbytheauctioningofallowancestosupportCCStechnologydevelopmentanddemonstrationinthesteelsector.Thefirsttwooptionsrequireahighpriceofallowancesinthemarket,meaningthatallcheaperabatementoptionswouldneedtobefullyexploitedbeforesteelsectorCCSapplicationsbecomethemarginalprice-settingoption.However,ascurrentcreditpricelevelsinChina’snationalETSareunlikelytosupportaCCSprojectintheiron/steelsectoratpresent,furthersubsidiesfromothersourcesarenecessary.ThethirdoptionoffersapromisingapproachtosupportearlystageCCSprojects,althoughdetailedregulationsandprocedureswouldneedtobeestablishedwhilerelevantgovernmentfinancedepartmentswouldneedtoapprovethismethod.Thethirdoptionremainsthemostflexibleoptionwiththepossibilityofalsobeingcombinedwiththeothertwooptions.Thethirdoption,ifimplemented,couldleveragemuchstrongersupportthanoptions1or2intheshortterm.Inthelongrun,oncethecarbonpricebecomeshighenough,option1solelywouldsufficetosupportsteelCCSprojects.Foroptions1and2,suitableandrobustlegalbasesandcomprehensiveMRVsystemsarerequired.Foroption3,thefundsfromauctioningofallowancescouldbeusedtosupportearly-stageCCSpilotordemonstrationprojectsintheChinesepilotregulatoryframework.TheEmissionTradingScheme(ETS)asanincentiveforCCSinthesteelsector19CarbonCapture,UtilisationandStorage(CCUS)hasbeenrecognisedasakeytechnologyinreducingcarbonemissions,howeveritsapplicationhasbeenmostlylimitedtothepowersector,despiteemissionsfromthenon-powerindustrialsectoraccountingforaround30%ofglobalanthropogenicCO2emissions.ThisreportexploresthechallengesofandrequirementsforimplementingCC(U)Sinindustrialsectorsingeneral,andinthesteelsectorinparticular,withtheobjectiveofidentifyingdriversofsuccessfulbusinessmodelsforthetechnology’scommercialisation.ThisbuildsonareviewofthecurrentstatusofCC(U)Sdevelopmentsinthesteelsector,andacomprehensiveliteraturereviewofCC(U)Sbusinessmodels(bothinthepowerandindustrialsector),theirconstitutingelements,andcurrently-establishedbusinessmodelsforlarge-scaleCC(U)Sprojectsoperatingindifferentpolicyenvironments.Theanalysisisfurthercomplementedbyinputscollectedthroughasurveyquestionnaireandtargetedsemi-structuredinterviewswithglobalCCSexpertsandrepresentativesfromindustry,academia,governmentandconsultancies.Theanalysisrevealsthat:•TherevenuemodelisthemostcentralelementtobuildingsuccessfulCC(U)Sbusinessmodels,aroundwhichthefollowingelementsarebuilt:fundingsources,capital&ownershipstructureandriskmanagement/allocation;•Surveyresponsesandstakeholderconsultationsmakeitevidentthatthecreationofalow-carbon/greensteelproductmarketisapromisingmechanismtosubsidisetheadditionalcostsofindustrialCC(U)S,whiletheneedtocreateclearrisk-allocationsystemsalongthefullCC(U)Schainisespeciallyhighlighted;•TheintroductionofCC(U)Sasanenablingemissionreducingtechnologywithinenergy-intensiveindustriesismainlydrivenbyconsumerandshareholderpressures,pressingenvironmentalstandards,ethicalresourcing,resourceefficiency,andproducer’sdrivetobefirst-moversinanemergingmarket;•ThevaluepropositionofCC(U)Sisassumedtobetheeventual‘burial’ofCO2,andaCC(U)Svaluechainisdescribedinsixmajorsteps:1)carbonsourcecharacterisation,includinga)data,suchasitslocation,theCO2outputflowrate,theCO2purity,andb)thetypeofoutputstream;2)CO2captureprocess,whereCO2isseparatedfromtheoutputstreamusinganappropriatetechnologybasedonthetypeofstream.Thisisthemostextensively-exploredcomponentofthevaluechain,andcapturetechnologiesarewidelyclassifiedwithinoneofthreecategories:a)post-combustion,b)pre-combustion,orc)oxy-fuelcombustiontechnologies.CapturetechnologiescanalsobeclassifiedbasedonCO2partialpressure,i.e.CO2concentrationlevelinthefluegasstream(High:30-70%,Medium:35%andLow:3-20%);3)purification;4)compression,whichtakeplacebasedontheCCUSbusinessmodels20finalproductorpermanentlystoredingeologicalreservoirs;•ForanyindustrialCCScontract,thefollowingfivechallengesareprioritisedintheliterature:1)upfrontcapitalinvestmentforCO2capture,2)recurringcostsforcaptureplantoperation,3)technicalperformancerisks,4)benefitsofreducedcarbonemissions,and5)aclearsolutiononcecarbonexitstheboundaryofthecapturesite;•Fourroutesareidentifiedtocontractuallyorganiseprojects:1)Withinasinglecompany(self-build)inavertically-integratedbusinessmodel,wheretheenergycompanymusthaveacapturesourceandastorage/EORsiteaswellasmeansoftransportation.SuchamodellimitsentrantstothemarketstospecificenterprisesthatcaninvestinandoperateanentireCCUSindustrychain.However,avertically-integratedmodelalleviatestherisksassociatedwithdifficultiesofcooperationamongdifferentsectors;2)Betweendifferentcompanies/jointventuremodel,whereCO2iscapturedfromapowerplantownedbyathirdparty,whereCO2isthentransportedtoastorage/EORsite,alsoownedbyathirdcompany.AtypicalownershipstructureofaJVbusinessmodelis40%(powercompany),30%(transportcompany),and30%(oilfieldcompany);3)CCSoperatorbusinessmodel,wherethepartiestothismodelincludetheCCSoperator,theoilcompany,andpowergenerationcompany,andtheexpensesinthismodelaresplitasfollows:theCCSoperatorbearsequipmentandO&Mcostsofcapture,transportandstorage,whiletheoilfieldcompanybearsequipmentandO&McostsofEORandexpensesofCO2purchasing;and4)CCStransporterbusinessmodel,wherethepowercompanycapturesCO2,coversequipmentandO&McostsofcaptureandgeneratesrevenuethroughCO2salesandfromtradingcarboncredits.ThetransportcompanycoversequipmentandO&McostsoftransportandgeneratesrevenueviaafeechargedfortransportingCO2,onewhichispre-agreeduponamongthestakeholders.Finally,theCO2user,i.e.theoilfieldcompany,coversequipmentandO&McostsofEORorstorageandthepurchaseofCO2,andgeneratesrevenuefromastoragesubsidyorsalesofoilduetoEOR.21SteelsectorstakeholdersaregenerallyunfamiliarwithopportunitiesandrisksinCCS.ThisreportreviewsbusinessmodelsofcurrentCCSprojectsandidentifiespotentialchallenges.BylearningfromthesuccessfulexperiencesofJapanCCSLtd.andNorwayGassnova,andbasedonthecurrentpolicysystemandtheenergyindustrystructureinChina,weexploreanoptionofcreatingaspecialpurposevehicle(SPV)tokickoffCCSinthesteelsector.TheSPVhasahigherdegreeofrisktoleranceandiscapableofattractingfinancialsupportfromthepublicsector.Thebusinessmodelsofthecasestudiesappraisedmakeitevidentthat:•EverycurrentCCSprojectiseitherownedbythegovernmentorsupportedtoacertainextentbythegovernment,whiletherevenuemodeliskeytocreatingvaluepropositionandcurrentprojectsremainlargelyreliantonrevenuefromEnhancedOilRecovery(EOR).•Unlikegloballarge-scaleCCSSPVs,suchasJapanCCSandNorway’sGassnovawhicharebothdirectly-fundedbytheirrespectivegovernments,theChineseGovernmentwillnotownaSPVtokickoffsteelCCSprojects.Therefore,steelplantownerswhointendtodeployaCCSprojectshouldestablishaSPVindependently.OnceasteelcompanymakesafinalinvestmentdecisiononaCCSproject,anSPVshouldbeestablishedwhichwouldowntheassetsofCO2capturefacilities.AllCCS-relatedbusinessescanthenbetransferredfromthesteelcompanytotheSPV.AsalegalentityandoperationalbodyoftheCCSproject,theSPVcan:1.Receivedomesticfinancialsupportandpolicysupportfromthegovernment;2.Signcontractswithaconstructioncompanyandsupplycompanytoensurethesuccessfulconstructionoftheproject;3.AchieveagreementswithbothinternationalandnationalresearchinstitutesanduniversitiestodevelopCCStechnologyR&D;4.Contractwithatransportcompanyandoilcompanytodeployafull-chainCCSproject,and5.AttractCCS-relatedprivatecompaniestoparticipateintheproject.CreatingaSpecialPurposeVehicle(SPV)forsteelCCUSprojects22TheBlastFurnace-BasicOxygenFurnace(BF-BOF)processisthemostcommonlyusedmethodforproducingsteelinChina,andtheblastfurnacegas(BFG)remainsthelargestsourcewithlowconcentrationofCO2intheBF-BOFprocess.CarboncapturetechnologycanbedirectlyappliedtopurifytheCO2intheBFG,providingalarge-scaleanddirectemissionsreductionoptionfortheChinesesteelindustry.PreviousstudiesontheBFGfocusedalmostsolelyonthedevelopmentoftechnologiesandoneconomicassessmentsofcapturecosts,whilealackofeconomicassessmentsandfeasibilitystudiesforafull-chainCCUSprojectandinparticularwithintheChinesecontextisevident.Thishampereddecision-makingatthegovernmentalandindustry’slevels,deterredtheChineseGovernmentfromformulatingincentivepoliciestosupportCCS/CCUSprojectdemonstrationsinthesteelindustry,andinturndiscouragedinvestorsfrompromotingthoseprojects.Inlightofthis,ourresearchfocusedonundertakinganeconomicassessmentandfeasibilitystudyofafullchainFirst-of-a-Kind(FOAK)100ktpasteelsectorCCSEnhancedOilRecovery(CCS-EOR)project,takingtheChineseengineeringcapacityintoconsideration.Byidentifyinglow-costcapture,transportationandutilisation/storageoptionsforaFOAKprojectandthedevelopmentofa100ktpaFOAKprojectinChina,wefoundthat:•CapturingCO2fromtheBFGwillresultinadualbenefitofincreasingthecalorificvaluealongwithCO2internaluseofnitrogenreplacementandexternalsalesforindustrialutilisationandenhancingoilrecovery;•Whenconsideringenvironmentalissuesandsystemcomplexitiesassociatedwiththechemicalabsorptiontechnology,andthatanexistingBlastFurnaceTopGasRecoveryTurbineUnit(TRT)couldbeusedtorecoverhighpressureenergyfromCO2-freeBFG,themembrane,PSA,andcryogenicmethodsandtheirintegrationtechnologiesaretechnicallyfeasiblefora100ktpaFOAKinChina,whererequirementsof90%capturerateand99%CO2concentrationandtransportationtoexternalutilisationandstoragesitearemet;•ConsideringtheflexibilityofinternalandexternalusesofthecapturedCO2andthetransferabilityoftheFOAKfacilitytoothersteelplantswithashortertransportationdistancetostoragesites,the100ktpaFOAKCCUSprojectisproposedwith50ktpagaseousCO2of95%concentrationcapturedbyaPSA-membraneunitforinternaluse,and50ktpaliquidCO2of99%concentrationcapturedbyamembrane-PSAandcryogenicdistillationunitforexternaluses.TheuseoftrucksisrecommendedtotransporttheliquefiedCO2toeitherexternalindustrialuserswhoareatanaverageof100kmdistanceaway,ortoEORusersinJiangsuprovince(distanceof250km);and•TheFOAK100ktpaCCS-EORprojectcanbeeconomicallyfeasiblewhenasubsidyofUS$15/tforCO2storageiscombinedwithfundingsupportofover80%ofthecapitalinvestment,assumingasalepriceofUS$45/tandtransportationdistanceof250km.Feasibilityofafull-scaleFOAKCCS-EORprojectinthesteelsector23Wecarriedoutasystematictechno-economicanalysisoftheefficacyofdifferentcarboncapturetechnologiesformajorsourcesofcarbonemissionsinthesteelmakingindustry.CCUSremainstheonlytechnologythatcandeliverlarge-scaledirectemissionreductionsintheindustry,withlessrestructuringcostsforestablishedplant-specificenergysystems.AninvestigationofCO2emissionsourcesinanintegratedsteelplantandanalysisofthefeaturesofthefluegasoflimekilns,cokeovenandtheassociatedpowerplant,aswellasofthehotblaststovegas,blastfurnacegasandconverterfurnacegassuggestthat:•TheCO2contentofthefluegasoflimekilns,hotblaststovegas,blastfurnacegasandconverterfurnacegasishigherthanthatofthepost-combustionfluegasgeneratedfromatypicalcoal-firedpowerplant;•TheblastfurnacegasbeforetheTopPressureRecoveryTurbineUnithasahigherpressurethanatmosphericpressure;•Thefluegasfromahotblaststovenormallyhasahighertemperaturethanotheremissionsources;and•ThedischargeofLinz-DonawitzGas(LDG)fromtheconverterfurnaceisintermittent,whileothersarecontinuousorapproximatelycontinuous.Weexploretheapplicabilityofcapturetechnologies,includingabsorption,adsorption,membrane,andcryogenicseparationmethods,inrelationtothecharacteristicsofthesourcegases,potentialby-productsandtheintendeduseandpurityrequirementsofthecapturedCO2.Wefoundthat:•Thechemicalabsorptionmethodissuitableforlow-concentrationgaseswhilethepressureswingadsorption,membraneseparationandcryogenicdistillationmethodsaremoresuitableforhigh-concentrationgases;•ThechemicalabsorptionmethodissuitableforobtaininghighpurityCO2streams(>99.9%pure)thanothermethods,whilethemembraneandPSAseparationmethodsandtheirintegrationtechnologiesaresuitableforproducingstorage-gradeCO2streams(about95%pure);•Thetechnicalapplicabilityandeconomicperformanceofcapturetechnologiesareaffectedbytheby-productopportunitiesassociatedwiththeremovalofCO2;and•Thetechnicalapplicabilityandeconomicperformanceofcapturetechnologiesarealsodependentoncapturerates.WerecommendthatcapturingCO2fromtheblastfurnacegas,hotblaststovegasandlimekilnfluegasisprioritisedinChina’ssteelindustrydueto:1)thehighconcentrationofCO2inthosegasstreams;2)thefactthatthecalorificvalueoftheBFGcanbesignificantlyimprovedbyremovalofCO2;and3)thatnitrogengas,whichisinhighdemandbythesteelindustry,canbeobtainedasaco-productfromthehotblaststovegasandlimekilnfluegasoptions.Techno-economicanalysesofCCUSinaChinesesteelplant24HighcostsofCCUSremainamajorobstacletoitslarge-scaledemonstrationanddeployment,however,optimalsource-sinkmatchingcanreducethecostofCCUSprojectsandenhancetheireconomicfeasibility.Afull-chainCCUSclustercouldsubsequentlybeformedbasedonanoptimalsource-sinkmatchofmultiplecapturesourceswithoneormorestoragesites.However,whiletheoperationofthesemultiplecaptureandstoragesourcescouldultimatelybeintegratedthroughapipelinenetwork,buildingandcommissioningofeachCCUSprojectmaytakeplaceoverdifferenttimeperiodsandatdifferentscales.Therefore,itisencouragedtoplanearlyforthedevelopmentofafull-chainCCUSclusterinordertosupportthelow-costimplementationofCCUSprojectsasawhole.AssteelproductionprocessesfeaturemultiplepotentialCO2capturesites,ourworksseekstoachieveoptimalmatchingbetweencaptureandstoragesitesthroughtheuseofanoptimisationmodel.Themodelaimstominimisethetotalcostofafull-chainCCUScluster,subjecttoaavarietyoftechnicalandeconomicconstraintsinthecontextofthesteelindustry.Wefurtherhighlightanddemonstratetheadvantagesandapplicabilityofthemodelthroughacasestudyofafull-chainCCUSclusterforthesteelsectorinChina’sYangtzeRiverDeltaregion.Ourfindingsarehighlightedasfollows:•Theoptimisationmodelisbasedontheleast-costsource-sinkmatchingofafull-chainCCUSclustersystemreflectingthedynamicsofthescale,timingandsitingofconstructionandoperationofafull-chainCCUSproject.Themodelcanfurtherproviderobustbottom-updecisionsupportforplanningafull-chainCCUScluster,basedonthedevelopmentandoperationofCCUSprojectsinthesteelindustry;•Afteranalysingtheimplementationstrategiesofdifferentsource-sinkmatchingschemesunderdifferentscenarios,wefindthatthemodelcanaddresstheimpactsofsteel-relatedtechnicalandmarketpoliciesonthesource-sinkmatchingofafull-chainCCUScluster.ThemodelcanthusenabletheplanningofaCCUSclusterwhileaccountingfortheobjectivesandconstraintsspecifictoCCUSprojectsinthesteelindustry;and•Theoptimisationmodelisbasedoncapturefromavarietyofemissionsourceswithmultiplecaptureconditionsatasteelplant,andcanthusbeusedtosupportrobustsource-sinkmatchingofafull-chainCCUSdemonstrationprojectandprovidethebasisfortheplanningofafull-chainCCUSclusterfortheindustry.Least-costoptimisationmodelofsource-sinkmatchingofafull-chainCCUScluster25CarbonCapture,UtilisationandStorage(CCUS)isoneofthefewtechnologiesthatcanhelpindustryachievelarge-scaleCO2emissionreductions.Currently,largeinvestmentandoperatingcostsarerecognisedasthemainobstaclestotheimplementationoflarge-scaleCCUSprojects.CostestimatesandeconomicassessmentsofCCUSprojectscanhelpdecision-makersunderstandandidentifythelowestcostpathwaystowardsimplementation.However,aCCUSsystemiscomplex,involvingmultipleinteractionsbetweencapture,transportation,utilisationandstorageactivities.Forthesteelindustry,CCUSinvolvesnotonlymultiplegassourcesinthecaptureprocess,butalsodifferentcapturetechnologiesfordifferentgassources.Inaddition,alargenumberoftechnicalandeconomicparametersassociatedwiththeCCUSsystemaresubjecttouncertainty.Conductingeconomicassessmentsandfindingthelowestcostoptionrequiresamodelthatcanidentifytheoptimalchoiceforcapturebetweengassourceswithinthesystem,takingaccountoftheinteractionsbetweencapture,transportation,utilisationandstorageactivities,andtheuncertaintyinparameters.Wecombinedalinearoptimisationmodelwithintervalandmixedintegerprogrammingtodevelopacostestimationmodelthatreflectstheinteractionsbetweenvariousprocessesandtheuncertaintyinparametersofafull-chainCCUSsystemforthesteelindustry.Thedevelopedmodelcanserveasatoolforeconomicassessmentofthefirstlarge-scaleCCUSdemonstrationprojectintheChinesesteelindustry.Wethenappliedthemodeltoahypotheticalcasestudyofalarge-scaleintegratedfull-chainCCUSprojectinvolvingcapturingCO2fromtheblastfurnaceandthebasicoxygenfurnace(BF-BOF)processofasteelplant,andthentransportingtheCO2bypipelinetoanoilfieldforEORorforstorageindepletedgasfields.Thecasestudydemonstratesthat:•Themodelcanprovidealeast-costestimateforthenetcostofaCCUSsystem,takingintoconsiderationthecompetitivecharacteristicsofmultiplegassourcesinthesteelindustryandtheinteractionsbetweenactivitieswithinthefull-chainCCUSsystem;•ThemodelcanbeusedtoestimatetheCO2emissionsreductionandstorageefficiencyofdifferentCCUSprojects,aswellastherequiredinvestmentresourcesandenvironmentalbenefits.Thiscanhelpguidetheplanningoftheoptimalselectionofinternalgassourcesforthesteelindustry,andinturninformtheeconomicassessmentofCCUSprojectsbasedoncostminimisation;•Themodelemploysintervalandmixedintegerprogrammingmethods,whichtakeintoaccounttheimpactofuncertaintyofparametersandvariablesonCCUSprojecteconomics,aswellastheimpactofthedynamicexpansionovertimeofdifferentpartsofCCUSchains;and•Scenarioanalysesindicatethatthemodelcanbeusedtoappraisetheimpactsofeconomic,technicalandpolicyfactorsonthecostofafull-chainCCUSsystemforthesteelindustryandsupporteconomicfeasibilitystudiesofspecificCCUSprojects.Costestimationofalarge-scalefull-chainCCUSprojectinthesteelindustry26‘CCSreadiness’or‘CO2CaptureReadiness’(CCR)isadesignconceptwhichrequiresminimalup-frontinvestmentinthepresenttomaintainthepotentialforCCSretrofitinthefuture.Assuch,capturereadinessavoidsacarbonlock-ineffectinthesteelindustry.WeconductedahypotheticalcasestudytodevelopaconceptualCCRdesignforaprojectwhichcaptures0.5milliontonnesofCO2peryearfromtheoff-gasofasteelplanthotblaststove.Assumingacaptureefficiencyof90%,capturing70tonnesofCO2perhourfromtheoff-gaswitharepresentativeCO2concentrationof25%,andusingagenericaminesolvent(30wt%MEA)–themostmatureCO2capturetechnologytodate–asabase-casescenario,wehereoutlinethekeytechnicalanddesignrequirementswhichensurethatasteelplantiscapture-ready:•ThegeographiclocationoftheplantsplaysamajorroleindeterminingitssuitabilityforCO2captureasthis,aftertheadditionofthecaptureplant,enablesthecapturedCO2tobetransportedforgeologicalstorageand/orenhancedoilrecovery(EOR);•Thechosencarboncapturetechnologymustbetechnicallyfeasibleforretrofit;•Sufficientspacemustbeavailableonornearthesitetoaccommodatecarboncaptureequipmentinthefuture;and•Pre-investmentswhicheasethecaptureretrofitandreduceplantdown-timeinthefutureretrofitmustbeconsidered.OurGISanalysisshowedthat51outof142steelplantsinChinaarewithina200kmradiusfromaCO2storagesite,whichopensupscopeforfurtherresearchonCO2storageopportunitiesforsteelplants.Areviewoftheessentialrequirementsofvariouscarboncapturetechnologyoptionsforninetypesoffluegasstreamswasundertakentoprovidethebasisforfurtherselection.Continuousupdatestothisreviewwouldbebeneficialtotracktheprogressofemergingcapturetechnologies.Equallyasimportantisensuringthatplantscanaccommodateanynewtechnologiesthatmaynotbecurrentlyascompetitive,sothattheymayberapidlydeployedwhentheybecomereadilyavailable.Ourstudyresultsaresummarisedasfollows:•Ourhigh-levelcaptureplantdesignincludesanindicativeamine-basedabsorptionprocessflowdiagramshowingmajorstreamsandthemainequipment,HeatandMassBalance,preliminaryequipmentsize,utilitiesconsumptionandotherkeyengineeringperformanceparameters;•Thespacerequiredforthecaptureunitata0.5milliontonneslevelisestimatedataround4,000m2,whichincludesthepre-treatmentunit,amineunit,operationcontrolbuilding,aswellasaCO2compressionunitforCO2transportationandstorage.Theadditionalspacerequiredforutilitiessupplyfacilitiesisestimatedataround1,200m2;•ThecomprehensiveutilisationofwasteheatwouldbeadvantageousforCCSapplicationsinChina’ssteelproduction.Itisrecommendedthatback-pressuresteamturbinesareusedtodrivemulti-stageCO2compressioninsteadofelectric-motor-drivencompressorswithpowerloadsof7,100kW.Thesteamrecoveredfromwasteheatboilerswouldbefedtothesteamturbine,whileexhauststeamatlowpressurefrombackpressureturbinethenflowsbacktothereboilersofthecarboncaptureunittoprovideapproximately75%oftheamineregenerationheatrequirements(withoutMVRprocessheatrecoveryoption);MakingsteelplantsCCS-ready27fromwasteheatboilerswouldbefedtothesteamturbine,whileexhauststeamatlowpressurefrombackpressureturbinethenflowsbacktothereboilersofthecarboncaptureunittoprovideapproximately75%oftheamineregenerationheatrequirements(withoutMVRprocessheatrecoveryoption);•Potentialpre-investmentoptionsareidentifiedtoeasefuturecaptureretrofit;and•OurresearchprovidesananalyticalapproachandengineeringprinciplestosupportthedesignofCCRsteelplants.ItmaybeadoptedtodevelopamorerigorousconceptualCCS-readinessdesignofsteelplantsattheFEEDstage.SteelMACisaknowledgesharingandopen-accessapplicationforcarbonemissionsreductionoptionsintheironandsteelsector,whichprovidessteelcompanieswiththeoptionofcustomisingtheunderlyingprocesseswithinthetoolbasedontheirspecificavailabletechnologiesandprocessdesign.Knowledgesharingcanacceleratethedeploymentoflow-carbontechnologiesintheironandsteelindustry,buttherearebarriersbroughtaboutbydifferencesinbusinessmodelsandlanguagesthataimtoreducecarbonemissions.TheprimaryaimofthisAppistoenableaninteractiveplatformforknowledgesharingofbestpracticeapproachesandtechnologiesforemissionreductionsinthesteelsectorandtheirassociatedfinancingmodels.Itprovidesdiversestakeholderssuchasbusinessleaders,thepublicsectorandpolicymakerswithasystematicvisualisationofthecomplexprocessesofsteelmaking,includingassociatedenergyandemissionintensities.DeveloperscanacquiredataandenhancetheimpactofBHP’sindustrialcarboncaptureandstorageprojectinChina.Inaddition,thetoolwillsupportresearchersincollectingdataandcommunicatingsolutionsforthedecarbonisationofthesteelsector.TheSteelMACtoolbringstogetherregionalpartnersthroughorganisedworkshops,networkmeetings,andinformaldinnersintheUS,Canada,ChinaandAustralia.TheultimategoaloftheSteelMACistoserveasa‘handyman’forcarbondioxideemissionsreductioninthesteelsector.Thetoolwillhelpresearchersidentifyanddevelopsolutionsforreducingcarbondioxideemissionsinthesteelsectorbyenhancingengagementbetweenpolicymakers,industryparticipantsandresearchers.Itwillaidresearchersininformallycollectingadvicefromthepubliconavarietyoftechnologiesand/orprojectproposals.ThetoolwillfurtherserveasabilingualplatformtoadvancecommunicationbetweenEnglish-speakingandChinesecommunitieswheretranslationwillbeprovidedbytheprojectpartners.CommunicationApp-“SteelMAC”28Platformoverview:TechnicalInputs:a)Top-downchoiceoftechnologiesusedineachstage(i.e.sintering,coking,BF,BOF/EAF,casting)b)Energysourceforeachstagec)Electricity/fuelusageandintensityd)ProjectlocationOutputs:1.Optimaltechnologicaldevelopmentpathwaysa)Energy-efficiencyimprovementb)Wasteheatrecovery(WHR)c)CarbonCaptureandStorage(CCS)d)Alternativefuels2.CO2abatementpotentials–top5cheapestabatementoptions,3.Costs–top5cheapestalternatives29StakeholderEngagement–WorkshopsOurprojectinvestigatedexistingpolicyandfinancialinstrumentsforCCUS(inChinaandglobally),conductedaseriesoftechno-economicanalysesofCCUSandidentifiedinvestmentrequirementsandpolicypriorities.Wefocusedondefiningthemostapplicablepolicyandfinancialincentivesforlarge-scaleCCUSinChina’ssteelsector,aswellasunderstandingthetechnicalneedstoestablishCCS-readyplants.Complementingourresearchwerewide-rangingconsultationswithkeystakeholdersinindustry,academiaandgovernmentaimedatgeneratingnewthoughtsandcollectsuggestions.On27thJuly2018,expertsfromtheWorldSteelAssociation,SheffieldUniversityandIEACleanCoalCentreparticipatedinanexperts’workshopinLondon,andheldanin-depthdiscussiononhowtoeffectivelyenableCCSinChina’sironandsteelsectorwithLiangXiandLinQianguofromtheUniversityofEdinburghBusinessSchool.EnableCarbonCaptureandStorageinChina'sSteelSectorStationMaster’sOffice,StPancrasRenaissanceHotel27July2018Chinaisthelargestgreenhousegasemitterintheworld.Chinahasplayedakeyroleindrivingrapidcostreductionsofemergingenergytechnologies,suchasonshorewind,solar,andcoal-firedpowerplants.Theestimatedcapitalexpendituretobuildanewcarboncaptureandstorage(CCS)projectinChinaisestimatedtoonlybearoundonefifthofthatinOECDEurope.Inthis,on30thNovember2019,jointlywiththeUKCCSResearchCentre,weheldaworkshoptoexplorethefeasibilityofdevelopingandco-financinganopen-accessCCSprojectinChina.SpeakersfromIEAGHG,UKInternationalClimateFund,andADB,amongstothers,sharedtheirexperiencesofsupportpoliciesforCCSactivities.PanelistsfromtheUSFinancingCarbonCaptureandStorageinChinaUniversityofEdinburghBusinessSchool30November201930NationalCarbonCaptureCenter,InternationalCCSKnowledgeCentre,ScottishCCS,TCM,BP,andCNOOCheldin-depthdiscussionsonfeasibilityofanOpenAccessCCSproject.31TheaimoftheworkshopwastoinviteexpertsfromtheironsteelsectorandexpertsinclimatefinanceandgreenfinancetoprovidedetailedreviewsondraftoutputsfromtheBHPfundedindustryCCSresearchprojectinChina.Theprojectoutputsreviewedbyexpertsinclude:•Low-carbonoptionsintheironandsteelsectorinChina•Thetechno-economicanalysisofaminecaptureintheironandsteelsector•Thetechno-economicanalysisofmembranecaptureintheironandsteelsector•Feasibilitystudyof100,000tonneperannualscalesteelCCSpilotwithenhancedoilrecovery•Proposalsfor500,000tonneperannualcommercialdemonstrationproject•CCSreadinessintheironandsteelsector•PolicyoptionsforCCSintheironandsteelsector•OptionstoincludesteelCCSintheETSinChina•BusinessmodelsforincentivisingCCSintheironandstreelsectorBHPIndustryCarbonCaptureandStorageProjectPeerReviewWorkshopPekingUniversityLakeviewHotel29May201932ExpertsfromtheMinistryofEcologyandEnvironment,BaowuSteelResearchInstitute,SuzhouEnvironmentalProtectionAdministration,Sinopec,GCCSIandNCSC,amongstothers,attendedaworkshopinSuzhou,analysedthetechnologicalandpolicydevelopmentstatusofCCUSanddiscussedapotentialCCUSroadmapintheironandsteelsectorinChina.IronandSteelCCUSTechnologyandBusinessModelSuzhouResearchInstitute,NorthChinaElectricPowerUniversity10October201933
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