Adoption of hydrogen-based steel production under uncertain domestic hydrogen availability: An Indonesian case study

Abstract

In line with the Nationally-Determined Contribution (NDC), the Indonesian steel industry must move to a less energy and carbon-intensive production where the hydrogen-based Direct Reduction Iron Electric Arc Furnace (H2-DRI-EAF) pathway comes as a prominent alternative. However, due to the complexity of the transition it is important to understand the key uncertainties in the adoption of H2-DRI-EAF production pathway in the steel industry, particularly since it must also address the availability of hydrogen domestically. We developed a system dynamics model, conducted a sensitivity to investigate the uncertainties, and to evaluate their effect on the observed indicators. Our results conclude that GDP growth, hydrogen maximum injection rate, and renewables development rate as the key uncertainties to the adoption of hydrogen in the steel industry, and ultimately to the effort in decarbonizing the sector. Furthermore, we found that domestic hydrogen production can fulfil between 20% and 77% of the demand in the Indonesian steel industry. In Indonesia's case, our results show that the share of H₂-DRI-EAF could be between 29 and 38% and the share of hydrogen in the fuel mix could vary widely from 1.91% to 18.9%. The findings in this study could potentially be useful for the steel industry and policy makers alike to design a comprehensive decarbonization strategies.