Evaluating fuel switching options in the Swedish iron and steel industry under increased competition for forest biomass

Abstract

Significant use of forest biomass in the iron and steel industry (ISI) to mitigate fossil CO2 emissions may impact biomass availability for other users of the same resource. Increased competition for biomass will likely have an effect on both the price of forest biomass assortments and on the economic feasibility of the ISI’s investments in biomass utilisation. This paper explores the market effects of increased biomass competition and the interactions between the ISI and the forest industry sectors. A soft-linking approach is employed that combines a spatially explicit techno-economic energy system model and a partial equilibrium model. This allows for new equilibrium price developments for different feedstock assortments to be endogenously modelled in a dynamic and iterative process. The results show that regional price disruptions caused by the ISI’s new biomass use affect geographical preferences for bio-production plants. Forest industries with competing demand for the same biomass assortments are accordingly affected negatively regarding both feedstock allocation and biomass supply costs. If the ISI substitutes fossil fuels and reductants with biomass-based alternatives, forest sector industries and the district heating sector could thus be at an economic disadvantage.