Interaction between defossilisation of basic industries and relocation - Scenario-based explorative and normative transition pathways to electrification for European basic industries and specific clusters

The steel and chemical production industries are the largest industrial emitters of greenhouse gases in the European Union, together accounting for half of the EU’s industrial greenhouse gas (GHG) emissions. A promising strategy for achieving deep GHG emissions reductions is the electrification of these two industries, which would depend on the rapid expansion of renewable electricity supply. Such electrification can be direct, where electrical appliances replace fossil fuel powered ones, or indirect, using renewable hydrogen produced from water by electricity. Both methods of electrification represent a systemic shift for these industrial systems and require a major wave of investment into new process technologies, as well as access to renewable electricity and green hydrogen. Old industrial structures could become stranded as a consequence of shifting energy and feedstock supply in this way.
The thesis focuses geographically on the major region for EU steel and chemical production: the area between the two North Sea ports of Antwerp and Rotterdam in the west and the Rhine-Ruhr area in the east. It studies the technical and economic feasibility of electrification in the steel and chemical production industries (specifically petrochemicals), followed by an analysis of the impact on locational factors and possible spatial reconfigurations of the production system. The analysis builds on scenario methodology with extensive stakeholder engagement and uses different quantitative bottom-up models developed during several projects. To accelerate and facilitate the transformation of the two focal industries in the region, the thesis identifies strategic options for policy makers, steel and petrochemical companies, as well as for infrastructure providers such as port authorities and network operators.
The results obtained demonstrate the feasibility of electrification and its potential to play a crucial role in the defossilised production of steel and petrochemicals, even in a region with a relatively low renewable electricity potential (such as the one studied). The transformation requires a hydrogen infrastructure for steel and petrochemical clusters and increased circularity, especially in the petrochemical industry. Some production steps in the value chain, such as iron making or chemical feedstock production, will have strong incentives to relocate (either partially or fully). However, other factors, such as the benefits of existing assets and the advantages of vertical integration in existing clusters, may discourage the total relocation of entire production chains.

The steel and chemical manufacturing industries are the largest industrial emitters of greenhouse gases in the European Union, together accounting for half of the EU’s industrial greenhouse gas (GHG) emissions. Rapid action is required to meet the EU's target of climate neutrality by 2050 and the 2030 targets at both EU and member state levels. If the GHG mitigation in these industries is governed by the EU Emissions Trading System (EU ETS) via a high carbon price alone, this is likely to lead to de-industrialisation. Consequently, active policies at all levels are necessary to enable the steel and petrochemical industries to move towards defossilisation. Policies are required not only at EU level, but also at the national and sub-national levels. This thesis focuses geographically on the major region for EU steel and chemical production: the area between the two North Sea ports of Antwerp and Rotterdam in the west and the Rhine-Ruhr area in the east. In this traditional industrial region, stakeholders are concerned about the risk that climate mitigation poses to their existing industries due to the value added employment opportunities and strong supply chain networks that these industries bring to the region.
A promising strategy for achieving deep GHG emissions reductions is the electrification of these two industries, which would depend on the rapid expansion of renewable electricity supply. Such electrification can be direct, where electrical appliances replace fossil fuel powered ones, or indirect, using renewable hydrogen produced from water by electricity. Both methods of electrification represent a systemic shift for these industrial systems and require a major wave of investment into new process technologies, as well as access to renewable electricity and green hydrogen. Old industrial structures could become stranded as a consequence of shifting energy and feedstock supply in this way.
This doctoral thesis studies the technical and economic feasibility of electrification in the steel and chemical production industries (specifically petrochemicals), followed by an analysis of the impact on locational factors and possible spatial reconfigurations of the production system. The analysis builds on scenario methodology with extensive stakeholder engagement and uses different quantitative bottom-up models developed during several projects. To accelerate and facilitate the transformation of the two focal industries in the region, the thesis identifies strategic options for policy makers, steel and petrochemical companies, as well as for infrastructure providers such as port authorities and network operators.
In this thesis summary, which is based on the four appended papers, I outline the scope and research questions and develop a set of locational factors that guided my modelling work on the possible relocations of the two production systems.
The results obtained demonstrate the feasibility of electrification and its potential to play a crucial role in the defossilised production of steel and petrochemicals, even in a region with a relatively low renewable electricity potential (such as the one studied). The transformation requires a hydrogen infrastructure for steel and petrochemical clusters and increased circularity, especially in the petrochemical industry. Based on the findings in the four papers, I argue that electrification offers a range of strategic options for proactive stakeholders – but it will have a knock-on effect on location. Some production steps in the value chain, such as iron making or chemical feedstock production, will have strong incentives to relocate (either partially or fully). However, other factors, such as the benefits of existing assets and the advantages of vertical integration in existing clusters, may discourage the total relocation of entire production chains in the steel and petrochemical industries.