Energy Efficiency, T&D, Transmission

Case Study: World’s Largest Steel Manufacturer Joins Capacity Market to Help Solve Peak Power Shortage

Issue 11 and Volume 19.

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by Luis de Miguel Martinez, ArcelorMittal Energy SCA, and Pieter-Jan Mermans, REstore

A landmark agreement between steel manufacturers Aperam and ArcelorMittal and demand response firm REstore will allow the return of up to 150 MW to the transmission grid at peak times.

The agreement will deliver cost savings for two of ArcelorMittal’s Belgian factories and contribute enough power to mitigate the grid’s need for new peak power plants.

Aperam, with its stainless steel business, and ArcelorMittal, the world’s largest steel manufacturer and supplier, have partnered with European demand response aggregator REstore to implement an innovative way to manage energy consumption, create new revenue and contribute to the country’s power needs.

ArcelorMittal together with Aperam consumes approximately the same amount of gas and electricity as all of Austria, or 25 percent of the total annual energy consumption in the U.K. Managing the cost of this energy plays a vital role in ArcelorMittal’s market strategy; the company must remain competitive in a global steel market. To compete against China, Brazil, Russia and other countries, ArcelorMittal’s European factories must mitigate growing costs from energy taxes, transport and renewables levies. One of the levers to mitigate part of this impact was the setup by ArcelorMittal of an internal business unit called ArcelorMittal Energy SCA in 2011 to focus on energy optimization and energy trading for its European manufacturing plants.

ArcelorMittal Energy SCA is working with REstore to intelligently reduce its power demand, pooling the resultant spare megawatts to relieve pressure from the transmission grid at peak times.

Market Context

In recent years, the U.K. Big Six utilities-British Gas, EDF, E.ON AG, nPower, Scottish Power and SSE-have closed or mothballed old and unprofitable power plants all across Europe. When the EU Large Combustion Plant Directive (LCPD) is fully implemented in 2015, more than 12 GW of noncompliant gas and coal power plants also will be shut down. The U.K. alone will see at least nine such plants closed. The European Parliament originally introduced the LCPD in 2001 to reduce acidification, ground-level ozone and particles throughout Europe by controlling emissions from large combustion plants in power stations, refineries, steelworks and other industrial processes.

With fewer gas and coal power plants to rely on, transmission system operators in countries such as the U.K., France and Belgium will find it increasingly difficult to absorb spikes in energy demand. On cold winter days, for example, demand increases as people need more heat in their homes. If demand outpaces supply-an increasing problem as more intermittent renewables are added to the energy mix-then the country’s lights could go out.

Until recently, the suggested solution was to invest in new peak power plants to provide emergency power during times of intense need; however, transmission system operators and regulators are looking for cheaper, more sustainable alternatives. The large-scale deployment of demand response offers a solution. Elia in Belgium and National Grid in the U.K. already use demand response.

The Solution

REstore partners with transmission system operators in the U.K. and Belgium, along with big industrial consumers across Europe, to relieve pressure on the grid in real time by helping consumers curtail power demand. In turn, consumers receive a payment big enough to incentivize their ability to reduce power vs. their fixed costs. Demand response technology improves the efficiency of current energy infrastructure and production, thereby reducing the need for more gas- or coal-powered plants, which would increase unwanted carbon emissions. REstore has the equivalent of a virtual gas power plant with approximately 1 GW of peak load energy under management.

In March, two ArcelorMittal-Aperam steel plants started to assess the opportunity to partake in the capacity market after Belgium’s Minister of Energy said the country will struggle to avoid winter blackouts. The capacity market’s purpose is to help keep the lights on; the aggregator offers capacity to the capacity market using a pool of industrial consumers that can reduce power demand at request of the transmission system operator during high demand. The aggregator only curtails power demand of the industrial consumers when there is an urgent need for peak power.

Local ArcelorMittal energy managers started identifying which factory operations could be curtailed to reduce power demand. They looked at machinery such as electric furnaces, rolling mills, grinders, pumps and casters. The critical question was whether it was possible to limit power to machinery fast enough and long enough to guarantee the minimum energy required to qualify as demand response. It quickly proved more challenging than expected. During a limited number of hours and days per year, ArcelorMittal could not always curtail its machinery. In addition, the local operations team was concerned that steel quality and customer delivery would be affected when machinery was curtailed. Individually, it looked unlikely that ArcelorMittal would be able to meet Elia’s stringent requirements for strategic reserves participation.

Nevertheless, REstore overcame these challenges by aggregating both plants into its portfolio, which contains a wide array of other industrial sites, all owned by different companies. Together, these sites make up REstore’s virtual power plant. When circumstances meant that ArcelorMittal’s plants couldn’t curtail power, another company in REstore’s portfolio would step in as a substitute, ensuring that Elia had a guaranteed number of megawatts available at all times. This approach ensured ArcelorMittal’s local operations team could carry on with business as usual while enabling ArcelorMittal to partake in the capacity market as part of a broader pool.

Results

Benefits for ArcelorMittal include:

  • Contributing to Belgium’s energy system and reducing the need for investment in peak power plants. Belgium’s security of supply is under stress as the country is phasing out its nuclear power stations and increasing renewable energy development. This puts additional pressure on the grid. Any contribution to the nation’s energy needs is welcome.
  • Financial remuneration for ArcelorMittal paid by REstore in the form of regular cash payments.
  • Saving an estimated 6,500 tons of carbon dioxide annually as less energy overall needs to be produced (6,500 tons of CO2 is equivalent to the annual CO2 emissions of 2,500 cars).

Conclusion

Demand response is significant for energy markets across Europe as the rise of renewables and closure of gas and coal plants challenge a steady energy supply. Minimal cost is involved, and there is great savings potential for corporations and energy providers.

Luis de Miguel Martinez is managing director of ArcelorMittal Energy SCA, the world’s leading supplier of quality steel products in all major markets including automotive, construction, household appliances and packaging. ArcelorMittal is present in more than 60 countries and has an industrial footprint in more than 20 countries.

Pieter-Jan Mermans is co-founder of REstore, an energy technology company focused on automated demand response. REstore offers curtailable capacity to energy utilities, balancing responsible parties and transmission grid operators in the form of a virtual power plant, offering technical specifications that are fully comparable to a gas-fired plant. REstore operates in the Benelux and the U.K. Jan-Willem Rombouts and Pieter-Jan Mermans founded the company in 2010.

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