01Where the electricity goes
Reducing iron ore with hydrogen (Fe₂O₃ + 3H₂ → 2Fe + 3H₂O) sets a hard chemical floor on the hydrogen needed per tonne of iron. Real shaft furnaces sit above that floor: they recirculate unreacted gas, run hydrogen in excess for kinetics and heat transport, and never fully metallise the product.
Making that hydrogen by electrolysis is the largest single electricity demand on the route, ahead of heating the reducing gas, melting in the electric arc furnace and running the auxiliaries. Every inefficiency in the electrolyser, and every kilowatt-hour lost to degradation over its life, is multiplied across every tonne the plant produces.
| Step | Relative demand | What drives it |
|---|---|---|
| Electrolysis for reduction | Dominant | Hydrogen per tonne, stack efficiency and degradation, balance of plant |
| Electric arc furnace | Significant | DRI share and temperature, gangue, slag practice |
| Reducing-gas heating | Moderate | Inlet temperature, heat recovery, electric versus combustion heating |
| Auxiliaries | Smaller but persistent | Gas compression and cleaning, cooling water, materials handling |
Relative ranking only; actual values depend on equipment, feed and operating strategy.
The consequence is simple and often under-weighted: an industrial-scale plant on this route is one of the largest electricity customers in any grid it joins, and with variable renewable supply it needs a substantially larger generation fleet behind it. The price, shape and firmness of that supply dominate everything downstream.
02Three clocks that do not agree
The configuration has to reconcile three time behaviours. Renewable generation moves on hourly, daily and seasonal cycles. Electrolysers can follow load, but with limits: alkaline systems typically need a substantial minimum load, PEM systems go lower and respond faster, and frequent cycling has a cost in degradation. The reduction shaft wants steady gas flow, temperature and burden movement; it tolerates modest turndown but not interruption, and restarts are slow and quality-sensitive.
Whatever cannot be absorbed by flexibility in one stage has to be absorbed by a buffer between stages or by firm supply from outside. The economics of the whole route are largely the economics of where those buffers sit and how large they are.
- Electricity buffering: battery storage and grid or firmed supply smooth what reaches every electrical load.
- Hydrogen buffering: storage between electrolysis and reduction decouples their schedules, at the cost of compression and vessels or suitable geology.
- Product buffering: hot briquetted iron (HBI) lets reduction and melting run on separate schedules and separate sites.
- Electricity
- Battery storage
Supplies the whole system
- Electrolysis → hydrogen
- Process equipment
Material route
- Magnetite feed
- Prep + pellets
- Hydrogen DRI
- EAF + refining
- Cast + finish
- Steel
03Battery storage belongs on the system line
In the configuration KyperX is examining, battery storage is a core element that charges from renewable and grid supply and discharges to the same system line that feeds the electrolysers, the gas heaters, the furnace and the auxiliaries. Placement matters more than size at first: a battery that can only feed electrolysis does nothing for the loads that are least able to tolerate interruption.
Batteries and hydrogen storage do different jobs. Batteries handle minutes to hours with high round-trip efficiency, which suits intra-day shaping, ramp control and ride-through. Converting electricity to hydrogen and storing it carries larger losses but can cover longer gaps, and only for the reduction step. The analysis question is the split between them, not whether either is needed.
04Utilisation is the cost lever
Electrolysers, compressors, hydrogen storage and reduction shafts are capital-heavy. Their contribution to cost per tonne scales roughly with the inverse of utilisation: halve the operating hours and the capital charge per kilogram of hydrogen, and per tonne of iron, roughly doubles. Published levelised-cost studies consistently show electrolyser capacity factor and electricity price as the two dominant sensitivities, ahead of stack capital cost once utilisation is low.
This is why cheap but intermittent electricity does not automatically produce cheap hydrogen, and why paying more for firmer supply can lower the delivered cost of steel. It is also why stack degradation matters commercially: rising specific consumption over a stack’s life raises electricity demand per tonne just when replacement capital comes due.
05The feed sets the ceiling
Shaft-furnace direct reduction depends on high-grade feed. DR-grade pellets need high iron content and very low silica and alumina, because gangue passes straight through reduction and has to be removed as slag in the furnace, costing electricity, flux and yield. Magnetite concentrates can often be beneficiated to that grade, but grinding, separation and pelletising add equipment, energy and cost, and the economics depend on the ore body.
Hydrogen DRI also differs metallurgically from natural-gas DRI. Reduction is endothermic, so the gas has to be heated to high temperature to keep the shaft in balance. The product carries little or no carbon, which conventional EAF practice relies on to foam slag, reduce residual iron oxide and supply chemical energy. Carbon-free DRI melts differently and can need adjusted slag practice or carbon additions, and fresh DRI reoxidises readily, which is one more reason to briquette it if it has to be stored or shipped.
06What a preliminary analysis should deliver
At concept stage the goal is not a headline cost per tonne; it is a defensible map of the decision space. A useful preliminary techno-economic analysis should establish:
- Hourly matching of supply, storage and load over representative years, not annual energy balances.
- The co-optimised capacities of generation, battery storage, electrolysis, hydrogen storage and the shaft, with the binding constraint identified.
- Cost per tonne as a range, with electricity price, capacity factor, stack degradation and feed grade as explicit sensitivities.
- The feed and product assumptions that the energy configuration depends on, stated so they can be tested.
- The two or three uncertainties that would change the decision, and the work that would reduce them.
What it cannot yet do is confirm final cost, emissions performance or product quality. Those depend on site resource data, firm quotations, feed test work and detailed design. A preliminary analysis earns its place by telling decision-makers which of those to pay for first.