Optimal sizing of a hydrogen-based direct reduced iron-electric arc furnace system integrated with methanol synthesis toward zero-carbon steel production

Abstract

A hydrogen-based direct reduced iron-electric arc furnace system integrated with methanol synthesis (H2-DRI-EAF-MeOH) provides a feasible pathway toward zero-carbon steel production. However, the volatility and intermittency of renewable energy sources (RES) may lead to capacity oversizing, while conventional annualized-cost and levelized-cost metrics are insufficient to evaluate investment return. To address these issues, this paper develops a fractional programming-based optimal sizing model for the H2-DRI-EAF-MeOH system. Hourly production rate limits are decoupled from annual production capacities and formulated as independent decision variables. Theoretical analysis demonstrates that increasing hourly production rate limits expands the multi-period operating feasible region, increases the theoretical upper bound on RES matching, and provides an investment-efficiency condition for increasing production rate limits. The annualized net return on investment (ANROI) is then adopted to represent investment return, and the resulting mixed-integer linear fractional programming model is solved using the Dinkelbach method. Case studies show that compared with the annualized net return (ANR) benchmark, the ANROI-based sizing yields higher internal rates of return (IRR), reaching 20.67% and 17.08% under the on-grid and off-grid scenarios, respectively. As the equivalent annual operating hours decrease from 8000 to 4000 h, the IRR increases from 19.68% to 20.67% under the on-grid scenario and from 12.64% to 17.08% under the off-grid scenario, while the corresponding battery storage capacities decrease by 113.56 and 796.31 MWh. The off-grid zero-carbon constraint enables CO2-to-MeOH conversion but reduces the system IRR to 14.99%, indicating that the resulting revenues are insufficient to offset the additional costs.