Black to Green – Sustainability Aspects of Aluminium Value Chain

#Bauxite , #Alumina, #Aluminium, #CarbonFootprint, #GreenAluminium, #InertAnode, #CarbonTax, #CostQuartile, #CarbonCapture, #Recycling.

Where we stand:

Metal production from Alumina is the most energy intensive process in the entire aluminium value chain with more than 90% share of total energy consumed in entire value chain. Therefore, it is prudent to analyze the energy sources of aluminium smelters for deriving an equitable energy source diagram of entire value chain.

At the first glance, above diagram may lead to some prejudice towards some region or country. But, an in depth analysis of geographies, occurrence of fuel and their trade flow shall open-up alternative viewpoint on the distribution of energy source in aluminium smelters.

Why is the energy mix (in aluminium smelter) the way it is?

Before getting into the detailed analysis of fuel/power source it is of importance to understand that Aluminium Smelters need a very stable quality of power round the clock. This is the reason why wind and solar PV have rare presence in Aluminium Smelter’s core DC power requirement. Further, reliance on grid power is also subject to the nature of power grids in any particular country / region. Further, this also dictates why a captive power plant concept is so critical for aluminum smelters.

All these put together explains the difference in power-mix of existing aluminium smelters in operation and global power generation mix.

Above collage of chart and tables is focused on countries / region having considerable contribution in global aluminium value chain. Nations like China, India & Brazil have undergone rapid growth in last three decades. On the contrary, other developed countries/region maintained their growth at moderate levels.

It is worth mentioning that China has added approx. 30 Mn MT (which is ~ 42 % of global production) of primary metal production in last 30 years. Approx. 2/3 of India’s aluminium capacity was built in last 20 years. Aluminium output of Middle-East countries has almost doubled in last 15 years. It would be accurate to state that between 80% - 85% of global aluminium capacity addition in last two decades is deliver by China, India and Middle-East countries and out of this 80%-85%, the mix of coal and gas based electricity is approx. 90%:10% :: Coal:Gas.

The obvious question is: Why couldn't the ratio be more leaning towards green?

Little higher than a quarter of global aluminium capacity is powered by hydroelectricity and these assets are distributed in Canada, Europe, China and other Asian counties except India. Canada, northern part of Europe and many provinces in China are just naturally gifted to build hydroelectricity facilities. Top 20 hydroelectricity generating countries account for ~90% of global hydroelectricity. On a relative scale, ~ 60% and ~50% of total electricity generation in Canada and Latin America is hydroelectricity respectively. The share of hydroelectricity is more than 85% in country like Norway. Whereas in countries like China & India, share of hydroelectricity in total generation are ~ 14% and 10% respectively. On a global scale (Fig-3), China is the largest producer of hydroelectricity and it is more than total hydroelectricity generation of Europe & Canada put together. This could lead to a counterargument on why China's aluminium industry uses less hydroelectricity than in Europe or Canada. The installed aluminium capacities between China and Canada/Europe are unmatched (see Fig. 1 above), as are the overall energy requirements.

Approx. 1.4% of global aluminium production is powered by nuclear energy and the capacities are concentrated in European countries and Asia ex-India. Top 15 nuclear electricity generating countries account for ~92% of global nuclear electricity. A careful analysis of Fig-2 & Fig-4 clearly establishes that nuclear powers are more concentrated in countries with substantial imports and/or countries with substantial reserves. The only exceptions are Australia and some African nations, which despite being uranium producers and exporters have essentially no nuclear power capacity. Nuclear ore/fuel is not so easily tradable commodity in a world of geopolitical polarities and security concerns. Therefore, it is extremely difficult to envision rapid increase in share of nuclear power in aluminium sector.

Approx. 11% of global aluminium production is powered by gas and ~80% of it is in Middle-East countries. A closer look of gas reserves, production and trade flows in conjunction with power generation pattern (Fig-2) indicate that Middle-East countries has the largest share of gas powered electricity (~ 70%) followed by Russia (~ 40%). On the contrary, Europe, Canada, US have lower shares between 25% - 35%. It is even lower in China (~3%) on relative scale. Major reasons being a large share of gas being used for heating in Europe, Canada, US & Russia. Industrial usage also has large shares in these regions. On the contrary, Middle-East has no such challenge and they have grown their gas power portfolio over a period of time along with extensive use of gas for industrial purpose. Further, they have a geographical advantage of being in close vicinity of major gas producers which makes their gas cheaper as handling & liquefaction/gasification costs are reduced/nil compared to other peers. So, there is every reason for ~ 80% of global gas based aluminium capacity being located within Middle-East countries.

A counter argument may arise on why coal powered smelters can’t gradually migrate to imported gas as it will reduce the carbon footprint by ~48%-53% (shall be elaborated in later sections)? A typical cost distribution of gas may answer this.

“Exploration + Production” : Liquefaction : Shipping : “Storage + Regasification” :: 20% : 40% : 20% : 20%.

More than 80% of global coal based aluminium smelting capacities are in China. Further, most of the Chinese aluminium smelters are in 3rd and 4th quartile of cost curve. Switching from coal to imported gas would drastically increase their energy input cost making it uneconomically unviable for a major chunk of Chinese aluminium capacity. Which implies an eventual push in metal pricing to maintain the supply-demand balance.

What about cross country gas pipelines? This may be cheaper route than conventional sea route transportation and associated process, but, it comes with its own risk of geopolitical situations. Further, hydro-carbon has been a weapon of choice in many diplomatic tussles between boundaries. Further, excessive reliance on imported fuel (whatever it may be) is a question on fuel security.

Approx. 57% of global aluminium production is powered by coal. As the production and trade-flow of coal indicates, this ~57% is predominantly concentrated in China, India & Australia. Earlier explanation on occurrence and usage of other fuels gives multiple angles of relating why the distribution is such.

There is a synergy between reserves, production, trade, flow, geographies and share of fuels used in power generation. But, above all, shift towards green energy is a mandatory step for a greener & cleaner earth. Aluminium being an energy intensive industry, it is difficult, but, not impossible.

Colour of Electricity!

Title of this section may appear as a “Misnomer”. How come electricity has a colour?

Colour has been found to influence memory performance by increasing our attention level. This is just an effort to designate colours to electricity from different fuel / sources based on their carbon (CO2e) footprint and prepare for the rest of the rest of the article.

Carbon footprint is a measure of the amount of CO2 released into the atmosphere as a result of the activities of a particular individual, organization, or community. Generation of electricity by different means (fuel & renewables) also releases CO2 and other greenhouse gases which are reported as CO2e (i.e. CO2 equivalent). Fig-5 above is a comprehensive representation of the concept and this would be a basis of our further analysis. Different fuels have different degree of impact on environment. Say for example, coal has the maximum carbon-footprint amongst all fuels. Carbon foot-print due to power generation by gas is almost half that of coal.

Carbon Footprint & Aluminium Value Chain:

Bauxite & Caustic Soda are the two major raw materials required for alumina production. Energy in terms of steam, electricity and calciner fuel, is the 3rd most important input to alumina refinery.

Similarly, Calcined Alumina, CP Coke and Coal Tar Pitch are the three major raw materials required for aluminium production. Obviously, energy in terms of electricity is another major input to aluminium smelters alongside minor fuel requirement for miscellaneous baking/casting/heating. Energy input to the smelter is arguably at the point of concentration as far as carbon footprint of aluminium value chain is concerned and the same shall be established through data as this section progresses.

Fig-6 represents a material flow map of aluminium value chain. The representation assumes some operating combinations of refinery and smelters to simulate the worst possible scenario in regard of carbon footprint. Operating combinations assumed are as under:

1. Alumina refining through Bayer’s process.
2. Coal based Co-Gen power plant for Refinery and CPP for Smelter.
3. HFO/LSHS based Alumina Calciner, ABF and Cast House.
4. An average of 350 km of in-land rail logistics is involved in all the items containing rail logo.
5. An average of 10,000 nautical miles of sea-route logistics is involved in all the items containing ship logo.

All other possible combinations shall have a lower carbon footprint than this simulated scenario.

All activities mapped within these seven columns in Fig-6 emit CO2, some at exorbitant scale, some at trivial scale. In general, emissions are classified in two broad types, direct & indirect. Let’s take an example of Aluminium for a better understanding. Direct emissions due to aluminium manufacturing is sum of emissions through electricity generation, burning of HFO/LSHS in ABF & Caste House and reduction process. Indirect emissions accounts for sum of emissions due to all activities to the right & left of the “Aluminium Ingot Production + Captive Power Plant” in Fig-6.

Though indirect emission apparently appears beyond the scope and responsibility of the direct emitter, indirect activies are driven by the need of direct activity. Hence, a wholistic analysis shall give an idea of overall carbon footprint the complete aluminium value chain is leaving behind.

Direct emission (in the case of Fig-6) due to aluminium production assuming average power consumption of 13.5 MWh/t and net carbon consumption of ~ 400 kg/t @ 50th percentile releases approximately 15 t CO2e per tonne of cast product. ~ 87%-89% of this is due to electricity used in hot metal production and 8%-10% is due reduction process.

It is worth mentioning that direct emission due to aluminium production is merely 71% - 74% of overall carbon footprint of the entire value chain. Remaining 26% - 29% accounts for the indirect emissions / carbon footprint. Other major contributors are alumina life cycle emissions of raw materials (both manufactured & naturally occurring), emissions due to intermediate product manufacturing (alumina) & different emissions involved. These three indirect emissions are distributed roughly in the tune of 5:4:2.

Is the green aluminium really green? Arguably, it is and primary reason being aluminium production accounts for 71% - 74% of total emissions. However, a global view captures a shadow of remaining 26% - 29% and this also needs to be addressed gradually to achieve a sustainable way of manufacturing.

What is Green Aluminium?

An aluminium product which has minimum/nil carbon footprint may be termed as Green Aluminium. By now, it is already established that source of electricity plays a major role in deciding whether an aluminium product is green. Any renewable power/nuclear power has negligible carbon footprint compared to electricity generated from fossil fuels. Hence, source of electricity can directly impact & improve the carbon footprint of aluminium produced.

There are other aspects as well, viz. proportion of recycling, use of inert anodes etc. In this section, we will make an effort to compare and review the possibilities.

This comparison assumes the defined process fuels and power source for refinery and smelter manufacturing processes. In case of nuclear and renewable power, steam generation for refinery is assumed using electrical boilers. In all cases, mining, raw materials and logistics fuel/energy mix remains unchanged.

It is evident that source of electricity plays the most important role in reducing carbon footprint. An effort has already been made in earlier sections of this article to understand the mix of electricity in aluminium sector and why it is the way it is. It is prudent to explore what alternatives sources of electricity are available which suits the requirement of aluminium value chain, e.g., round the clock power supply, stable supply quality (frequency etc.). Conventional solar PV and wind mills may add-up to share of green power of any unit / organization and reduce the carbon footprint caused by auxiliary power etc., but, it can’t replace the process power requirement. To achieve a sizable reduction in emissions, fossil fuel based process power needs to be replaced by renewable / nuclear power which are steady in quality and available round the clock. Pumped Storage Projects (PSP) and Concentrated Solar Plant (CSP) are two probable solutions amongst many.

Hydrogen (H2) technology is evolving at a faster pace and it is a subject itself. Any techno-economically feasible solution in this regard shall replace existing process fuels and reduce carbon footprint of the entire value chain further to negligible levels.

Another important aspect is addressing the carbon footprint that induced by anode / reduction process. There has been constant effort of process improvement and reducing net carbon (anode) consumption from an average of 500 kg/t-Al to 400 kg/t-Al in modern smelters. Over and above, many global leaders in aluminium are working together to develop commercial scale Inert Anode which emits oxygen in place of CO2. There are limited published information on this topic. However, a careful review of available literatures [Ref. 22, 23] give us the following:

1. Theoretical energy requirement for productions of aluminium by Hall Heroult process is ~ 6,240 kWh/t-Al.
2. Actual energy consumption for aluminium production by Hall Heroult process is almost double of theoretical requirement. It is predominantly due to heat losses, inefficiencies and engineering limitation/challenges.
3. Theoretical energy requirement for reduction of alumina is ~ 35% lower in presence of carbon anodes as it gets benefit of exothermic reaction of CO2 formation which is missing in case of inert anodes. In other words, theoretical energy requirement of aluminium production with inert anode is ~54% higher than conventional carbon anodes. i.e. ~3,370 kWh/t-Al additional theoretical energy requirement with inert anode. This could be even higher in actual considering the heat losses and other inefficiencies and engineering limitation/challenges.

4. Inert anodes generates ~ 0.9 t of oxygen / t-Al.

It is hard to estimate the range of additional energy requirement for aluminium production using inert anode over conventional carbon anodes until substantial number of units are in operation. Till such time, let us use the theoretical amount of additional energy (~3,370 kWh/t-Al) requirement to assess its benefit in reducing carbon footprint in aluminium production.

As evident from Fig-10, inert anode is advantage few as it requires more power than conventional carbon anode cells. Those operating on nuclear / hydro / other renewable energy have direct benefit of drastic reduction in direct emissions making them as good as zero direct emitter of CO2. This may have a direct effect on the dynamics of metal pricing. Some aspect of this shall be addressed in sections to follow.

Success of inert anode is also dependent on how fast fossil fuel based primary aluminium capacities shift to hydro/nuclear/renewable sources.

The Buzz Word – “Carbon Taxation”:

1. Few fascinating facts [Ref. 24] about carbon taxation are as under:
2. Countries like Finland & Poland implemented carbon tax as early as 1990.
3. Between 1990 and 2006, many other European countries joined the league of carbon taxation.
4. Between 2007 to 2016, Japan and Mexico joined the league of carbon taxation. During this period, Kazakhstan as a country and many other provinces in China and Canada introduced Emission Trading System (ETS) or equivalent / similar tools.
5. Between 2017 to till date Canada, Colombia, Chile, Argentina and South Africa implemented carbon taxation. Simultaneously, China, Indonesia, New Zealand and Germany implemented ETS. Most recent of it are China in 2020-2021 & Indonesia in 2022-2023.
6. Countries like USA, Australia, India and Brazil are yet to join the league.

There are two major models of carbon taxation, viz. direct carbon tax on emission and cap and trade model.

Carbon Tax is a tax levied or amount charged per ton of emissions made by any entity. This is a direct cost to the emitter and it encourages emitter to reduce emission. In other words, reduce growth. The revenue accrued thereof by govt. / authorities must be finding their way for a meaningful utilization towards a sustainable world and someone must be monitoring that. This is beyond the scope of discussion of this article. Apparently, it is a passive approach of decrease demand and modifying behavior which has harmful effects.

Does this mechanism really reduce the total emission? Any producer may keep on passing the carbon tax to the end user and continue emitting more.

Cap & Trade (also known as emission trade system, ETS) is a govt. regulatory framework which sets the limit, or "cap" on emissions permitted across a given industry. It issues a limited number of annual permits that allow companies to emit a certain amount of carbon dioxide and related pollutants that drive global warming. The total amount of the cap is split into allowances. Each allowance permits a company to emit certain tonnage of emissions. The government distributes the allowances to the companies, either for free or through an auction. But the government lowers the number of permits each year, thereby lowering the total emissions cap. That makes the permits more expensive. Over time, companies have an incentive to reduce their emissions more efficiently and invest in clean technology as it becomes cheaper than buying permits. Companies are taxed if they produce a higher level of emissions than their permits allow. They may even be penalized for a violation. On the other hand, companies that reduce their emissions can sell allowances ("trade" them) to other companies that pollute more. They can also bank them for future use.

This method at least has a mandate on total emission levels and authorities can reduce the same over y-o-y to gradually improve the situation.

There are many alternative direct and indirect regulatory frameworks around these two fundamental models. Few countries apply this as fuel tax, few name this output based pricing system regulation (OBPS) etc.

According to a report that was launched at Innovate4Climate (I4C), the World Bank Group's flagship climate action event which held in Bilbao, Spain, from May 23 to 25 2023, the revenues collected from carbon taxes and ETS in 2021 was about US$ 84 billion. Hypothetically, on a conservative basis, anything between 30,000 – 40,000 MW of nuclear/wind/hydro/CSP/solar power capacity could have been built with such humongous revenue [Ref. 26].

Fig-11 indicates that the revenue from carbon tax and ETS has gone up year over year. Global carbon emissions as well as temperature anomaly are also in uptrend with no sign of pivot.

Is the carbon tax model really reducing emission and global temperature anomaly?

Shift in Cost Quartile & Green Premium:

World Bank’s carbon pricing dashboard charts the rate of carbon taxations and prevailing ETS across the globe. It is as high as US$ 155 / t of CO2e in Uruguay and as low as US$ 3.3 / t of CO2e in Argentina. On a global average basis, we may consider a range US$ 60 – 70 / t of CO2e. However, ETS allowing trade of permits, the rates are escalated to US$ 90 – 100 as well in many cases.

With the increasing corporate thrust towards sustainability, greener products e.g. green aluminium is in high demand. Aluminium producers who are already using hydro / renewables for smelting are progressively adopting inert anodes and sourcing green alumina to make their aluminium green aluminium. Increase in power consumption due to inert anode is returned in multifold in terms of green premium.

In a hypothetical situation, if carbon tax in implemented on aluminium, say at a rate of US$ 60 / t of CO2e, it would have US$ 800 – 1100 /t-Al impact on cost for coal based plants, which is 55% - 57% share of global production. For gas based smelters, which is 10% - 12% share of global production, impact would be of US$ 400 – 600 / t-Al. On the contrary, the green premium would be surging high due to the inherent nature of trade & supply/demand imbalances and offer pricing advantage to few.

If any such thing ever happens, 35% - 45% of global primary aluminium capacity would turn into loss making and eventually slow down production widening demand-supply gap, in turn pushing the metal prices higher and again getting back to production gradually. As happens in any business / trade, the price escalations would eventually be passed on to the end user / consumers.

Aluminum usage is bound to grow with every passing year and capacity growth in aluminium sector is mandatory for each and every developing nation to augment the demand growth. However, driving the prices higher drags the growth rate of such nations.

Is this really reducing the global emissions? Or technical solutions which would allow the growth and nature co-exist are required to look into!

Silver Lining Over the Horizon - Carbon Capture & Aluminium Recycling:

Undoubtedly, switching to renewable / green energy shall directly reduce the emissions to a negligible level and contribute in faster pivoting of global temperature anomaly to keep it within acceptable limits. However, drastic change from fossil fuel to renewable at all geographies may not be feasible at a rate that is expected to achieve the pivot in global temperature anomaly. This is further complicated in aluminium smelter where only particular types of renewable energies (viz. Hydro & Nuclear) are technically feasible for its specific requirements of being available round the clock at a very stable frequency.

Alternative measures must be given priority to augment the process of emission reduction initiatives. Carbon capture and aluminium recycling are two potential measures which offer equally impactful results in reducing emissions.

Carbon Capture [Ref. 31] - The actual technical term is “Carbon capture, utilization and storage” (CCUS). It involves capture, compression, transportation and storage – whatever applies case by case basis. This is an emerging technology and comes at a very high cost for lean CO2 emissions like power generation which is of utmost relevance to aluminium sector. Currently, it costs US$ 50 – 100 / t of CO2 for CCUS and its expensive. This means a smelter operating on coal based thermal power needs to spend US$ 750 – 1500 / t-Al for 100% carbon capture. Such rates are economically unsustainable. The encouraging side of this is with passing time, the premium on new technology fades away and it also optimizes.

Probably, utilization of carbon tax and ETS revenue (Fig-11) in developing CCUS technology, paying their royalty bills would have made the technology cheaper to the world for their use and rapid implementation.

Recycling [Ref. 32, 33] – Recycling of aluminium takes between 250 kWh to 500 kWh of electrical power (or equivalent energy). Direct emission from recycling aluminium production is 95%-97% lower than primary aluminium production. Adopting this approach adds to the suitability efforts and fast track reduction of emissions. Aluminium scarp recycling market is to projected to grow at a rate of 8.16% CAGR up to 2030. 57% of North America’s Aluminium production comes from recycling. Europe is able to achieve more than 80% recycling efficiency rate (RER). Other major producing nations also need to regularize this industry to achieve higher RER and reducing carbon footprints. As the aluminium per capita usage goes up, the maturity of the end user shall also develop and help the regulators to achieve higher RER. The point made is, there is ample scope in recycling.

Closing Note:

Purpose of this article is to collate relevant information & facts along with some basic calculated data to present sustainability aspects pertaining to aluminium value chain. This reading is expected enhance awareness of the reader on the subject and encourage them for further reading in their respective field of work. A detailed reference list is also provided to open-up further reading opportunities. Ultimate goal is to be aware of every opportunity around us and leverage the same to make aluminium and earth greener with every passing day.

References:

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5. Life Cycle Greenhouse Gas Emissions from Electricity Generation: Update, https://www.nrel.gov/docs/fy21osti/80580.pdf.

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16. Life cycle assessment of caustic soda production: A case study in China; Jinglang Hong et.al. March 2014 Journal of Cleaner Production 66:113–120

17. European Environmental Agency, Guidebook 2016, 2.A.2, Lime Production.

18. EuLA – A Competitive and Efficient Lime Industry, Cornerstone for a Sustainable Europe.

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21. Closing the gap for aluminium emissions, World Economic Forum, December 2021.

22. Is aluminium electrolysis using inert anodes a blind alley? https://blog.sintef.com/sintefenergy/energy-efficiency/aluminium-electrolysis-using-inert-anodes/

23. Progress of inert anodes in aluminium industry: review, Sai Krishna et. al. https://core.ac.uk/download/pdf/220104488.pdf

24. Carbon pricing dashboard, World Bank. https://carbonpricingdashboard.worldbank.org/map_data

25. EPA's Climate Change Indicators in the United States: www.epa.gov/climate-indicators

26. Projected Cost of Generation of Electricity, https://www.iea.org/reports/projected-costs-of-generating-electricity-2020.

27. Revenue from Carbon Tax, ETS – World Bank Data.

28. Earth observatory, https://earthobservatory.nasa.gov/world-of-change/global-temperatures.

29. Investopedia for Carbon Taxations.

30. Tax Foundation for Carbon Taxations.

31. In carbon capture too expensive? https://www.iea.org/commentaries/is-carbon-capture-too-expensive

32. Aluminium scarp recycling market. https://www.globenewswire.com/news-release/2022/11/11/2554375/0/en/Aluminum-Scrap-Recycling-Market-Size-is-projected-to-reach-USD-25-12-Billion-by-2030-growing-at-a-CAGR-of-8-16-Spherical-Insights.html

33. Aluminium Recycling. https://international-aluminium.org/wp-content/uploads/2021/01/wa_factsheet_final.pdf