Can industrial overcapacity enable seasonal flexibility in electricity use? A case study of aluminum smelting in China
This addresses the challenge of decarbonizing energy systems while managing industrial restructuring, offering a potential solution for policymakers and industries in China and similar contexts, though it is incremental in applying existing overcapacity concepts to seasonal flexibility.
The study tackles the problem of industrial overcapacity in energy-intensive industries by evaluating its potential for enabling seasonal flexibility in electricity use, using China's aluminum smelting as a case study, and finds that this approach could reduce system costs by 23-32 billion CNY/year (11-15% of product value).
In many countries, declining demand in energy-intensive industries such as cement, steel, and aluminum is leading to industrial overcapacity. Although industrial overcapacity is traditionally envisioned as problematic and resource-wasteful, it could unlock energy-intensive industries' flexibility in electricity use. Here, using China's aluminum smelting industry as a case study, we evaluate the system-level cost-benefit of retaining energy-intensive industries overcapacity for flexible electricity use in decarbonized energy systems. We find that overcapacity can enable aluminum smelters to adopt a seasonal operation paradigm, ceasing production during winter load peaks that are exacerbated by heating electrification and renewable seasonality. This seasonal operation paradigm could reduce the investment and operational costs of China's decarbonized electricity system by 23-32 billion CNY/year (11-15% of the aluminum smelting industry's product value), sufficient to offset the increased smelter maintenance and product storage costs associated with overcapacity. It may also provide an opportunity for seasonally complementary labor deployment across the aluminum smelting and thermal power generation sectors, offering a potential pathway for mitigating socio-economic disruptions caused by industrial restructuring and energy decarbonization.