The competition was easily as hot as the molten iron the novel smelting process is expected to produce but when the final results were tallied, an American Iron and Steel Institute (AISI) project proposal to be conducted in collaboration with the University of Utah had been selected by the U.S. Department of Energys Innovative Manufacturing Initiative for a $7.1 million award. The project, which seeks to develop a new ironmaking process based on the gaseous reduction of fine iron concentrates, is keyed to reduce the energy needed to make iron while reducing environmental emissions, especially carbon dioxide, by up to 50 percent. In an exclusive one-on-one interview, Larry Kavanagh, president, Steel Market Development Institute (SMDI), a business unit of the American Iron and Steel Institute, discusses the background, status, and focus of the project as well as the impact of the Shale gas revolution on process objectives and dynamics.
Inner Circle: Lets start with a brief background of the flash ironmaking process, a timeline of the AISIs involvement in its evolution. And then well go on to a description of the details of whats, whats behind it and how things will work.
AISIs Kavanagh: We started in 2003. The steel industry in North America recognized at the time that new in order to achieve the same type of energy efficiency reductions wed accomplished in the past 20 years--which at that point was on the order of 25- to 28-percent -- new processes would be necessary going forward.
We started with 11 different technologies under evaluation, reduced that number to four, and then we narrowed the field down to two. Fast forward then to 2007, when we were investigating two processes, one of which is flash ironmaking, the subject of the Department of Energy award. The project is being conducted with our partners at the University of Utah under the direction of Professor Rocky Sohn. Its an iron making technology, which takes advantage of the plentiful iron ore fines here in The united States and is an adaptation of technology from the copper smelting industry that we felt would have good application in iron making in the steel industry.
So, from 2003 until we submitted our project proposal to DOE at the end of 2011, we have continued to develop the technology, moving through different laboratory scales as we passed all of the technical hurdles. That progress allowed us to continue to invest in the approach, up to this point where we are ready to undertake pilot-scale work with the Department of Energy.
Inner Circle: What is the objective of the pilot-scale work? Have you selected a location for the pilot plant? Whats the next step in the progress of the project?
SMDIs Kavanagh: The project that were undertaking is going to run three years and is funded at just under $9 million. Were going to start it at the Utah laboratory, because one of the key advantages of this technology is its ability to operate on multiple fuels, whether that be natural gas, some form of synthetic gas or ultimately hydrogen in the future.
What needs to be proven over the projects three-year timespan are the economics of the process and the scale-up parameters so that we can go from a small pilot-scale vessel ultimately in a steel plant somewhere, to the next phase, which would be a demonstration unit, maybe one-fifth commercial scale. To summarize, its the economics of the process and the scale-up parameters that need to be validated over this three-year period.
Inner Circle: Will the pilot plant operate in conjunction with an existing mill?
SMDIs Kavanagh: Yes. At some point late in the first year, early in the second year, we will identify our company partners and a steel mill site, where the pilot plant will be installed. That hasnt been done yet.
Inner Circle: What was the nature of the second project that was in the running until October?
SMDIs Kavanagh: The second project is ongoing. The technology is called Molten Oxide Electrolysis and its being developed at the Massachusetts Institute of Technology (MIT). That technology uses electricity to separate iron from iron ore. Todays conventional production process uses carbon via coke in the blast furnace to make iron. The technology at MIT passes electrical current through iron ore, and what you get is molten iron and oxygen. It is a very viable technology, which we liked a lot. We submitted that project to the Department of Energy for funding in this round. It was not selected.
But there was another funding opportunity in a different part of the Department of Energy that still has the MIT project under review. Were very bullish and positive about it. Weve just been notified its passed the first of three steps necessary to receive an award.
Those two projects together form what we call the CO2 Breakthrough Project. Its a project in its full sense thats run by World Steel out of Belgium, and there are different development cells going on around the world. In North America, the AISI is running the North American CO2 Breakthrough Program, which involves the two projects I mentioned. Theres a cell in Japan, a cell in Europe, one in Korea and one in Australia. The various participants coordinate information exchange on technical performance and breakthroughs through World Steel so we dont duplicate each others work.
Inner Circle: Do you have any other projects pending or you are working on for submission to the DOE?
SMDIs Kavanagh: No. Right now, those two projects comprise the main body of our research. There are no other projects at the moment that we plan for DOE submittal.
Inner Circle: Can you tell me a little bit about the DOEs decision-making dynamics and what youve learned over the years about the selection process.
SMDIs Kavanagh: Thats an excellent question. Let me answer it in two parts. First, we have a group within the AISI called the Committee on Manufacturing Technology that is comprised of senior technology officials from our member companies.
The initial project vetting and screening happens internally before we submit a project to DOE. We eliminate projects we think have low chances of success compared to the other proposals we get. Once we settle on a project or a suite of projects that we feel address a fundamental need as defined in our technology roadmap--and have a good chance of success--well submit that to the Department of Energy.
On the Department of Energy side, there is a rigorous screening and outside peer review process. So, when you identify and propose a project that passes all those tests--the industry funnel and the DOE funnel--the chances of success are higher than with a typical R&D project, where the hit rate might be one in seven or eight. We tend to do pretty well, more like one in two. Thats been our history.
Another important consideration is criteria. To fairly qualify for public funds, there has to be some public value in the expenditure of government money in support of a project. That could come in the form of reduced dependence on foreign fuel, reduced emissions to the atmosphere, et cetera.
The projects that get funded wind up qualifying for our steel industry goals, whether that goal is productivity-, energy-, or quality-related. So you, you have to hit that sweet spot. Theres both a private and public good test and then a, a technical superiority, technical merits test. Thats a long answer, but thats an important question.
Inner Circle: Are you aware of the other types of projects competing against the AISI entry or are you in the dark regarding the competition and the status of your project at any given time?
SMDIs Kavanagh: Were in the dark. This program was heavily proposed, so there was a lot of competition. And the DOE did some early screening to narrow down the candidate projects. But we dont know what the competition is until the end. We know there were 13 awards made, and thats the first we heard about what other projects were in the running.
Inner Circle: Are there verbal presentations? Or is it all done on the basis of a written proposal?
SMDIs Kavanagh: Its all done on the basis of the proposal. The process starts with a pre-proposal, which is essentially a one- or two-page summary of what you want to do, why its important, why it should be funded, what the energy savings might be and so on. Those are reviewed. And you get an encouraged or discouraged notification from the Department of Energy. If you receive the encouragement notification, you prepare the full proposal.
The DOE format is very good in that youre not allowed to submit 900 pages. They ask specific questions that address points they feel are the important qualification tests. You then submit the full proposal and thats it. Then you hear back and are advised either yes you are funded, or no you arent.
Inner Circle: How tough are the questions the DOE asks?
SMDIs Kavanagh: We have been working with the Department of Energy since 1986 or 87, and this process has been refined over the years. They ask the right questions regarding the technical hurdles: how does the project compare to existing technology? Where do the savings come from? What are the chances of success? What is your commercialization plan? How do you handle intellectual property? How are you going to manage the program and how are you are going to take care of the governments money? They want to know about your team, about the qualifications of both the managers within AISI and the scientists who are performing the work. Its very rigorous and very complete.
Inner Circle: Do you actually have to evaluate the chances of your own projects success?
SMDIs Kavanagh: No. They want to understand what the technical hurdles are and how you are going to surmount them, in other words, whats your plan. They want to feel confident that the plan is intelligent.
One of the criteria for being granted government money is there has to be high risk. The concept is their funding helps mitigate the risk while accelerating the path to completion. If you were to make a proposal involving something that was on the doorstep of commercial success, it wouldnt qualify.
So, its kind of a fine line. You have to explain where and how high the hurdles are, but show that you have an intelligent plan to surmount them so that while the risk is high, the chance of success may rise to that risk.
Inner Circle: How heated was the competition for the DOE funding?
SMDIs Kavanagh: It was very competitive. DOE initially received more than 1,400 concept papers and they accepted over 200 of those for actual proposals. So, that is a lot of competition. And out of the 200-plus full proposals that were received, 13 awards were made, one of which was ours.
Inner Circle: Were you surprised at being granted the award? Obviously, there was some pretty keen competition.
SMDIs Kavanagh: You never know until you know. I personally was not surprised given the nature of the work we had done before. Some of the early, paper studies prepared when we were evaluating 11 technologies, were co-funded by the Department of Energy. So they were aware of the technology. And then the middle phase, where we kind of proved the technical concept in the lab, was funded entirely by the steel industry.
The DOE was always watching what we were doing and given their interest in extractive metallurgy and transformational technologies, our submission was kind of right in their wheelhouse.
Inner Circle: Do you have any idea of the manhours that go into preparing a submission like this?
SMDIs Kavanagh: I would imagine its greater than 1,000 hours. Its a lot of work, when you consider the input from our team, from the research team, the writing, and then the refining. I myself spent quite a bit of time on the proposal to make sure it focused exactly on the questions being asked by the DOE. We learned a long time ago if they say, What are the technical merits?, you have to know what the technical merits are. Its a time-consuming process.
Inner Circle: Has the game-changing potential of the Shale gas revolution impacted the project in any way?
SMDIs Kavanagh: Thats an excellent question. The timing of the cap-and-trade debate coincided with when we had advanced beyond the paper study and were working in the lab to determine if the concept was technically viable for steel
So, the focus at that point was how quickly can we get to do this and prove it on hydrogen? Because thats really where the low-to-no CO2 factor comes in. Of course, we dont have a hydrogen infrastructure yet, but it was important when youre talking about CO2 emissions in 2050. If we were gonna have widely available hydrogen at a reasonable cost in 2030, its not unreasonable.
The plan then was to test the process on natural gas just to make sure all the valves worked and fuels burned when they were supposed to. The idea was then to try to ramp up to hydrogen as quickly as possible.
Then the shale gas discoveries come into play. Next thing you know were looking at this and thinking, Wow, this is a great technology on natural gas. So, weve, switched the order of what were going do. Were going to actually try to prove the technology all the way to scale on natural gas.
The savings in this project come from the fact that youre consolidating steps when compared to conventional integrated steelmaking, even when compared to the direct reduced iron route. Were not making pellets. Were using fines. Were dropping them in the top of the furnace, and the (material) is kind of heated in time-of-flight, and it comes out molten at the bottom. Im very much oversimplifying now.
But, to answer your original question, yes, we did re-sequence the project. This is now a technology we feel is going to be commercially viable using natural gas as the main fuel. Well still do the hydrogen research, but were going to make that a secondary objective at this point.
Inner Circle: What kind of output rates will you start with and what is the theoretical throughput limit on scale up?
SMDIs Kavanagh: The ultimate limit is one of the things were trying to determine with this project, so that we can understand how big we can get. We dont know the answer to that yet. Thats the purpose of this research.
Inner Circle: What is your sense of a possible pending step-change in ironmaking, either globally or here in North America? Is the blast furnace here to stay and is it going to remain the anchor of iron making for the next hundred years?
SMDIs Kavanagh: I think youre going to see things happen in two steps. Right now, we have mature and efficient blast furnace technology. You see the investment Nucor is making in gas-based DRI in Louisiana. Once we get into a better economy where the steel industry in North America can consider greater capital investments, you may see more DRI-type installations.
At the same time, once you make the decision to reline a blast furnace, youre committed for another 20 years, Right now, if you really look at the technologies out there that might work in North America with our ores and coals and/or gas, theres not a really good alternative to the blast furnace at scale, with the same productivity other than the DRI route. Thats definitely viable. So unless they decide to augment or go the DRI route people who operate, blast furnaces are going to continue to do that.
If a blast furnace comes up for reline 10- or 12 years from now, there may be alternates to consider at a different capital cost and with a different environmental footprint that would then be viable. But Id say its going to be at least 10 or 12 years. So, if a blast furnace comes up for reline today, its going to be a blast furnace. If one comes up for reline in 2025, it might be something else -- absent the DRI route.
People could still go DRI today. And what you may see is a scenario where we have some smaller blast furnaces. When those are up, maybe, the decision makers will opt for DRI modules.
The important thing is our member companies have continued to invest. Their commitment to innovation and developing technologies for the future hasnt wavered. That says a lot about our industry, and thats why were excited to go forward
Inner Circle: Where do the bulk of your constituents interests in new processes and technology lie? Do they tend to be upstream or downstream of the caster?
SMDIs Kavanagh: Energy is a big cost of making steel. So if youre focusing on where you could lower energy input, its obviously on the hot end. But we also do a lot of work on the finishing end. The whole development of advanced high-strength steels for automotive, for new short span steel bridge technology, the eSPAN140, which we just announced. Theres a lot to be gained there. And that has more to do with meeting our customers requirements or to help them lower the environmental footprint of their products, such as we do with advanced high-strengths steels for automotive.
So, it depends on what the driver is at the time. If its energy and energy productivity, the focus is north of the caster. And if its directed at expanding market share, if its directed at solving customers environmental problems, if its to better a particular market segment, its on the finishing side. But were, were across the technology portion of AISI and the market development portion of AISI. Were trying to cover all of that. And the support has been great.