Material Insights · Understanding the Material World

Steel plant energy recovery: Economics and contracts

Moderate paybacks on an asset welded to coal

What this tab covers Economics and commercial structures: levelised cost of the recovered energy against the fuel it avoids, host-site risk, and service models such as heat-as-a-service.

Paybacks are moderate because the energy is high grade and on site. The risk lies with the host: the asset is welded to a coal-based blast furnace that may not survive the transition.

Levelised cost of heat or avoided cost

Favourable

Paybacks are short to moderate. CTCN gives 3 to 4 years for CDQ, with average revenue of EUR 8 to 9 million a year, assuming power is worth EUR 0.16 per kWh, a high price (CTCN figures date from about 2006 to 2011). A 2023 journal study of one Turkish TRT reported 42.4 GWh a year and USD 2.76 million a year of savings, and gave a payback of about 0.15 years on a 2018 plant cost of USD 400,000. Treat that cost and payback as unreliable: USD 400,000 is implausibly low for a turbine averaging about 5.3 MW (calculated, 42.4 GWh over 8,000 h), and probably leaves out most of the installation. Sinter cooler power costs JPY 5,000 million for about 130 GWh a year (calculated), with a 5.5-year payback. Tata Steel reported INR 62 crore for CDQ on two Jamshedpur batteries and INR 65 crore at Kalinganagar. Process gases already meet more than 60% of a typical plant's energy needs.1451113

CDQ payback 3-4 years11 TRT case study 42.4 GWh/y; reported payback about 0.15 years (implausible, see text)13 Sinter recovery payback 5.5 years4 CDQ capex, Tata Steel INR 62 crore (Jamshedpur), INR 65 crore (Kalinganagar)5

Host factory credit risk

Mixed

The host is usually a large, rated steelmaker, so default risk is modest. Stranding risk is the bigger concern. CDQ, TRT and blast furnace gas only exist while the plant makes coke and runs a blast furnace. A switch to hydrogen direct reduction or scrap-based electric arc furnaces removes them. Projects should be sized to pay back well before a likely furnace reline or closure date.

Heat-as-a-service and ESCO models

Mixed

Most steel recovery is owned by the steelmaker, not by a third party, because the kit is deep inside the process. The main outside channel has been technology transfer. Japanese engineering companies supplied 10 CDQs and 5 TRTs to India, starting from model projects backed by Japan's NEDO. In China, NEDO model projects at Jinan and Jiangyin were credited with a potential 2,359 kt CO2 a year. This pass found no sourced take-or-pay or heat-as-a-service contract.911

Japanese CDQs in India 109 Japanese TRTs in India 59 NEDO CDQ projects in China, CO2 potential 2,359 kt/y11

Sources

  1. Energy use in the steel industry World Steel Association (worldsteel), 2025
  2. Sinter plant heat recovery (power generation from sinter cooler waste heat) UNFCCC Climate Technology Centre and Network (CTCN)
  3. Integrated Report 2018-19, Annexure: particulars of energy conservation Tata Steel, 2019
  4. Japan steel industry's contribution to energy saving (K. Fujimoto, JISF, 2nd CJK Cooperation Dialogue) Japan Economic Foundation / Japan Iron and Steel Federation, 2015
  5. Coke dry quenching for iron and steel sector UNFCCC Climate Technology Centre and Network (CTCN)
  6. Performance, exergy, and environmental analysis of blast furnace top pressure turbine in an iron-steel factory (Albayrak, Ergun and Yildiz), Periodicals of Engineering and Natural Sciences 11(4) International University of Sarajevo (peer-reviewed journal), 2023