Can industrial overcapacity enable seasonal flexibility in electricity use? A case study of aluminum smelting in China

Ruike Lyu, Anna Li, Jianxiao Wang, Hongxi Luo, Yan Shen, Hongye Guo, Ershun Du, Chongqing Kang and Jesse Jenkins

Papers from arXiv.org

Abstract: In many countries, declining demand in energy-intensive industries (EIIs) such as cement, steel, and aluminum is leading to industrial overcapacity. Although overcapacity is traditionally seen as problematic, it could unlock EIIs' flexibility in electricity use. Using China's aluminum smelting sector as a case, we evaluate the system-level cost-benefit of retaining EII overcapacity for flexible electricity use in decarbonized systems. We find that overcapacity enables smelters to adopt a seasonal operation paradigm, ceasing production during winter load peaks driven by heating electrification and renewable seasonality. In a 2050-net-zero scenario, this paradigm reduces China's electricity-system investment and operating costs by 15-72 billion CNY per year (8-34% of the industry's product value), enough to offset the costs of maintaining overcapacity and product storage. Seasonal operation also cuts workforce fluctuations across aluminum smelting and thermal-power sectors by up to 62%, potentially mitigating socio-economic disruptions from industrial restructuring and the energy transition.

Date: 2025-11
New Economics Papers: this item is included in nep-cna, nep-ene, nep-env and nep-min
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