Industrial overcapacity can enable seasonal flexibility in electricity use

In many countries declining demand in energy-intensive industries (EIIs) such as cement, steel and aluminium is leading to industrial overcapacity. Although industrial overcapacity is traditionally envisioned as problematic and resource wasteful, it could unlock EIIs’ flexibility in electricity use. Here using China’s aluminium smelting industry as a case study, we evaluate the system-level cost–benefit of retaining EII overcapacity for flexible electricity use in decarbonized energy systems. We find that overcapacity can enable aluminium 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 per year (11–15% of the aluminium smelting industry’s product value), sufficient to offset the increased smelter maintenance and product storage costs associated with overcapacity. It may also create labour complementarities between the aluminium and thermal power sectors.