Cost optimization of electrolytic oxygen distribution: A mathematical framework with a green steel and hospital case study in Portugal

Abstract

Decarbonizing the steel industry is crucial as it accounts for 7 % of global carbon emissions. Hydrogen-based direct reduced iron with electric arc furnace technology offers a sustainable solution. Both gases, hydrogen and oxygen, from electrolysis are necessary for steel production, however, in a different ratio than the electrolyzer delivers. This study evaluates the economic feasibility of distributing electrolytic excess oxygen from a green steel facility in Portugal to hospitals. Using a capacitated vehicle routing problem model, results show liquefaction (57 %), distribution (39.9 %) as key cost components, emphasizing the need for optimized logistics. Selling 6007 tons of excess oxygen yearly for 0.7 €/kg results in a net present value of €39.1 million over 20 years and a cost-benefit ratio of 8.25 and provides highly profitable application. The internal rate of return of 248 % and a discounted payback period of under half a year further underscore the project’s strong financial viability. This study confirms the economic benefits of valorizing electrolytic oxygen, providing a competitive alternative to conventional production while supporting steel decarbonization and medical oxygen supply.