Industrial emission abatement by the numbers
While there are several challenges for industrial clusters on the path to net zero, an integrated approach to implementing low-carbon solutions can create sizeable economic opportunities.
What are industrial clusters?
Industrial clusters are characterized as geographic areas that comprise co-located companies representing either a single or multiple industries. The presence of multiple industrial energy consumers in close proximity creates opportunities to scale low-carbon technologies by aggregating demand and forming a captive market. With the ability to share risk and resources among multiple partners, industrial clusters also allow for the creation of a digital integrated system that is cleaner and more reliable.
There are several differentiating characteristics of industrial clusters that will influence the applicability, impact and economic feasibility of potential solutions for reducing their emissions.
Industry composition: The composition of industries (heavy vs. light) and their specific energy requirements within a cluster will influence the scale, feasibility and economics of potential solutions.
Geography: Some clusters will have geographic or geological advantages that will allow them to pursue specific solutions, such as undersea storage for carbon capture and storage (CCS), salt caverns for hydrogen storage, and high wind/solar resource quality.
Existing infrastructure: The presence, age and quality of existing infrastructure, as well as their ability to be repurposed, can enable or block solution viability for clusters.
Energy costs and policy: The relative economics of fossil energy vs. clean electricity can influence pursuit of a particular solution.
Net-zero solutions for industrial clusters
There are many initiatives dedicated to reducing industrial emissions, focusing on specific technologies or specific sectors. These efforts are critical. However, there is also a need to focus on the potential synergies of co-located plants and the opportunities available from a multi-stakeholder and integrated approach toward a net-zero future for industrial clusters.
With increased digitalization and stakeholder collaboration at the center, a holistic approach can optimize emissions solutions and create an integrated energy system that enhances system value outcomes.
We have identified four solutions that can help lower industrial emissions:
Industrial clusters must consider their characteristics when not only choosing the optimal mix of solutions to help them achieve net-zero emissions, but also consider those that maximize system value benefits across the economy, society, environment and overall energy system.
Opportunities through collaboration
Through a multi-stakeholder collaboration, industrial clusters provide an opportunity to not only reduce emissions, but also deliver other benefits such as job creation, productivity gains, green credentials and acceleration of technology deployment. Some of the value opportunities:
Industrial companies: Emissions reduction safeguards against exposure to carbon taxes or any other associated financial penalties. There are also business opportunities in creating premium products such as green steel, low-carbon cement and others for use in domestic and international markets.
Governments: Demonstrate global leadership in taking decisive actions to achieve net-zero emissions targets. They can export knowledge of industrial policies that can accelerate transformation of industrial clusters, thereby unleashing system value benefits including job creation and improved air-quality-linked health benefits.
R&D innovation and digital services: Industrial clusters provide a platform to scale new low-carbon technologies, thereby offering opportunities to demonstrate feasibility, reduce costs and improve performance.
Energy companies: Increased visibility on industrial demand for different energy sources to aid CapEx planning and strategic outlook. There is potential for expansion of business lines and/or products such a new class of utility business to include CO2 transport and storage. Significant expansion of renewables, demand optimization, integrated energy management services.
Financiers: Fulfill climate commitments and pledges to stakeholders—including shareholders—by expanding scope of ESG asset class via investments in low-carbon technologies such as CCS and hydrogen.
Actions to accelerate net-zero industrial clusters
It is imperative for government and industry to collaborate, align on goals/targets, develop and implement roadmaps on a cluster-by-cluster basis to reduce industrial emissions and achieve net-zero targets.
Options for government
- Set binding commitments for industrial clusters to achieve net-zero emissions within a specified time frame.
- Create incentives such as tax credits and/or avoidance charges to encourage investment into GHG abatement initiatives.
- Provide financial support in the form of loans and grants for development expenditure to technologies with no immediate financial attractiveness.
- Develop alternative economic models to support low-carbon infrastructure.
- Support R&D investment into emissions reduction initiatives.
- Leverage existing infrastructure for emissions reduction solutions.
Actions for industry
- Align on common goals and develop cluster-specific roadmaps to achieve net-zero targets by a specific year.
- Build trust among cluster partners by forming working groups with representatives from all stakeholders.
- Assess the concentration of industry within the geographic region and understand the diverse set of needs.
- Develop commercial models and risk-sharing initiatives that help accelerate implementation of roadmaps.