Decarbonising industry is one of the world’s greatest challenges. The costs, today, are huge and therefore the technology adoption required has hardly started. But several technologies already exist. Gbemi Oluleye at Imperial College (UK) explains the first step is to measure the market size for each sub-sector, then estimate how much policy-driven adoption is required to achieve the cost reductions that make the change viable. After that, no further support will be needed and market forces can take over. Her case study is Solid Oxide Fuel Cells in wastewater treatment plants across Europe. First she runs through the major challenges: the extremely high cost of adoption today, dependence on high temperature heat (from fossil fuels), long lifetimes of industrial units, and others. She also lists the leading technologies (advanced waste heat recovery, biomass and decarbonised methane) as well as several others (electrolysis based steel making, recirculating blast furnace and CCS, molten oxide electrolysis, solid state synthesis for ammonia production, electrowinning). Articles on this subject are hard to find, which could be a worrying sign that the commitment to industry’s decarbonisation is far from clear.

Energy systems: The macro scale

We need fundamental shifts in the way goods are produced, and energy is generated if we want to decarbonise. We can achieve them through several pathways focused on new materials, feedstocks and energy vectors with less dependence on fossil fuels, increased use of renewable electricity, renewable gas (including hydrogen, biogas, biomethane and synthetic methane), CCUS, direct air capture, and integration of negative emission technologies.

One of the major barriers to decarbonising the energy system is the investment required. A hybrid solution could pave the way for decarbonising both heating (at different qualities) and electricity provision and provide a much lower cost pathway to decarbonisation. As high uptake of these options is required to limit the temperature increase to 1.5°C above pre-industrial levels, it is necessary to determine whether the estimated market size (or demand) is sufficient to trigger cost reduction, thereby increasing uptake of strategies for decarbonisation.

Renewable gas uptake

Looking at renewable gas uptake, the expected scale up of plants by 2050 show possible cost reductions in CAPEX and unit costs of energy by 50% indicating a significant aspiration for achievable cost reductions as a result of production scale up due to increased market size. The associated learning rate required for green hydrogen is 24 – 26%. Biomethane seems to have the lowest learning rate amongst renewable gas options (4 – 5%) as most of the components for biogas production and upgrade have reached commercial application.

Emulating wind, solar cost reductions

It should, however, be recognised that the rate of decrease in renewable power generation costs (particularly solar PV) has been very rapid and faster than many had predicted. The historical learning rate of wind onshore is 5 – 12%, solar PV (long term) 12 – 17%, and solar PV (short term) 20 – 23%. Even though there is no guarantee that renewable gas technology will be able to replicate this reduction in costs, a reduction in electrolyser costs is already evident from ongoing projects. (Figure 1).

Decarbonising industry: The micro scale

But what about the challenge of decarbonising the industrial sector? The interesting question around adoption of technologies is whether market forces and size can drive clean-energy industry going forward. Industry accounts for around a quarter of all UK greenhouse gas emissions – with more than two thirds of these industrial emissions coming from a small number of energy intensive industries (EII) clustered in Humberside, Southampton, Teeside, Merseryside, South Wales, and Grangemouth.

The 5 big challenges

The highest emitting cluster is Humberside containing chemical facilities, manufacturing, a refinery and power station amongst others.  The EII sectors are particularly challenging in terms of reaching net zero-carbon. Firstly, they are susceptible to global competition, and hence efforts to radically decarbonise sectors in one region may have consequences for viability in that region, and lead to relocation to areas with less rigorous regulation.

Secondly, existing industrial processes depend heavily on carbon-based energy, so decarbonisation requires potentially disruptive changes in feedstock and processes. Third, high-temperature heat (from 500 to over 1600°C) is required in EII, which may be particularly difficult to decarbonise. Fourth, processing units in the EII are typically highly integrated, and therefore any change in one part will affect the others. Finally, industrial sites have long lifetimes, so upgrading or replacing these facilities to lower carbon emissions requires that planning and investments start well in advance.

Emerging strategies

Emerging strategies to decarbonise industry are grouped under several categories:

• Technology substitution
• Material and feedstock substitution
• Fuel substitution (including electrification and renewable gas)
• Carbon capture and utilisation or storage (CCUS)
• Advanced energy efficiency
• Material efficiency
• Advanced energy demand reduction strategies.

Technology readiness (TRL)

The optimum mix and/or hierarchy of decarbonisation options will vary from facility to facility, as local factors determine which ones are most practical. Emerging decarbonisation strategies for the EII that can achieve more than 66% reduction in CO₂ to carbon neutrality currently have an adoption of 0%. This includes options with high TRL (technology readiness level) such as advanced waste heat recovery (8 – 9), biomass as fuel for direct combustion (7 – 9) and decarbonised methane as fuel.

There are also options with lower TRL such as electrolysis based steel making (4), recirculating blast furnace and CCS (4 – 5), molten oxide electrolysis which is carbon neutral (1 – 2), solid state synthesis for ammonia production (3 – 5) and electrowinning in the iron and steel sector (2 – 3). Therefore, the question is once a technology has been demonstrated (with high TRL), how can the market size be exploited to shrink the time to wide-spread uptake?

Industrial Energy Systems: The Nano scale

Direct combustion in the iron and steel industry contributes 54% to CO₂ emissions, and in the chemical sector contributes, 63.3%. In general, 45% of industrial CO₂ emissions are from the provision of high temperature process heat, 21% from steam at different qualities (temperatures) and machine drives.

These energy requirements are provided from industrial energy systems based on a heat only configuration or a heat and power (CHP configuration) – Figure 2. Decarbonising industrial energy systems could play a role on both the micro and macro scale, since most industries (both energy intensive and less energy intensive) have an energy system providing hot and cold utilities.

The decarbonisation strategies relevant to this system are:

1. Fuel substitution (electricity, renewable gas including biogas)
2. Technology substitution (for example from combustion in gas turbines or internal combustion engines to fuel cells)
3. Energy demand reduction techniques like Pinch Analysis to guarantee minimum energy demand
4. Supply side techniques like recovering and reusing wasted thermal energy from the energy system and associated technology to yield optimum supply,
5. Carbon Capture Use and Storage.

Research has shown that a combination of energy demand reduction techniques and optimum supply, i.e. advanced waste heat recovery, can reduce CO₂ emissions by 20 – 53%, generate revenue for a facility from less import of electricity with a payback of between 2 – 4 years, however adoption is very low.

Optional and mandatory change

Therefore, in the context of policy (i.e. mandates) should the strategies that guarantee demand and supply efficiency be mandatory? This will ensure the renewable gas produced on the macro scale is used efficiently. Based on this, suggested hierarchy of options for decarbonising industrial energy systems is shown in Figure 3.

Achieving higher reduction in CO₂ would require capital-intensive technologies and complete system revamp. One of the ways is to substitute both fuel and technology. Fuel substitution can be to biogas and technology substitution to fuel cells – considering solid oxide fuel cells (SOFC). Currently, adoption of SOFC is low in the UK industry.

Extremely high costs? Make use of market size

New technologies that can deliver lower CO₂ are several orders of magnitude more expensive than the business as usual technologies. Often times, a techno-economic assessment implies they are not economically viable. It may be possible to exploit the associated market size related to the demand for technologies within a defined market to trigger technology cost reduction.

Therefore, an analysis of the market potential could show when cost reductions can be achieved as well as identify the factors/ combination of factors required to accelerate adoption. Such factors include the incumbent market forces such as energy prices, innovations in business models (especially surrounding how a new technology is paid for) and innovations in policy. The Market Potential Analysis leverages the size of the market and determines how long policies are required in order to prevent technology lock-in, and how changing the offering surrounding a technology can increase its market share.

Technology Adoption case study: From nano to micro scale

As a case study to address both fuel and technology substitution – Solid Oxide Fuel Cells (SOFC) need to attain about 60 – 80% cost reduction in order to be driven by only market forces to some extent. 780 units need to be sold to arrive at such cost reduction. Analysis from the only demonstration of biogas based solid oxide fuel cells (SOFC) in an industrial context in Europe is the basis of this case study.

In the case study the market is the energy systems for wastewater treatment plants and the market size on the micro scale is 6,181 plants in Europe with Population Equivalent > 20,000. The associated ideal demand for the SOFC from all plants is 13,282 units. Insights from this study can be applied to energy systems in the more intensive sectors. Ideally 780 out of 13,282 units need to be installed to arrive at 70% cost reductions, and this would only happen if it’s economic on a nano scale.

Using incentives to grow the market

Results show that the SOFC demand from economically viable plants is 80 units, and that’s because of existing incentives for electricity from biogas in two member states. If all 80 units are installed, only 38% cost reduction is possible. Therefore, the existing price instruments are not enough to drive adoption.

Offering a higher incentive (i.e. 1.5 times) means that demand increases to 146 units with more plants becoming economically viable, and 100 units needs to be installed to achieve 47% cost reduction. On the other hand, changing how the SOFC is paid for. For example, product sale and service with finance especially where the capital investment is not made upfront but as an annual payment throughout the technology lifetime. The annual payment can be from operational savings/ revenue generated from using a more efficient technology, reducing energy imports due to minimum demand (Figure 3) or efficient supply (Figure 3). The new business model increases demand to 540 units. 47% cost reduction can be reached if only 100 out of 540 units are installed.

If the business model is incentivised i.e. assuming a price instrument of 4p/kWh (=4.67 cents €/kWh) is offered for electricity produced from biogas fuelled SOFC, when operational savings over the technology lifetime are ploughed back to pay for the technology. The associated demand from economically viable plants increases to 1286 units, and 70% cost reduction can be achieved if 780/1286 units are installed.

What is necessary to trigger the market today is changing how a technology is paid for, and policies to support the new business models. Simultaneous innovations in policy and business models could accelerate adoption of technical solutions that can decarbonise industrial energy systems. Accelerated adoption can ensure the increase in production costs from decarbonisation is not passed through to customers nor shouldered by industry.

You can download the slides from Dr Oluleye’s seminar.

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Dr Gbemi Oluleye is a Research Fellow at the Centre for Environmental Policy, Imperial College (UK)

This article is published with permission