Industrial clusters locate plants and factories in one area to share resources, problems and solutions. They already have a long history of collaboration. But the logic of co-location now has a new driver: net-zero emissions. The sectors can range from heavy industry (e.g. steel and cement) to light (food, paper, etc.) The challenge is to make the most of new clean technologies and processes, and at the same time maintain or increase productivity, increase the green credentials of their products, and enhance the environment. Done wisely, it can also support regional investment and job creation. Louise Anderson at the World Economic Forum and Melissa Stark at Accenture summarise the two organisations’ joint report that looks at the issues and focuses on best practices and case studies, for use by both private and public decision makers. In this article they highlight projects in the UK, the Netherlands and China. Every cluster – old and new – is different and must formulate its own roadmap, starting now. Success will help see industry’s considerable global emissions reduced in line with our Paris goals for 2050.
By January 2021, countries representing more than 61% of global CO2 emissions and almost 70% of the world economy had committed to net-zero emissions, aligned with the Paris Agreement. To deliver on these ambitious commitments, demand centres, such as cities and industrial clusters, will play a key role in helping countries achieve their targets.
According to Professor Lin Boqiang, Dean, China Institute for Studies in Energy Policy, Xiamen University, “We would like to see the majority of cities in China commit to achieving net zero by 2035-2045 to ensure the country can hit net zero by 2060.” Industrial clusters will need to take a similar approach.
Coordinating multiple stakeholders
There are many initiatives and papers 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.
This integrated approach can enable new forms of collaboration among cluster partners and with policy makers while encouraging them to consider the optimal mix of solutions that not only help all parties achieve their climate targets, but also maximise financial returns and unlock other economic and societal benefits, including job creation and air quality improvements.
So, what are Industrial Clusters? Industrial clusters are characterised as geographic areas that comprise co-located companies representing either a single industry, for example, chemical parks, or multiple industries such as steel and cement. As early as the end of the 19th century, industrial clusters were being developed in countries such as the U.K. and the U.S., and after the Second World War, they became economic growth engines – generating jobs, leading technological innovation, and attracting investment. Europe is currently home to over 3,000 industrial clusters.
Heavy and light industry
An industrial cluster can comprise companies from both heavy industry, for example, steel and cement, and light industries such as food and paper. Globally, the split in emissions between heavy and light industry is evenly distributed and any greenhouse gas (GHG) abatement solutions at the cluster level must consider aspects such as fuel and energy requirements that can vary based on industry.
For example, light industries have emissions that are easier to abate since their processes can be electrified using commercially available technologies. However, industrial processes for heavy industry require higher temperatures which are difficult to electrify. Industrial Clusters provide a unique platform to aggregate energy demand and create a scalable internal market for multiple low carbon solutions that can address the needs of both heavy and light industry.
A new challenge
Industrial Clusters are now faced with a new challenge – how to accelerate a path to climate neutrality that creates jobs and attracts investment? What is the next leap forward for the companies currently present in clusters, who have been exploiting sectoral coexistence through exchange of waste materials, shared green buildings, energy efficiency and infrastructure for years? As policy makers encourage industrial clusters toward net zero, what further advantages can be derived from these industrial zones that provide a unique opportunity to not only scale and optimise demand for energy, but also share risk among multiple stakeholders?
There is a menu of emissions abatement opportunities to pursue, but a holistic approach to industrial clusters is best suited to optimise emissions reduction solutions and create a digitally integrated energy and resources system that maximises system value outcomes. On the path towards net zero, industrial clusters should make informed decisions that help maintain/increase productivity, improve the competitive position (price) and increase the appeal of their products (e.g., green products) in the global marketplace, and enhance the environment in which they are located.
The role of governments
Governments will be instrumental in making the transition to net zero industrial clusters possible. By designing the right frameworks and providing the necessary economic incentives, they will be able to drive both the creation of new clusters and the enhancement of existing zones that attract both domestic and foreign investment due to their green credentials.
In some cases, these investments will help revitalise entire geographic areas through the economic value they provide. For example, the industrial cluster project at Humber, aligns with the U.K. government’s goals to not only lower overall emissions but also its “levelling-up” agenda that aims to create high-skilled jobs in the local area. The Humber project is expected to create 50,000 new jobs.
Best practices, case studies
The World Economic Forum has collaborated with Accenture to launch a report (on 2nd March) which addresses the opportunities and challenges faced by industrial clusters in achieving net zero emissions.
“The paradigm of competition and collaboration to achieve net zero must shift significantly. The private – private and public – private collaboration models must evolve to take a holistic and integrated approach to the benefit of society at large. This will create new challenges and, most importantly, new business opportunities and new employments underpinned by a clear environmental sustainability focus.” said Roberto Bocca, Head of Shaping the Future of Energy, Materials & Infrastructure and Member of the Executive Committee, World Economic Forum.
The report highlights best practices from industrial clusters across the globe including a spotlight on the Humber project in the U.K. and the Suzhou Industrial Park in China. These two case studies illustrate how the key solution areas (Systemic Efficiency/Circularity, Direct Electrification & Renewable Heat, Hydrogen, and Carbon Capture, Utilisation & Storage) have been applied to reduce emissions while maximising system value.
“There is tremendous value potential for both energy users and providers in new integrated models like the digital platform connecting users and providers of energy in Suzhou, or in the green hydrogen models,” said Stephanie Jamison, a senior managing director and global Utilities lead at Accenture. “In the three green hydrogen cases in the report, we see offshore wind and solar and green hydrogen production integrated with multiple end uses that maximise the value of this molecule.”
Another example of an inspiring industrial cluster is the Port of Rotterdam, which is working towards achieving a carbon-neutral and circular port in three steps. The approach incorporates efficiency and infrastructure, transition to a new energy system, and transition to a new raw materials and fuel system. As part of this plan, the Port of Rotterdam CO2 Transport Hub and Offshore Storage Project (Porthos) will transport CO2 from industry located in the port and store it in empty gas fields in the North Sea.
Net-zero is now a driver
The drivers pulling organisations together in industrial clusters are changing. Net zero commitments will require new ambitions, new partnerships, and new ways of working for industrial clusters. The transformation will be challenging, particularly while ensuring productivity, product affordability and process resilience. Cluster stakeholders must collaborate now to first align on common net-zero goals and then develop and implement roadmaps on a cluster-by-cluster basis to reduce industrial emissions and achieve net-zero targets.
Louise Anderson is the Electricity Industry Lead, World Economic Forum
Melissa Stark is the Global Head of Renewables and Energy Transition Services, Accenture