The decarbonisation of heavy industry is making little progress. There are two main reasons. Firstly, there are no easy technology wins. Efficiency and carbon capture have been the favoured options. But efficiency gains have their limits, and carbon capture is still proving very expensive. Secondly, governments don’t want their home industries to lose competitiveness incurring costs reducing emissions. Dolf Gielen and Paul Durrant at IRENA say a focus on renewable power can open the door to progress, but it has not got the recognition it deserves. If it did, renewables could deliver 25-60% of the needed industrial emissions mitigation. Here they summarise their studies that look at chemicals and petrochemicals, iron and steel, cement and concrete. Other policies and processes will be needed too, including “circular economy” strategies, as well as raising the capacity of proven new techniques that have not yet reached scale (e.g. hydrogen-based direct reduced iron production). Efficiencies and CCS will still be needed too. To deal with the problem of lost competitiveness, either global sectoral agreements or border tax adjustments will be needed to establish a level playing field. And cooperation with China will be essential as it accounts for half of global industrial commodity manufacturing.
Global CO2 emissions are falling this year due to the COVID-19 crisis. But this is no cause for complacency. We will need deep year-on-year emission reductions in the coming decades to reach net-zero by mid-century.
That objective has increased the importance of emission mitigation in the manufacturing industries, which account for around a quarter of global energy and process CO2 emissions. Industrial emission reduction options have been studied for decades, but deployment of low-carbon solutions has been limited to a few demonstration projects.
Governments have been slow to act
One reason for that lack of progress is that there are no “easy wins” for these sectors and so attention has been concentrated elsewhere: it is, for example, more straightforward and cheaper to focus on replacing coal with renewables in power generation.
A second reason is that the threat of carbon leakage and loss of competitiveness has made governments reluctant to apply progressive regulatory frameworks. This is especially the case for energy and carbon intensive industries such as iron and steel making, the chemical and petrochemical industry and cement making.
However, a recognition that net-zero carbon is only possible if industry also reduces emissions substantially is starting to change the mindset. For example: in the G20 context, new solutions for industry are being studied; in the climate context, Sweden and India are leading a multinational initiative to share knowledge; the World Economic Forum and the Energy Transitions Commission continue private sector engagement through their Mission Possible Platform; and the International Renewable Energy Agency (IRENA) has been tasked by its members to explore the role of renewables and circular economy solutions for industry.
5 opportunities (and challenges)
There are very few off-the-shelf solutions available now but there are a number of promising approaches that could lead to effective solutions. They can be broadly divided into five categories:
- Promoting energy efficiency and circular economy (reducing energy demand);
- Shifting electricity demand to renewables and replacing fuels with renewable electricity (electrification);
- Utilising green hydrogen from water electrolysis with renewable power and other forms of indirect electrification (Power-to-X);
- Making direct use of renewable energy sources and biomass as feedstock;
- Deploying CO2 capture and storage and CO2 capture and use (CCS and CCU).
The application of these approaches to industrial sectors presents some particular challenges and opportunities. For example, one strategy that has been barely explored to this day is the potential to relocate industrial production to locations with better access to clean low-cost energy.
One potential unique strategy for energy intensive commodities and materials is the circular economy concept: carbon can be stored in products, the efficiency of materials use can be raised, waste materials can be recycled or used for energy recovery and materials can be substituted.
On the challenge side, industrial energy systems are often highly integrated so not easily replaced. For example, given cogeneration is widely deployed, a shift to renewable power thus also requires a change in heat supply.
The underplayed role of renewables
To date, most attention in these sectors has focused on energy efficiency and CO2 capture and storage. This can be explained by the economic benefits of increased efficiency and the ability to deploy CCS for existing plants, which is of special interest to incumbents. But the efficiency potential is limited and progress in CCS has been slow to date.
At the same time, new economically viable solutions are emerging, notably in relation to renewables. A forthcoming IRENA study indicates a 25-60% role for renewables in industrial emissions mitigation (Figure 1) with both direct and indirect electrification in combination with renewable power playing a central role. This potential has so far not been fully recognised amongst industry planners and policy makers.
Ammonia, methanol and plastic materials account for the bulk of energy use and CO2 emissions in this sector. Globally around 200 ammonia plants and 200-300 steam crackers are in operation, nearly all of which currently use fossil fuels.
Moving away from fossils fuels will require a switch to green hydrogen and biomass for energy and feedstocks, but the circular economy also deserves special attention in a petrochemical context. Demand growth needs to be limited, for example in the context of packaging for food and the internet delivery economy. Recycling progress has been limited to date, but new technologies such as pyrolysis may enhance its prospects.
Biomass as the only form of renewable carbon is one option for this sector but today less than 5% of petrochemicals is produced with biomass-sourced carbon. This share needs to grow substantially, which is technically feasible, but hindered by current high costs and lack of incentives to make the transition.
Green hydrogen is starting to emerge as an option, with a range of countries releasing ambitious strategies, such the European Union’s Hydrogen Strategy launched on the 8th July and announcements of large projects such as USD 5 billion plan to build a green ammonia plant of 1.2 Mt per year in Saudi Arabia, to be commissioned in 2025.
Globally around 300-400 blast furnaces are in operation across less than 200 sites. Nearly all use fossils fuels for energy and most use fossil fuels as a reducing agent. Production, however, could be switched away from blast furnaces to the direct reduced iron (DRI) process which could eliminate coal and coke use, if green hydrogen was used. DRI production using hydrogen from fossil-fuels is today a well-established part of the industry, so the shift from natural gas based DRI to hydrogen based DRI production would be a relatively easy, low risk step to take. Low cost green hydrogen is critical to make this happen. Complementing this shift in the production process, an economically attractive strategy could be to produce the DRI close to the mining locations, such as those in Australia and Brazil, and continue steel production at established sites close to the consumers.
Global cement production has grown from 1.2 Gt in 1990 to 4.1 Gt in 2019 such that globally, around 6,000 cement kilns are in operation with demand still growing, particularly in developing economies.
Reducing emissions in this sector is particularly challenging because process emissions, in particular associated with the production of clinker (a key component of cement), account for more than half of all emissions.
Some emissions reductions could be achieved by increasing the share of waste and biofuels used with the only limitation being the local availability of such fuels. There is also some potential to reduce the amount of clinker produced through substitution of feedstocks and more efficient use of cement and concrete. However, such approaches will often require adjustment of building and construction standards, a process that takes time.
These options can help, but CO2 capture and storage (CCS) looks essential in this sector to achieve very low emissions. Combining CCS with the use of biomass (BECCS) could lead to cement kilns with net zero or even negative emissions.
A policy framework for industry transitions
Driving a broad and sustained renewables-based transition at the pace needed will require a suite of policy actions. An integrated policy framework is needed to align approaches. Some key components of such a framework are set out below:
Implications for Europe
Europe can build a leading role in decarbonising industry. The European Union’s recently launched hydrogen strategy is a strong start but alone will not be enough. Comparable vision and support is needed in other areas such as: creating demand for ‘green’ industrial products; supporting other solutions such as biomaterials; and ensuring establishing a comprehensive circular economy.
To ensure Europe’s production is competitive, either global sectoral approaches or border tax adjustments will be needed to establish a level playing field. Neither is easy to implement in an increasingly fragmented world. Green commodity mandates, similar to the European approach for car CO2 emissions, and backed by strong certification regimes could support early investment and assist with competitiveness concerns.
Europe is not large enough to make the transition happen on its own but can champion multilateral action and lead by example. Cooperation with China, in particular, will be critical as its economy accounts for around half of global industrial commodity manufacturing.
Delivering deep decarbonisation across multiple industrial sectors around the world in a just and economically acceptable way is a formidable challenge. The growing consensus on the need to do so, coupled with the increasing availability of very low-cost renewables and a small but growing suite of options suggests it can be achieved, but only if the right actions start now.
In April, IRENA published the annual update of its Paris compliant roadmap to 2050, the Global Renewables Outlook: Energy transformation 2050. This report also explored what further steps would be needed to deliver net-zero emissions by 2050. To expand on the potential of emerging renewable solutions for industry and transport, in September, IRENA will be publishing its Reaching Zero with Renewables report and will be discussing the actions that are needed to expand their uptake at IRENA’s Virtual Innovation Week from 5th – 8th October.