Dec 21, 2016 by

The Climate Group’s Energy Transition Platform is an initiative designed to support highly-industrialized state and regional governments in developing and implementing innovative clean energy policies. Here, Dr. Tamaryn Napp of the Grantham Institute – Climate Change and the Environment, the knowledge partner of the Energy Transition Platform for the Innovation Lab phase, assesses the opportunities and challenges of transitioning the industrial sector towards zero carbon production.

Energy intensive industries, such as steel and cement manufacturing, are struggling with overcapacity as the economic downturn has driven down global demand. Last year saw the lowest price of steel in over a decade; as a result, many companies have had to shut down plants and there is limited spare capital for innovation and investment. These are hard times but they provide an opportunity for a much-needed overhaul of aging and inefficient technology.

The 2015 Paris Agreement was hailed as a major milestone in our efforts to tackle climate change, and it is now generally accepted that to limit global warming to the target of ‘well below 2 degrees Celsius’ will require global carbon dioxide emissions to be ‘net-zero’ as early as 2070 and, beyond that, negative emissions (i.e. removing carbon dioxide from the atmosphere) (IPCC, 2014). In practice this translates into a complete transformation of our energy system over the next century – in all sectors and countries.

In the 20 years since the Kyoto protocol was signed in 1997, a wide range of policies have been introduced across the globe to reduce greenhouse gas (GHG) emissions. Despite a lack of coordinated efforts prior to the Paris Agreement, these measures are now starting to pay off, particularly in the electricity sector, but also in the transport sector.

The cost of onshore wind is now close to being competitive with gas-fired power generation. Rapid reduction in unit costs and improvements in efficiency have reduced the costs for utility-scale solar photovoltaic panels from around US$4 per Watt-peak in 2010 to US$1.2-1.8 per Watt-peak, today.

Advancements in battery technologies, amongst others, have meant that electric vehicles are likely to be cost comparable with conventional cars by as early as 2020 (on a lifetime cost basis).

By comparison, despite sustained improvements in energy efficiency over the last decade, progress in the industrial sector remains slow. The industrial sector still accounts for around 37% of the total energy consumed globally. In 2013, 9 Gigatons (Gt) of global carbon dioxide emissions came directly from the combustion of fossil fuels in the industrial sector, amounting to 28% of total emissions.

The scale of the challenge

An industrial sector with zero carbon dioxide emissions however, will not be straightforward to achieve, and there are a number of obstacles blocking the way: firstly, the sector is very heterogeneous with a wide range of processes and products, meaning the number of crosscutting solutions is limited.

Secondly, in addition to emissions from fossil fuel combustion, some industrial processes produce carbon dioxide as a by-product of the chemical reaction; one such example is cement manufacturing. These so-called ‘process emissions’ cannot be addressed with energy efficiency measures or by switching fuels.

Thirdly, manufacturing plants are long-lasting and major retrofits are usually only made according to long refurbishment cycles, offering only a short window of opportunity for upgrades and improvements to the energy efficiency of the core process. Finally, unlike the electricity sector, products need to be competitive on an international market, reducing the scope for businesses to absorb or pass on any additional costs to consumers – making low carbon technologies uneconomical.

Improving energy efficiency by adopting the best available technologies, and switching fuel from coal to gas and biomass, are the main short-term options for industry to reduce GHG emissions. The International Energy Agency estimates in its Energy Technology Perspectives 2016 report that these measures combined could reduce emissions by 4.9 Gt in 2050 (down from the projected 13.6 Gt in their counterfactual scenario that they predict will lead to global warming of 6 degrees Celsius). By this point, however, most industries will already be operating with the current Best Available Technology (BAT) and there will be limited options for further improvements.

The role for research and development

As manufacturing in China slows down, Africa is poised to take over. Estimates from the TIAM-Grantham Global Model indicate that future demand for steel and cement in Africa could be as much as two to six times what it is today by 2050. By investing in research and development (R&D) now, new low carbon processes can be advanced and ready for deployment when demand picks up again, as no doubt it will.

Currently, though, advanced processing technologies designed to reduce emissions – such as smelt reduction steel making; or inert anode technology, which eliminates around 37% of direct emissions from aluminium production – are still not zero carbon processes.

At the moment, we are relying on carbon capture and storage (CCS) as the silver bullet to address the remaining emissions. Yet CCS technology is far from ready to be rolled out at industrial plants. CCS is a complex technology with many different stakeholders involved: not only must carbon capture technologies be tailored to the specific industrial process, but also technologies to transport and store carbon dioxide are yet to be proven reliable at scale.

Alternative processes that are truly ‘zero carbon’, such as those based on (low carbon produced) hydrogen or (renewable) electricity, are still in the proof of concept phase. There is an urgent need for further innovation in this sector, and industry, academia and government alike need to step up to the challenge.

It cannot be stressed enough that, without significant advancement in CCS applied to industry, and the development of alternative zero carbon processes, zero carbon production in the industrial sector will not be possible. Innovation is a long-term, high-risk game. By their nature, demonstration of new industrial processes requires significant upfront investment with no guarantee of returns.

In addition to assisting with funding for R&D, governments need to send clear long-term policy signals to reduce uncertainty for industry. Collaboration between countries and sectors to share knowledge and lessons will help to speed up the process by distributing the cost and providing some mitigation of risks. Activities such as The Climate Group’s Energy Transition Platform are an important step in the right direction.

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