Transitioning Industrial Clusters towards Net Zero

In this series of blog posts, Brainnwave CEO Steve Coates reflects on his attendance at COP26, the impacts on our industry and the implications for other business leaders who are thinking about the practicalities of decarbonization.

According to the UN, countries representing approximately 70% of the world’s GDP have committed to net zero targets. Major ecosystems such as industrial clusters will therefore play a key role in helping achieve these ambitions. Industry accounts for almost 30% of global Greenhouse Gas (GHG) emissions and includes some of the hardest to abate sectors of the economy. Industrial clusters – geographic regions composed of co-located companies from one or more industries – represent approximately two-thirds of industrial emissions.

The physical proximity of different industries in clusters represents a significant opportunity to leverage cross industry collaboration to reduce emissions. These clusters can utilize co-located supply and demand to scale low carbon technologies, to find innovative financing opportunities, and to build new partnerships which accelerate the path to net zero.

Speakers

• Louise Anderson, Electricity Industry Manager, World Economic Forum
• Niccolo Aggogeri, Managing Director, Eni
• Maryam Brown, President, SoCalGas
• Agustin Delgado, Chief Innovation and Sustainability Officer, Iberdrola
• Will Gardiner, Group Chief Executive, Drax Group
• Stephanie Jamison, Senior Managing Director – Strategy & Consulting, Europe, Accenture
• Arshad Mansoor, CEO, Electric Power Research Institute (EPRI)
• Ernest Moniz, CEO of Energy Futures Initiative and EJM Associates and former Sec. of State for Energy, United States
• Manuel Nunez, Innovation Director, Petronor
• Cordi O’Hara, President, National Grid Ventures
• Chris Oughton, Director, Kwinana Industries Council
• Cristina Oyon, Director of Technology, Innovation & Sustainability, SPRI
• Alistair Phillips-Davies, CEO, SSE
• Dan Sadler, Vice President, UK Low Carbon Solutions, Equinor
• Melissa Stark, Global Renewables and Energy Transition Lead, Accenture
• Dr Jennifer Wilcox, Acting Assistant Secretary for Fossil Energy and Carbon Management, DOE

The World Economic Forum used this session to announce the launch of a Global Industrial Clusters towards Net Zero Initiative. At the session were representatives from a number of these clusters, each with their own unique properties and targets:

Kwinana in Western Australia

• Reduction potential of 8.2 MT of CO2 per year
• $11.5bn of GDP output
• Key Industries are: Cement, Chemicals, Refineries and Power Stations
• 30,000 skilled workforce

HyNet North West (UK)

• Reduction potential of 4.5MT CO2/year initially 10MT CO2/year after 2030
• £2.8 bn of gross value added to UK 2022-2030 (not sure why they use this metric?)
• Will deliver 80% of the UK’s Hydrogen target of 5GW
• Will deliver 100% of UK’s CCS target by 2030

Zero Carbon Humber (UK)

• Reduction potential 12.4 MT CO2/year
• 55,000 jobs protected
• £18bn GDP generated in the Humber per year
• Key Industries: Chemicals, Cement, Refineries and Steel

Basque Super Cluster (Spain)

• Comprises 16 separate industrial clusters
• Produces 7.2MT of CO2 per year
• 46.15% of GHG emissions are emitted by industries
• 23.9% contribution to GVA in 2019
• 204,000 jobs in industries in the region
• Industries in first phase: Refining, cement, steel, foundry, pulp and paper

So what is the big idea? Well, the challenge of carbon reduction transcends any one company. It needs scale and it needs collaboration and shared infrastructure. By creating these clusters you create a common mission and purpose. It makes a lot of sense when you see it written down but it was a great deal harder to achieve than it is to write it down.

Panel discussions on the accenture stage

Dan Sadler from Equinor summed it up nicely into six core things you need to get a cluster organized:

1. You need to align around a shared value quest and set of benefits and it needs strong alignment to government policy.
2. You need to develop trust with your partners which starts with strong leadership and is helped by transparency and a lot of time spent talking.
3. You need to believe that the whole is bigger than the sum of the parts, collaboration will help to deliver more to every organization involved.
4. You need a contractual framework to enable you to work together with your partners.
5. You need to be able to explain it in simple terms that are very easy to understand by everyone. “If you can’t explain something in simple terms then you don’t understand it well enough” Einstein
6. Turn Up. People must show up on a regular basis. Be committed to the initiative and dedicate time to it.

On reflection I would add a seventh to the list above, a shared data infrastructure. Naturally I am biased since this is core to what we do at Brainnwave but in my experience the challenge of data driven insights is hard enough in one organization with siloed data pools. Try doing that across 12 different organizations and you see the size of the problem. This is where I think the latest advances in cloud technologies and machine learning can play a real role in supporting these clusters to develop and deliver credible plans.

I enjoyed the discussion from Secretary Ernest Moniz, former US Secretary of Energy who said that the US has a lot to learn from the EU (you don’t hear that very often.) A similar approach is just getting started in four key areas across the US:

• The LA Basin, which is the largest international trade hub in the US with 1/3 of all goods passing through its ports.
• Ohio River Valley
• Caroliners (green hydrogen hub)
• Houston/Texas and Gulf Coast hub

Across all these clusters it seems there are four key levers to pull:

1. Carbon Capture and Storage (this came up a great deal across all the clusters). This basically means capturing the carbon as it is emitted from an industrial process then transporting it via a pipeline and injecting it into a storage facility which is typically underground (like an old oil well).
2. Production of hydrogen to be used as clean fuels in industry or blended with existing gas infrastructures.
3. Electrification of transportation.

Undoubtedly these levers all need economies of scale to be viable.

All these initiatives will need government support whilst the market is created. The infrastructure needed is complex and government incentives will be needed to attract the capital investment and create certainty. Hubs like these create stakeholders who all have a vested interest in seeing the infrastructure being developed. This regional approach, targeting heavy industry areas seems eminently sensible to me.

Article tagged with: basque super cluster, clusters, COP26, Glasgow, hynet north west, industrial clusters, industry, Kwinana, net zero, zero carbon humber