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The UK government appears ready to try to reverse decades of job
losses in its once-prominent industrial sector by retrofitting it
to support carbon capture, utilization, and storage (CCUS) and
hydrogen technologies, laying the plans out in an
Industrial Decarbonization Strategy announced 17 March.
The strategy aligns industry with both the national 2050
net-zero GHG emissions
target published in 2019 and the 10 Point Plan for a Green
Industrial Revolution
published in November.
While the lack of detail in such net-zero-related targets irked
environmental groups, the government continues to insist it is
putting its best foot forward ahead of the UK's presidency of
COP26, the United Nations' climate conference convening Paris
Agreement parties, set to take place in November in Glasgow,
Scotland.
To reach its 2050 emissions goal, the UK has now turned its
focus on the global pain point of industrial emissions. Its
strategy plans to push industry to make ever-steeper cuts to
emissions -- about 66% by 2035 and 90% by 2050 -- in an effort to
see lower-carbon fuels meet 40% of UK industry's total energy
demand by 2030. It also wants industrial clusters to capture 3
million mt of carbon dioxide annually using CCUS, although it
didn't say whether this was related to the production of hydrogen
or simply fossil fuel combustion.
To do this, the UK government plans to transform five existing
industrial clusters into net-zero or lower-carbon hubs. While it
has yet to name the clusters, the government awarded £171 million
($236 million) in CCUS and hydrogen design studies to nine green
technology projects in Scotland, Merseyside, the Humber, Teesside,
and South Wales.
The scattering of the phrase "Green Industrial Revolution"
across the strategy document hints at a revival of the 19th
century's industrial revolution in which steel and coal were
key.
Change may be welcome in the UK's historic steel sector
heartlands of Wales and Yorkshire as well as oil and natural gas
sector hubs around Scotland, as these sectors have been in decline.
The latest illustration is the current debt crisis at Liberty
Steel, one year after Chinese Jingye Group bought British
Steel.
The strategy aims to provide "certainty" for industry and
investors, perhaps taking the view that this could persuade
industrial supply chains to relocate to the UK.
CCUS, hydrogen
The government expects the entire industrial sector to swap its
use of fossil fuels, largely natural gas, for lower-carbon
alternatives such as hydrogen, electricity, and bioenergy, but will
allow the use of fossil fuels where they have carbon capture
attached. By 2050, it wants the country's industrial sector to use
"almost no fossil fuels unless with capture."
Prime Minister Boris Johnson and the government are spending
heavily on industrial hubs, seeking "at least four low carbon
clusters by 2030 and at least one net-zero cluster by 2040." A £1
billion ($1.4 billion) pot called the CCUS Infrastructure Fund will
initially allow the government to outfit two industrial clusters
with infrastructure for capturing, transporting, and storing carbon
dioxide by the mid-2020s, and two more clusters will follow by the
end of the decade.
This year, the government will draw up the details of the CCUS
funding mechanism it plans to implement by 2022. It has proposed
Contracts for Difference (CfD), reflecting success with using CfDs
to grow the country's offshore wind sector, for now the largest in
the world. The CCUS scheme will subsidize operation,
transportation, and storage for first-of-a-kind installations. A
negotiated price would come first, and a market-based price
later.
Planned fossil fuel generation and CCUS subsidies may be a
jumping-off point for another emerging technology: biomass
generation and capture or bioenergy CCUS (BECCUS). During 2021, the
government will also set out a plan to defeat barriers to
electrification and BECCUS technologies.
BECCS not only generates electricity, but it is able to produce
negative emissions, the CEO of the research nonprofit Resources for
the Future Richard Newell
told audiences at CERAWeek by IHS Markit earlier in March.
BECCS in addition to forestry projects will be used to offset the
UK's remaining industrial emissions (about 6 million mt of carbon
dioxide equivalent), said the government in the strategy.
It appears a hydrogen subsidy equivalent is still far off. The
government said it has a long list of ways to overcome the cost gap
between natural gas and hydrogen that it calls business models. The
government plans to consult on hydrogen cost business models in the
second quarter of 2021 and reveal its chosen tactic in 2022. It
will also explain more details in the Hydrogen Strategy promised
this year under the 10 Point Plan.
A £240 million ($331 million) Net Zero Hydrogen Fund, also
announced in the 10 Point Plan, will support private investment in
early low-carbon hydrogen production projects. This looks to be the
other half of its £139 million ($192 million) grant scheme
announced in 2020, aiming to encourage industrial fuel switching
from natural gas to hydrogen.
Fuel combustion is the largest emissions source in
manufacturing, and industry produces 16% of national emissions. In
the UK, the industrial sector consumes mostly electricity and
natural gas, and its emissions would drop if hydrogen was used in
place of natural gas. It could drop 71% if blue hydrogen is used or
91% if green hydrogen was used, according to 2018 report by UK think tank Policy
Exchange.
The government justifies its overall industrial pivot to CCUS
and hydrogen by saying the technologies are "robust" in the face of
changes to industrial demand, technical challenges, and fuel
prices. But in a conflicting statement about carbon pricing, the
government noted that risks for low-carbon investors remain
high.
Initially, most low-carbon hydrogen is expected to be sourced
from natural gas because the production technology is currently
cheaper. "Which option industries take to decarbonize will depend
on a real mix of factors. There's a lot of concern over the
environmental integrity of bioenergy, whilst hydrogen must be
produced in a genuinely low-carbon way. Hydrogen electrolyzer costs
are falling fast so producing hydrogen with renewable or nuclear
electricity is one way of doing that, but in the near term,
hydrogen with gas and CCS is possibly going to remain cheaper for
the next decade or so," Ajay Gambhir, a senior research fellow with
Imperial College London Grantham Institute for Climate Change and
the Environment, told IHS Markit.
This is another source of possible risk for the UK strategy, as
prices for natural gas, the primary source of that initial
low-carbon hydrogen, nearly tripled between the first quarter of
this year and the last, according to IHS Market commodity data.
The strategy's emphasis on subsidies has been welcomed by
industry. The CEO of manufacturing trade body Make UK, Stephen
Phipson, said: "Britain's big corporations have large ring-fenced
budgets for green initiatives, but our smaller firms will need
support to make sure they are able to make the changes necessary to
ensure the UK meets its carbon targets and that they can benefit
from the dramatic changes to the way industry will work in the
coming years."
Carbon price leverage
Raising the price of pollution is another way the UK will
encourage its industry to switch fuels. The UK plans to re-design
the existing UK Emissions Trading Scheme (ETS) covering industry,
which replaced the EU ETS in January, under which industrial actors
must buy allowances for certain emissions. It will create a cap on
emissions, which will gradually tighten in order to better align it
with the country's net-zero aims as well as reviewing the
allocation of free allowances that make certain industrial actors
exempt.
The government is taking stock of its own contribution to
emissions, through tweaks to policy for trade deals, planning,
standards and labeling for products, and public procurement. The
strategy includes plans to create an approach to trade that
mitigates carbon leakage, the offshoring of emissions that could
increase a company's emissions overall. It is considering issuing
import fees on goods produced in countries with lesser carbon
pricing policies. It will also have to deal with the EU's own
proposed version of carbon import tariffs, the Carbon Border
Adjustment Mechanism, in view of their shared goals.
Achieving those trade aims will also involve working through
forums such as the G7, G20, Office for Economic Cooperation and
Development, and United Nations Environment Programme, it said. The
UK plans to, for example, use COP26 and its G7 presidency to
"create a coalition of countries committed to shared approaches to
developing the market for low carbon products" by 2030. The UK also
plans to seek international coalitions for green public procurement
at the same time as it will capitalize on export opportunities for
low-carbon products, the government said.
Norway likewise has recently announced plans to
seek export opportunities for its own CCUS and hydrogen
industries.
Hubs part of strategy
The UK is raising the bar for an industrial sector that already
had made progress on emissions. Industrial emissions in the UK have
halved since the 1990s. This is due to environmental policies,
fiscal policies, as well as increasing volumes of embedded
generation, and lower energy-intensive industry activity, according
to the Policy Exchange report. The 2008 financial crisis also
hastened a decline in industrial gas consumption, although it still
remains important for both metal and chemicals producers, according to Oxford Institute
for Energy Studies.
Industrial emitters have followed best practices to limit air
emissions under the EU's Industrial Emissions Directive (IED) since
2013, which the UK has adopted post-Brexit. Greener industrial
heating has benefitted from biomass subsidies under the Renewable
Heat Incentive (RHI). The UK has already offered industry tens of
millions of pounds in grants for technologies like industrial heat
recovery and CCUS.
But the UK's "piecemeal" industrial emissions policy lacked an
overarching strategy, said the government's advisory body, the
Climate Change Committee (CCC). It may be one reason why the
industrial decarbonization strategy is now targeting the UK's
industrial clusters, such as chemicals manufacturing on Teesside,
which also produces 50% of the UK's hydrogen, a key component of
ammonia production.
These clusters show the highest levels of carbon dioxide
emissions in a national heat map created by
consultancy Element Energy. More than half of UK industrial
emissions come from refineries, chemicals, construction, iron,
steel and cement, and lime manufacturing. Most of the country's
industrial emissions were in regional clusters, where iron and
steel industries made up nearly a third of emissions, according to
the strategy.
Resolution on steel
The steel sector, which is responsible for 7-9% of global
emissions, is challenging to decarbonize because coal is often used
in three parts of the steelmaking process: as an energy source for
furnaces, as a reducing agent for iron ore, and as a source of
carbon alloys.
Hydrogen might someday be used for some of these processes
instead. European steelmakers like Sweden's SSAB and Luxembourg's
ArcelorMittal have announced trials of steel production with
electric arc furnaces using hydrogen.
The UK industrial decarbonization strategy plans to set steel
producer targets, alongside both the industry and the CCC, so that
ore-based steelmaking reaches near-zero emissions by 2035.
Posted 26 March 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability