Effectively decarbonising operations continues to dominate the conversation for the UK’s industrial sector, with net-zero ambitions widely considered a key corporate focus alongside competitively meeting production demands. In this article, Ulf Nahrath, Shell’s VP of UK Energy Transition and Infrastructure, discusses the possible options available, the economic implications of each, their potential challenges and the benefits of adoption.
The UK’s future net-zero energy system must balance cost, reliability and broader economic benefits. It should offer resilience, ensure security of supply and support new jobs. In parallel, it must quickly transition towards the use of cleaner products, with the ambition of achieving net-zero by 2050.
After all, tomorrow’s energy demands will increasingly be delivered by a wider portfolio of more sustainable, more circular, more decentralised alternatives. Alongside a significant increase in the generation of renewables, we’re likely to see investment in alternative fuels, such as greener hydrogen, nuclear and bioenergy, as ever-more pivotal elements of the energy landscape.
As businesses continue to seek new and innovative solutions to further reduce the impact of energy costs on their bottom line, buying better is no longer enough. Instead, they must focus on managing consumption, embracing efficiency and test feasibility of electrification, hydrogen or post combustion carbon capture. This is the most effective long-term solution to reduce both cost and carbon.
The challenges of decarbonising the industrial sector
According to insight from HSBC, the UK’s industrial sector is responsible for more than 12% of our national greenhouse gas emissions. From chemicals and cement manufacture, to the production of iron, steel, plastics, glass and textiles, keeping up with escalating demand is highly resource intensive. While the sector has reduced its emissions by 57% since 1990, pace and change is needed to further decarbonise.
Reducing emissions requires major transitions, including a substantial reduction in overall fossil fuel use, the deployment of low-emission energy sources, switching to alternative energy carriers and maximising energy efficiency. The benefits of doing so, however, are widespread – lower operational costs, increased revenues, access to cheaper capital and an enhanced reputation to name but a few, alongside a backdrop of lower carbon intensity.
The first priority is helping industrial businesses to secure the energy they need at an affordable price in a sustainable way. Immediately available decarbonisation pathways include biomethane, solar PV and natural gas. Switching to the provision of zero-carbon power or buying carbon credits through your energy provider is yet another fast and effective solution.
In the medium and long-term, businesses should be looking towards solutions such as clean biofuels, carbon capture and storage (CCS), battery technologies and carbon offsetting. Hydrogen (both blue and green) will become ever-more readily available across the UK over the coming decades, offering yet another low carbon option for energy intensive users.
Each offer numerous financial and environmental opportunities, but also come with their own set of specific challenges. Understanding their strengths and limitations is key to identifying the right approach for your business.
- Option 1: electrification
A simple yet proven approach, replacing gas with electricity can prove an important step to cutting carbon. While offering the simplicity of using a single carrier, it’s important to consider whether or not the grid offers sufficient local capacity for energy intensive operations and the possible cost implications as electricity is historically 2.5 times more expensive than gas in the UK and its distribution cost to customers even more so.
Private wire options, such as on-site renewables (solar, wind, battery storage, etc.), can effectively navigate this barrier, but having sufficient space to house assets and the capital required to invest is critical to success.
- Option 2: Hydrogen
There are two approaches to producing hydrogen: blue hydrogen (produced by splitting natural gas into hydrogen and carbon dioxide) and green hydrogen (produced by splitting water via electrolysis into hydrogen and oxygen). Green hydrogen requires a large energy input from a renewable source and blue hydrogen requires carbon capture infrastructure making use of large carbon stores in the North Sea. The UK government’s aim is to have 10GW blue and green Hydrogen production capacity installed by 2030.
The application and operation of hydrogen is similar to natural gas, but with the added benefit of lower carbon intensity. This said, any business must consider its own readiness and viability. For example, plant equipment like turbines or boilers must be converted to be fully compatible to use hydrogen as an input fuel, while you’ll also need direct access to a hydrogen pipeline.
- Option 3: Carbon Capture and Storage (CCS)
CCS is yet another attractive decarbonisation option for industrial businesses. The process sees CO2 captured and separated from flue gas, before being treated, processed, transported and injected deep underground where it can be safely stored in the North Sea depleted oil or gas reservoirs or aquifers.
The opportunity for industrial offtakers is significant. What’s more, there is little change needed for plant equipment (just amendments needed to flue processes). This said, however, businesses should be aware that impact and value is based on scale, while good carbon transportation links are needed.
Opportunities for the future
While the past 24 months have proven uncertain at best for industrial energy users, the system will continue to evolve between now and 2050, bringing with it changes in cost profiles, stringent regulation and the requirement to embrace new technology.
It’s no longer an ‘if’ but a ‘when’ for industrial businesses to decarbonise their operations. Driving widespread energy efficiency across your business should be an immediate first step, while clear consideration should be given to initiatives such as electrification, hydrogen and CCS.
For any industrial company looking to decarbonise, it’s essential to take a baseline of carbon intensity, equipment and cost and then undertake extensive due diligence to understand the cost and supply security implications of available solutions, as well as infrastructure availability and the adaptability of existing plant equipment.
Shell Energy is perfectly placed to support users in their journey to net-zero. Our experienced team are here to help customers navigate the complexities of decarbonisation and achieve their long-term net-zero goals.
To find out more about Shell Energy and its affordable, cleaner, simpler renewable energy solutions, visit www.shellenergy.co.uk/business.