Commercially resilient net-zero industrial clusters exploit the system value of low-carbon technologies and infrastructure

Nixon Sunny, Niall Mac Dowell and Nilay Shah

Imperial College London, UK

The United Kingdom (UK) had the second lowest industrial natural gas prices in Europe until recent years. The availability of cheap and abundant gas from the North Sea has resulted in the UK industry stock being highly reliant on gas-fired applications for heating and power generation. However, energy policy in the UK has lacked pragmatism in relation to natural gas infrastructure, and this is proving to be very costly for industrial firms and taxpayers. In retrospect, consumers could have been less exposed to the high gas prices following the Covid-19 crisis, if the energy infrastructure was built with commercial resilience as a guiding principle. For example, the UK has the technical potential to store its entire annual natural gas demand in geological salt caverns, but currently it only has the commercial capability to store around 3% in dedicated geological storage. Given that approximately half of the UK gas consumption is met by imports from other countries, a resilient gas network would have more storage capacity to exploit seasonal price differences, and insulate the consumers from price shocks.

This observation offers an invaluable lesson as the UK, along with other developed economies, is undergoing a low-carbon transition that requires sizable investments in the energy infrastructure. Avoiding past mistakes may well make the difference between developing a manufacturing sector that is internationally competitive in the long-run from one that is destined to fail. Here, the government and the private sector need to align strategy, incentives, and investments to be in line with the objectives of the Industrial Decarbonisation Challenge. In this context, this contribution explores the potential to reduce the cost of decarbonising industrial clusters by exploiting the system value of low carbon technologies. A case study on the Humber industrial cluster is presented to identify commercially resilient investment decisions to address this key research gap in the literature.

A mathematical model is developed to characterise the cluster emissions profile, the demand for heat in the respective sites, and technology options, at the granularity of an individual emitting facility. The model, based on mixed integer linear programming, is open-source and freely available for use. A technology-rich database of mitigation measures such as post-combustion CCS, solar and wind power, blue and green hydrogen, and negative emissions technologies form the model inputs. The purpose of the model is to identify synergies between low-carbon technology and infrastructure (i.e., transmission and storage) investments, prior to subjecting the designs to exogenous shocks. Solutions that are “resilient” are identified as those that are not worse off the nominal performance by more than the level of accepted risk under a broad range of economic conditions. The model is formulated as a minimisation of the total cost of CO₂ avoidance in reaching net-zero emissions in the Humber cluster.

The results suggest an important role for post-combustion CCS, fuel switching with hydrogen and electricity, and negative emissions technologies. In particular, hydrogen or electricity supplied from bioenergy with CCS is able to offer the cluster a twin fold benefit of CO₂ avoidance by displacing natural gas, whilst simultaneously removing CO₂ from the atmosphere. The total cost of CO₂ avoidance is expected to range between £130/ton and £210/ton under a range of input prices for natural gas, grid electricity, and biomass pellets. Overall, solutions that are most resilient to economic uncertainty tend to favour indigenous resources such as waste biomass, or domestic production of renewable electricity, as they hedge against price fluctuations in the international market. Government policy needs to incentivise investments that can boost industrial output, while learning from the lessons offered by the recent gas price crisis.