Roll-out of renewable energy projects is hampering the chemical sector’s desire to procure more clean energy
TECHNICAL ASSISTANCE
Many alternative low-carbon processes for the chemical industry are still a long way from commercialisation
NECESSARY COMPONENT
Carbon capture, utilisation and storage technologies will be required to help reach decarbonisation targets
KEY QUOTE
We need to fundamentally change the way we produce
The global chemical industry has just 24.8 gigatonnes of carbon dioxide (GtCO2) left in its carbon budget—equal to 6.2% of the world’s total remaining carbon budget—until 2050, according to a recent report by the University of Technology Sydney (UTS) for the UN-convened Net Zero Asset Owners Alliance. UTS calculated sectorial decarbonisation pathways aligned with limiting global warming to below 1.5°C for energy-intensive industries without the use of negative emission technologies such as carbon capture and storage (CCS). Currently, the global chemicals industry is ranked as the third-highest contributor of carbon emissions in the industrial sector and is responsible for around 6% of annual global carbon emissions. Global CO2 emissions from the industry is an estimated 2.9 GtCO2-equivalents a year. Based on the carbon budget calculated by the UTS, and at its current rate of emissions, this gives the industry less than ten years to reach net zero and stay within the 1.5°C of global warming target. On top of a background of regulatory directives appearing in many markets, an increase of “green” consumer demands, soaring energy prices and the ESG preferences of investors, decarbonisation has become an imperative for the chemical industry.
SLOW GOING But it is not an easy task. The chemical industry is considered one of the hard-to-abate sectors—together with steel, cement, aluminium and heavy-duty transportation—due to the high energy intensity of its production processes and its dependence on fossil fuels for both manufacturing and products. It is a task that the industry has only recently begun to tackle, according to Philip Fosbøl at the Technological University of Denmark (DTU). “Decarbonisation in the chemicals industry hasn’t really taken off yet. They are slowly beginning to wake up, but there is a long way to go,” he says. Fosbøl expects a long transition period for the industry. “Lowering the carbon footprint of the industry significantly is possible but will be a huge technical and economic task. The necessary technologies are not yet brought to scale and many have yet to be developed. It will be costly to develop and implement the solutions that are needed,” he adds. Nicola Rega of the European Chemical Industry Council—or Cefic—believes the industry is aware of the work it needs to do to reach decarbonisation goals. “The pressure is mounting, but it will not be a simple trajectory for the industry. For some industries, the path to decarbonisation is clear, but for the chemical industries there are many paths and this makes it a challenging quest. We need to fundamentally change the way we produce,” he says. Much of the progress relies on the implementation of effective regulatory frameworks, as well as increasing investments and more demand from customers to strengthen the business case for the industry, Rega adds.
UNSUSTAINABLE SITUATION According to the IEA, the chemical industry is responsible for 11% of the world’s primary demand for oil and 8% of the primary demand for natural gas. With demand for chemical products expected to grow, annual production is predicted to increase by 3.3% annually (excluding pharmaceuticals), according to German chemical manufacturer BASF. In a business-as-usual scenario, the use of fossil fuels and carbon emissions from the industry will increase significantly. Chemical production is set to become the single largest driver of global oil consumption by 2030, according to IEA. “This is clearly an unsustainable situation,” says Karin Klitgaard at the Confederation of Danish Industry. With the EU’s Green Deal, the bloc’s more ambitious decarbonisation targets and the prospects of EU’s carbon border adjustment mechanism—fundamentally a carbon tax on imports to the EU proposed to include basic chemicals, fertilisers and plastics—chemicals manufacturers inside and outside the EU are being put under pressure to accelerate their efforts, according to Klitgaard. “The European chemical industry is facing a huge task, but so is China, which is responsible for a large part of global chemical production and is being challenged to rethink the sector’s dependence on fossil energy—both regarding production and regarding products,” Klitgaard says. Several of the largest chemical companies in the industry have scaled up their decarbonisation targets. US chemical company DuPont committed to reducing its carbon emissions by 30% by 2030, including sourcing 60% of its electricity from renewable energy. BASF set a target of a 25% reduction of CO2 emissions by 2030 compared with 2018 levels and to reach net-zero by 2050. Danish firm Topsoe, which provides chemical solutions for the ammonia and methanol sector, signed up to the Science Based Target initiative. The programme supports private companies in setting decarbonisation pathways. Topsoe wants to achieve net-zero greenhouse gas emissions in its own operations by 2030 and is set to announce a net-zero ambition for its entire value chain in 2022.
NO SILVER BULLET Being hard-to-abate and energy-intensive, decarbonisation of the global chemical industry is complex. The industry must fundamentally rethink what they will manufacture in the future and how to do it—this will require a number of different and major transformations. “There is no silver bullet for the transition of the chemicals industry towards net-zero. It is a very important, but a complex puzzle that companies need to solve,” says Brecht D’hont from Deloitte, a consultancy firm. Firstly, there need to be more low-carbon production systems used within the industry. Over 60% of the industry’s direct carbon emissions are related to production processes. This calls for improvements in process efficiency, for instance, by further digitalisation and the use of excess heat. This is an area that the industry has focused a great deal on in recent years with energy consumption in the EU chemical sector going down by an average of 0.8% per year between 1990 and 2019. PROCESS CHANGE However, Rega from Cefic says that given recent efforts and progress in energy efficiency it is not an area that will provide much progress. “We will have to look at changing the way we produce,” he says. The big task ahead is to find the technologies and investments that help the sector pivot away from coal and natural gas, which are currently the primary energy sources in production and replace them with more renewable energy sources and electrification. According to Frederik Debrabander, also from Deloitte, this is still an area where companies deal with a lot of uncertainty which complicates making effective investment decisions. For instance, the electrification of crackers—one of the most carbon-intensive processes in the chemical industry due to the high temperatures required—is still not mature enough to deploy on an industrial scale, according to Debrabander. “Therefore it is important that companies have a good balance of short-, medium- and long-term solutions to reach net-zero,” he says. CLEAN FEEDSTOCK The remaining emissions of the sector come from carbon feedstock embedded in products such as oil used for the manufacturing of plastic and natural gas for ammonia, for which low-carbon alternatives need to be sourced. The options include bio-based feedstocks or developing renewable-based hydrogen as a feedstock. There is also the possibility of recycling the products, which would reduce the need for virgin material and the associated production emissions. Chemically-recycled plastic generates 2.3 tonnes of CO2-equivalent per tonne less than virgin plastic production. “There are reduction potentials across many processes, products and areas in the chemical industry, but much of this is still only at a pilot scale. Therefore, there will be a need for a significant increase in both private and public investments in relation to supporting the technological leap that is needed— otherwise it will not happen fast enough,” says Fosbøl from DTU. Fosbøl is currently researching the development of waste plastics or carbon and hydrogen as feedstocks for plastic production, instead of using oil. He expects the timeline for cost-effective biogenic carbon feedstock for plastics will be 5-10 years.
POWER DEMAND One of the biggest barriers to the chemical industry’s decarbonisation is guaranteeing access to electricity from renewable energy sources. A 2017 study released by Cefic estimated that up to 4900 terawatts of renewable electricity generation capacity would be needed for net-zero European chemical production by 2050. To put this into context, the EU had 236 gigawatts of wind capacity installed by the end of 2021. “The supply of renewable electricity is a great barrier. The pace for installing new renewable energy is not at all fast enough to where we are supposed to be going,” says Rega. To help start procurement of renewable energy, chemical companies are dipping their toes into the power purchase agreement (PPA) market. Germany’s BASF signed a 25-year PPA with Danish energy company Ørsted providing them with the output from a 186-megawatt share of the 900-megawatt Borkum Riffgrund 3 offshore wind project under development in the German North Sea. Elsewhere, Danish biotechnology firm Novozymes entered a ten-year PPA with Swedish power company Vattenfall for the generation from its Kriegers Flak offshore wind farm in the Baltic Sea. According to Nicola Rega, there are still obstacles to obtaining the infrastructure and changes in the electricity network necessary to support the PPAs. “Permitting still takes ages and we still do not have the needed grids and infrastructure around the PPAs. This makes the potential for this solution still largely untapped,” he says. CARBON CAPTURE With the size of the task ahead for the chemicals sector, the need for negative emission technologies, such as carbon capture and storage (CCS) seems to be unavoidable. “Carbon capture will be needed as a necessary part of the solution,” says Fosbøl. “I don’t expect the industry to achieve large CO2 reductions within the necessary time frame. The technologies are not advanced yet and it will not be possible to build the necessary capacity of green power. CCS will be needed in many places in the sector—either as a transitional or permanent solution,” Fosbøl adds. This is also the message in the IEA Clean Technology Scenario, which sets out an energy system pathway for the sector consistent with the 2015 Paris Climate Agreement. In the IEA’s scenario, carbon capture, utilisation and storage (CCUS) is set to deliver 38% of the emissions reductions needed in the chemical sector. Key to this, according to Rega, will be a massive scale-up of CCUS and the utilisation of the captured carbon as a feedstock. “We depend on carbon in many manufacturing processes, so carbon capture and utilisation is an important part of this process, especially in regards to a transition from fossil-based to circular and renewable-based feedstock,” he says.
KNOWN UNKNOWNS According to research by RWTH Aachen University and the University of California, CCUS could reduce emissions of carbon and other greenhouse gases by 3.5 GtCO2-equivalent a year by 2030. In regard to CCUS, however, there is also a fair share of unknowns in terms of when and how it could become a feasible and effective full-scale solution. The conversion of the captured CO2 is still inefficient and the associated high energy costs would demand a massive scale-up in energy production. To fulfil the potential carbon reductions would require 18.1 petawatt-hours of electricity per year, according to the RWTH Aachen University and University of California research. This means the sector needs more support in rolling out CCUS, says Cefic’s Riga. “What the industry needs now to increase their efforts and investments is to get the regulatory framework in place. There is no reward right now for capturing carbon. If it was cheap, we would have done it by now,” says Riga. CCUS is something that Topsoe is focusing on. They are working with manufacturers of ammonia and methanol on capturing the emitted carbon in the production by solid oxide electrolysis cells. They are also technology providers to Ørsted, AP Moller–Maersk and DSV Panalpina on a project focused on converting captured carbon into methanol or jet-fuel using hydrogen from electrolysis of water. “We can not make chemicals and fuels in the future without CCUS. We need to extend the use greatly. The US and a few EU countries have set up attractive economic conditions for the development of this, but the EU in general needs to look at the incentives to make this more attractive,” says Kim Grøn Knudsen from Topsoe.
BUILDING BLOCKS The chemical industry can also play a role as an enabler in the decarbonisation of other industries. The chemicals industry provides materials used in the manufacturing of wind turbines and solar panels as well as green hydrogen. Therefore, the Confederation of Danish Industry’s Klitgaard also believes that the decarbonisation agenda is a great growth opportunity for large parts of the industry. “As an important enabler in relation to the green conversion of many other industries and companies, there are enormous growth opportunities,” she says. This is supported by Brecht D’hont from Deloitte: “Chemical companies need to embrace sustainability, not seeing it as a risk, but as a growth opportunity to make their product and solution portfolio more sustainable. The chemical industry is critical to enable the full sustainability transition.” ELECTROLYSIS HOPE Topsoe is also pursuing new market opportunities within the sustainability transition. It has recently established what it calls a Power-to-X division and is pursuing what it calls “electro-chemical solutions” (e-methanol, green ammonia and green hydrogen). It plans to open a green ammonia plant by 2023 in Denmark and, in 2022, it announced plans to build a factory for production of electrolyzers needed for making green hydrogen plants. The investment is expected to cost Topsoe around DKK 2 billion. The goal is to produce the equivalent of 500 megawatts per year from 2024, with the potential of going up to five gigawatts a year. In comparison, approximately 300 megawatts of electrolysis capacity for green hydrogen had been installed globally, by the end of 2020. “We regard the transition of renewable electricity to sustainable fuels as an obvious market opportunity. There is increasing demand in many markets and regions and momentum is building,” says Grøn Knudsen. “The main challenges right now is maturing the technologies and ultimately making them available and proven on an industrial scale and also ensuring that we have enough renewable energy to produce the sustainable fuels in sufficient quantities,” he adds.•
TEXT Anna Fenger