(566e) Decarbonisation of Power and Industry in the UK

Power and industry are the largest contributors to point source CO₂ emissions in the UK. Their decarbonisation is critical for the UK to reach carbon targets and minimise climate change and the associated social and economic loss. The two sectors vary greatly with regard to their pathways to net-zero. While decarbonisation of the power sector is well-analysed, industrial emissions are considered notoriously difficult to abate. Many options for low- and zero-carbon power (renewables, carbon capture and storage (CCS), storage) exist, and the provision of negative emissions through bioenergy with CCS (BECCS) can lead to carbon-negative electricity. In industry, no clear pathways forward exist, many technologies rely on CCS, and substantial residual emissions are to be expected. In addition to residual and negative emissions, power and industry are connected through the additional power demand arising from abatement in industry. Much of the important work on industrial decarbonisation is currently focused on individual technologies. However, there is interest in analysing the whole of industry and how it might reach net-zero together with the power sector, which is where this study is aimed at.

We build our model on ESO¹, a power systems model, extend it to include industry, and apply it to the UK. The cement, steel and refinery sectors and options for abatement in these sectors are modelled explicitly. Remaining industrial sectors, such as chemical industry, paper, natural gas processing, are included as fixed emissions requiring offsets. Abatement for these small point sources is difficult to achieve and likely uneconomical unless incentives are particularly high. The additional power demand caused by abatement in industry is added to the baseline power demand. We model import and export of industrial products explicitly and in the first part of the results analyse four scenarios with regard to abatement and trade. In the “BAU & offset” scenario industry is restricted to conventional technologies, and BECCS is required to provide offsets for the entire sector. For “abate & offset”, abatement is made available. In the “import & offshore” scenario, all industrial products are imported and therefore the emissions offshored. Lastly, the “abate & export” scenario assumes an increase in UK production of low-carbon products and subsequent export. A net-zero carbon target on the total emissions with a linear trajectory is enforced for all scenarios. For the second part of the results, we investigate how trajectories to net-zero might be incentivised using a carbon price (CP) and negative emissions credit (NEC).

Figure 1 shows the results for industrial production for the four scenarios. When abatement is available, oxy-combustion is the optimal choice for cement, production with biochar and CCS is determined preferable for steelmaking, and a high amount of post-combustion capture (PCC) is optimal for refineries. Notably, all optimal abatement technologies require CCS. Abatement is deployed in the abate & offset scenario – indicating it is preferred over BECCS offsets. Examination of the emissions trajectories and emissions for transport and storage in figure 2 reveals that residual and negative emissions are highest (54 Mt-CO₂/yr) when all industrial emissions are offset (BAU & offset). CCS in industry reduces the emissions by 90%, resulting in only 3 Mt-CO₂/yr in residual emissions from cement, steel and petrochemicals. When industrial emissions from the three sectors are offshored, the negative emissions requirement is only marginally lower. This is one indicator that the economic damage from offshoring industrial emissions might not be worth the reduction in system cost. The impact of an abate & export scenario on the power sector is minor as residual emissions from cement, steel and refining are small. Consequently, strategies for exporting low-carbon British products can be pursued without major adjustments in power. The CO₂ emissions requiring transport and storage range between 65 and 130 Mt-CO₂/yr, with the abate & offset scenario capturing 85 Mt-CO₂/yr. With only carbon budgets to drive decarbonisation, CCS is deployed first in the industrial sector in 2035, then CCGT-CCS and BECCS are added in the power sector.

The decarbonisation of power and industry can be incentivised using a carbon price (CP), i.e., a penalty paid by all emitters in the system, and a negative emissions credit (NEC), i.e., a reward per t-CO₂ removed by negative emissions technologies (in this case, BECCS). For this study, ranges of 0-300 £/t-CO₂ for the CP and 0-200 £/t-CO₂ for the NEC are simulated. The results are detailed in figure 3. Many combinations of CP and NEC are able to deliver net-zero in our model (thin solid contour line). Higher combinations of both lead to cumulative net-zero (thick solid contour line). NEC values between 90-135 £/t-CO2 across the range of CP values achieve net-zero in 2050. A NEC alone allows to reach net-zero at the minimum cost to the private sector. In this scenario, no abatement in industry is deployed and the burden of decarbonisation is placed entirely on BECCS. Adding the CP reduces the cost to the public sector. It also decreases cumulative emissions (not shown). Indicated in the graph is the break-even line for the public sector. For every NEC granted to the negative emissions technologies, there is a minimum CP necessary to offset the cost to the public. An even higher CP allows the public sector to use the penalties on emitters to support other decarbonisation efforts, such as funding R&D. The highest possible CP and the lowest required NEC constitute the public sector optimum, combining the highest income through penalising emissions and lowest expenditure towards BECCS. In our model, this public sector optimum is located at a NEC of 90 £/t-CO₂ and a CP of 300 £/t-CO₂. This optimum is preferable to the private sector optimum from a burden-sharing perspective, as it leads to CCS in industry, renewables expansion, and therefore a lower demand for BECCS. Arguably, a CP this high may place an undue burden on emitters. A more sensible optimum might therefore be located at the CP beyond which no significant decreases in cumulative emissions are gained.

In this work, we have modelled power and industry together and evaluated trajectories to net-zero. We found that emissions in cement, steel and refining can be reduced by 90% with technologies heavily relying on CCS. Under carbon budgets, CCS is deployed first in industry and later in power. We quantified the required amount of carbon offsets for varying scenarios as well as the volume of captured CO₂. We identified combinations of CP and NEC that incentivise decarbonisation to net-zero and evaluated optimal pathways from both the private and public sector perspective. Future work may involve including more industrial sectors explicitly and modelling industrial demand side response.

References

1. Heuberger CF, Rubin ES, Staffell I, Shah N, Mac Dowell N. Power capacity expansion planning considering endogenous technology cost learning. Appl Energy. 2017;204:831-845.