Towards a competitive NetZero industry

We are facing times of uncertainty that affect all social actors. Regarding NetZero industry, its greatest concerns, according to a recent survey carried out by the CEOE, are:

1: Price and availability of raw materials.

2: Energy prices.

3: Competitiveness.

4: Regulations.

Cristina Rivero, who participated in our last Future Trends Forum Building a net zero world, explains this to us. Cristina is Director of the Industry, Energy, Environment and Climate Department at CEOE (the Spanish Confederation of Business Organizations, that integrates two million companies and freelancers from all sectors of activity).

In her presentation, Cristina talks about the challenges and opportunities for the Spanish industry to move towards a net zero world and, at the same time, to be competitive in an increasingly sophisticated and unpredictable world:

Below, we summarize Cristina Rivero’s vision of the current and future situation of the industry facing decarbonization:

Key industry challenges and how to address them from Net Zero

Besides the potential shortage of raw materials and components, the high price of gas and electricity should not be ignored. For electricity-intensive industries, this means a significant loss of competitiveness and an erosion of margins.

The solution, according to this expert, is to focus on triple sustainability – social, environmental and economic – by taking appropriate measures to accelerate the energy transition.

This can be addressed by joining the European Union’s (EU) plans to reduce greenhouse gas emissions by 55% by 2030 (through the “Fit for 55” policy package).

To get an idea of the magnitude of the challenge, the EU has managed to reduce emissions by 32% from 1990 to 2020, i.e. in 30 years. It is now a matter of accelerating measures and actions as much as possible during this decade to reduce the remaining 23%. To this end, the EU will devote 30% of its global budget for 2021-2027 to fighting climate change and its effects.

Towards Net Zero for the Industry 

Decarbonization efforts were first focused on the energy sector[an1] . From 2005 to date, this sector has managed to reduce its emissions by more than 60%. In the same period, the industrial sector, the second most important, has reduced emissions by 36%, according to Cristina Rivero.

And reducing emissions in industry is primarily a matter of reducing emissions in industrial heat generation.

And reducing emissions in industry is primarily a matter of reducing emissions in industrial heat generation.

Today’s demand for industrial heat depends mainly on fossil fuels, biomass and electricity. Renewable resources are used only to a very small extent. Therefore, decarbonization would require a drastic change in the way industrial heat is generated.

Choices for reducing the energy use of industrial heat will depend on the specific use and temperature required:

– Thus, the technology to decarbonize in the so-called low-temperature process industries, such as agrifood, pharmaceuticals or textiles, is not complicated, because it is relatively simple to substitute fossil fuels with electricity.

• For those industries with high-temperature processes, such as cement, steel or ceramics, the technological solutions are more complex.
  • On the one hand, the use of green hydrogen is being studied, but according to Cristina, this energy vector is still a decade away from becoming cost-competitive.
  • On the other hand, it is necessary to develop and implement carbon capture, utilisation and storage (CCUS) technologies[an2] , and
  • to innovate in new green fuels that do not pollute the environment.

In other words, under certain conditions, electrification can be an economical and sustainable option: heat pumps can be economical solutions for low and medium temperature needs. Electrification may also be possible for specific high-temperature industrial processes, such as electricity-based steel production, an area that is in the midst of innovation with initiatives such as Boston Metal applying a new technique called molten oxide electrolysis (MOE). However, the sustainability of electrification depends on a large-scale decarbonization of the electricity sector to truly reduce emissions at the system level.

Direct renewable heat sources, such as solar and geothermal, can also be economical for applications below 400 degrees Celsius, but are not easy to integrate into all industrial facilities. Bioenergy can be used for high-temperature heat demand, but it is a limited resource and is only economical and sustainable under certain operating conditions and in certain regions.

Finally, end-use efficiency, through the use of modern equipment, improved insulation or heat recovery, can reduce end-use demand even before heat is generated. Often, limiting overall heat needs should be the first strategy to adopt, before taking steps to decarbonize the remaining heat use.

Ultimately, the widespread deployment of energy efficiency solutions and a combination of the aforementioned solutions point to a more sustainable future for the industrial sector.

The expert also points to the recycling of materials as another way of reducing energy needs. In Europe, only 12.8 percent of material resources come from recycled or recovered products.  If this percentage could be increased, the energy needs for material production would be reduced.

Spanish industry and the Net Zero challenge

Such challenges also bring with them opportunities for industry modernization, especially in the manufacturing industry, thanks to the Next Generation Funds.

Spain is one of the largest beneficiaries of these funds. With 150 billion euros, 40% of them are to be devoted to the energy transition.

For industry to benefit from these funds, it must align its projects with climate commitments. In this regard, it is vital to comply with the EU taxonomy for sustainable activities. This need for adaptation, in turn, is causing companies, and especially industry, to rethink their business models and how to develop new processes, encouraging innovation.

According to Cristina Rivero, achieving the Net Zero objective is more a political and economic issue than a technological one. The great challenge for European industry is to decarbonize while maintaining or improving competitiveness.

This requires promoting innovation and creating qualified employment. Spanish industry demands clear and concrete signals to ensure industrial stability and production protection against external competitors that do not comply with Net Zero objectives. In this sense, the expert applauds the Carbon Border Adjustment Mechanism (CBAM) proposed by the European Commission.

The decarbonization plan, as we have mentioned and as the expert Rosa Sanz also pointed out[an3] , applies first to the energy sector, then to industry and then to transport and construction. And this plan will affect citizens, so it must be ensured that it is carried out with social justice in mind, both nationally and internationally. This is where the European Just Transition Mechanism (JTM) comes into play.