Four Levers We Can Adopt to Decarbonize the Chemical Industry

Joel Gubihama 03/04/23

The chemical industry is one of the biggest in the world, bringing in over $4.7 trillion a year. Furthermore, the goods it produces are intricately linked to some of the biggest value chains in the world, including those in manufacturing and construction.

The chemical sector accounted for over 2 percent of world emissions in 2021 with emissions of about 925 million metric tons (MT) of CO2. In the meantime, there have been significant changes in the industry, such as growing consumer demand for lower-carbon products and higher consumer awareness of recycling and the use of recycled materials; increased demand for resource-efficient production; and increased regulatory pressure for stricter material requirements.

To put this into context, a total of 762 MT of CO2 was produced in Germany's industry in 2021, of which 181 MT came from the chemical sector. With the chemical industry having aims to reduce CO2 emissions by 35 percent, or 63 MT, by 2030, the nation's overall CO2 emissions are expected to have decreased by 45 percent under current decarbonization targets.

Source: McKinsey & Company

Innovative technological solutions, like the utilization of recycled materials, captured carbon, and alternative reduction agents, are needed to meet the needs of chemical processes that employ fossil fuels as feedstock and process gas. It is possible to electrify the combustion of fossil fuels to produce steam, electricity, and heat; however, some reactions need temperatures that are now inaccessible to electric equipment. Chemical decarbonization will hence require solutions tailored to these particular problems.

Based on this analysis, four levers of decarbonization typically have the largest effect: steam generation, heat integration, electricity procurement, and energy efficiency.

1) Steam Generation

Steam generation is crucial for decarbonization, but coal phase-out and carbon-free steam-generation capacities are needed. Seven carbon-free heat-source technologies are available: biomass, solar thermal, hydrogen, biogas, thermal storage, heat pumps, and e-boilers.

Source: McKinsey & Company

Heat source technologies are evaluated based on feedstock availability, regulatory applicability, and lod-profile applicability. Solar thermal energy depends on high sunlight conditions, while biomass relies on dedicated energy crops. By 2030, low-emitting, cost-effective steam generation could be achieved by replacing conventional capacity with a flexible combination of hydrogen-ready gas-fired and electric steam generators.

Combining technologies for fuel-switching flexibility can be beneficial, but requires additional spare capacity. In some cases, the economic value of switching fuel outweighs the additional operational and capital expenditures, but this should be determined on a case-by-case basis.

2) Heat Integration

The chemical industry has historically wasted significant amounts of residual heat, primarily due to low steam generation costs and lack of heat pump technologies. However, chemical parks have found ways to efficiently use residual heat by connecting heat sinks and sources using digital twins and heat pumps.

Source: McKinsey & Company

Amplified by the gas shortage demand, several heat integration solutions have only recently become available. Among these technological solutions are high-temperature heat pumps, steam mechanical vapor recompression, and heat separation.

Heat utilization can be significantly increased by connecting heat sinks and sources, either directly or using heat pumps. Off heat can be fed into steam or hot-water grids. Optimizing and redesigning consumers with net present value-positive cases can reduce energy demand by 20-40%, thereby reducing overall energy consumption.

Heat integration has led to significant cooling water savings and reduced electricity for pump operations. Digital twins of heat sinks and sources optimize heat utilization and pump positioning. A redesign of heat sources beyond company borders is required, leveraging digital capabilities for economic simulation and feasibility assessment.

3) Electricity Procurement

Electricity procurement is crucial for decarbonization in chemical parks, but selecting the right strategy for renewable energy sources is essential. Power purchase agreements (PPAs) with renewable producers can help deliver power, but long-term energy procurement strategies are needed to replace gray electricity with renewables.

Source: McKinsey & Company

With this in mind, renewable energy can be procured by purchasing certificates, such as:

Renewable Energy Guarantees of Origin in Europe.

• PPAs or
• Investments in off-site assets.

In addition, electric-grid capacity can be expanded to allow for electrification and to purchase additional green electricity as needed.

Chemical parks leverage economies of scale by aggregating and bundling capacities from various plants or consumers, enabling them to meet competitive prices and reduce demand volatility. By operating a combined-cycle plant, they can self-produce a green baseload, reducing external procurement of demand peaks through PPAs.

4) Energy Efficiency

Reducing energy losses during operations is the aim of improving energy efficiency. The abundance of tiny energy-efficiency initiatives makes it possible to easily realize additional savings potential. Indeed, our analysis of chemical parks revealed that they gave varying degrees of priority to decarbonization strategies, which might result in a significant annual drop in CO2 emissions. Due to the initiatives' relative simplicity, the current site team mainly carried them out without requiring external support or large capital expenditures.

CONCLUSION

Action must be taken quickly to meet the chemical industry's decarbonization goals and stay up with other industries. Leaders can start by prioritizing opportunities, identifying resources, and implementing the appropriate technology through informed decision-making.

Reference

Wenke Bengtsson, Simon Knapp, Peter Crispeels, Ken Somers, Ulrich Weihe, Thomas Weskamp: Decarbonizing the chemical industry, https://www.mckinsey.com/industries/chemicals/our-insights/decarbonizing-the-chemical-industry