How industrial clusters can help the US reach its net-zero targets

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Melissa Stark, Global Lead for Energy Transition and Net Zero Transition Services, Accenture, Joanna Kolomanska-Van Iperen, Lead, Energy, Materials Infrastructure Platform, World Economic Forum Geneva

• Industrial emissions account for almost a quarter of total emissions in the US and are among the hardest to abate.
• Industrial clusters are gaining traction in the US, but more can be done to scale-up decarbonization efforts.
• Transitioning Industrial Clusters toward Net Zero initiative supports facilities to define and achieve their emissions reduction goals.

Industrial emissions account for almost a quarter of total emissions in the US. They are also some of the most difficult to abate.

That makes decarbonization of industrial clusters such an appealing concept. Industries in the same general location that collaborate to meet decarbonization goals benefit not only from sharing risk, infrastructure and natural resources, but also from a united approach to tackle pressing topics such as workforce transformation or environmental justice.

Collaborating for change

Transitioning Industrial Clusters towards Net Zero – an initiative of the World Economic Forum in collaboration with Accenture and EPRI – aims to accelerate the value of cross-sector collaborations. It brings together global industrialists, researchers and policy-makers to examine barriers facing participants and how public and private finance can help overcome them.

Insights from this initiative have identified how successful industrial decarbonization efforts outside the US can be modified to address the US market, informed Signatory US Industrial Clusters’ responses to the Department of Energy’s (DoE) Regional Clean Hydrogen Hub RFI and RFP and helped shape discussions at the DoE’s Global Clean Energy Action Forum (GCEAF) and Carbon Management Project Review. Two public reviews of the initiative’s work can be found in recent whitepapers on policy enablement for industrial decarbonization across 10 nations and opportunities for financing industrial clusters in the US.

Emerging clusters in the US

Accelerating industrial cluster development in the US (as elsewhere) calls for an approach that balances social, economic and environmental benefits with the needs and interests of corporations, non-governmental organizations (NGOs), governments and communities. Such an approach facilitates financial and operational risk-taking and encourages governments, suppliers and stakeholders to collaborate on capital investments and the development of ecosystems of decarbonization technologies and talent.

The potential of such an integrated approach is demonstrated in the initiative’s Signatory HyNet North West cluster in the UK. This cluster has leveraged existing infrastructure and strong federal support to align over 40 memorandums of understanding for future users of carbon and hydrogen, long before those infrastructure, generation and storage assets have been developed.

The following four US industrial clusters have now joined Europe and Asia-Pacific Signatories of the Transitioning Industrial Clusters toward Net Zero initiative:

• H2Houston Hub:focused on leveraging hydrogen to become a global leader in low-carbon energy. The NGO Center for Houston’s Future (CHF) – created to advocate for social, environmental and economic promise in the city – is set to play an integral role as facilitator of cross-sector collaboration.
• National Capital Hydrogen Center: focused on accelerating the creation of a hydrogen ecosystem in the Mid-Atlantic. Anchored by non-profit Connected DMV, the cluster brings together commercial, industrial, governmental and community organizations to target the abatement of 2.7 Mt CO2 in the region by 2030.
• Ohio Regional Clean Hydrogen Hub Alliance:brings together over 150 parties devoted to exploring the hydrogen economy’s potential across the state of Ohio and neighbouring Pennsylvania. The cluster is seeking US DOE Hydrogen Hub funding to seed an inclusive clean energy transition that will provide significant economic and social benefits.
• Greater St Louis – Illinois Clean Hydrogen Hub:comprises industry and community leaders and academic institutions, and intends to collaborate on developing infrastructure and deploying innovative technologies to collectively achieve greenhouse gas emissions reductions for the region by 2035.

In October 2022, the initiative brought together these four US clusters along with seven global Signatory Industrial Clusters and more than 30 representatives of multinational industrials to discuss four technologies identified as transformational for advancing industrial decarbonization: clean hydrogen, carbon capture utilization and storage (CCUS), direct electrification process efficiency. Forums like this – and the actions they prompted – are critical to laying the groundwork for the new clean resource markets needed to decarbonize industrial processes.

New funding for industrial clusters

Financing is critical to scaling industrial decarbonization. In the US, the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA) may unlock billions of federal dollars to stimulate action on this front.

Importantly, these government funds can be leveraged to attract additional private sector capital. This has been demonstrated many times before. In the UK, for example, public investment made up approximately 70% of funding for the offshore wind fleet in 2010; public investment is now about 25% and heading towards zero.

Public financiers identified the target transition point to private investment and deployed mechanisms such as Renewable Obligation Certificates (ROCs) and auction-based Contracts for Differences (CFDs) to enable this maturation. Additionally, the UK’s Department for Business, Energy and Industrial Strategy (BEIS) actively promoted offshore wind seeding and scaling, as well as an active and strong industrial cluster programme.

Such examples are informing our insights for US policy-makers and the cluster community on how to optimize public funds. A key question for us is: what creative funding mechanisms would most effectively mobilize $100 of private sector financing for every $1 of Infrastructure Investment and Jobs Act (IIJA) funding?

Our teams are dedicated to answering this question with globally informed, locally tailored actions plans – such as the one demonstrated by the National Capital Hydrogen Center’s Hydrogen Green Print – that drive collective value.

Discover

What’s the World Economic Forum doing about the transition to clean energy?

Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated.

Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010.

Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system.

Benchmarking progress is essential to a successful transition. The World Economic Forum’s Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world’s largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.

To future-proof the global energy system, the Forum’s Shaping the Future of Energy and Materials Platform is working on initiatives including, Systemic Efficiency, Innovation and Clean Energy and the Global Battery Alliance to encourage and enable innovative energy investments, technologies and solutions.

Additionally, the Mission Possible Platform (MPP) is working to assemble public and private partners to further the industry transition to set heavy industry and mobility sectors on the pathway towards net-zero emissions. MPP is an initiative created by the World Economic Forum and the Energy Transitions Commission.

Is your organisation interested in working with the World Economic Forum? Find out more here.

Accelerating the value of industrial clusters

While every industrial cluster’s approach must be carefully tailored to the local industrial profile, political climate, geology, etc., US industrials must act now to capture federal funding and seed institutional investment. These ecosystems must:

• Build collaboration structures and agreements that incentivize all emitting organizations within a geography to participate – and maintain a commitment to collective action after federal funding has been deployed.
• Engage local and federal regulators to discuss the barriers to (and enablers of) assets and infrastructure in clean resource markets like carbon and hydrogen.
• Facilitate roundtables with global industry leaders, policy-makers and community advocacy groups to understand drivers of success and explore how to apply them locally.

As the industrial cluster concept continues to gain momentum, the Transitioning Industrial Clusters towards Net Zero initiative will continue to support the formation of international technology and supply-demand partnerships, share insights about decarbonization roadmaps across sectors and organize public-private roundtables to facilitate collaboration among policymakers, financiers and industries. We also look forward to expanding the initiative to include more stakeholders in the US, Europe and Asia-Pacific.

We believe that an integrated approach to industrial cluster decarbonization – one that incorporates social, economic and environmental concerns and delivers social, economic and environmental benefits – is the only way to realize sustainable change. Working together and sharing best practices is how we will accelerate our journey to a net-zero world.