Clean energy deployment along the value chain is key to China’s industry decarbonization. 3 business leaders explain why

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

Author: Liming Chen, Chair of Greater China; Member of the Executive Committee, World Economic Forum, Samantha Zhu, Chairperson; Market Unit Lead, Greater China, Accenture

Energy and industry has been one of the themes for this year’s United Nations climate change conference, COP28, in Dubai, aimed at driving innovation and action for large-scale deployment of renewable energy and energy efficiency within high-emission industries including steel, cement, and aluminium.

The focus is on levers and pathways for rapid decarbonization, job growth, economic opportunity and just transition across the energy and industrial value chain.After all, energy and industrial transformation are mutually reinforcing and have been our focus areas for a long time.

Now, the World Economic Forum and Accenture are working together to promote new initiative Clean Power for Industry – which aims to bring together relevant government departments, industrial companies, related institutions and academia to promote the use of clean power in industrial operations and accelerate progress towards net-zero emissions from heavy industry.

Clean Power for Industry initiative for China

The initiative focuses particularly on China, which currently accounts for the largest share of global industrial production, including of steel (61%), aluminium (57%) and cement (52%). These three industries account for more than half of global production, and the proportions in the chemical and paper industry are also considerable (more than 40%). Therefore, every move by Chinese industrial sector will have a significant impact on global output and energy use.

The initiative looks at two proposed solutions for the clean power transition – captive power transition and green power trading.

According to the initiative’s latest research, which outlines China’s carbon reduction strategy in the industrial sector, we must combine the efforts of industry – i.e. demand side – and the supply side to contribute to the power transformation.

Research covers a wide range of topics, including energy security, geopolitical factors, the interaction between carbon reduction and social factors, the scalability of renewable energy, transnational cooperation in clean energy, and financial instruments to promote effective carbon reduction.

Industry also agrees that companies and energy suppliers should focus on both the supply and demand sides and that accelerating the transformation of the energy structure and building a diversified energy system should be the first priority.

Secondly, we should improve unified and standardized policies, optimize financial incentives to empower enterprises, promote the circular economy and develop breakthrough technologies, and finally encourage cross-domain collaboration between the upstream and downstream segments of the value chain to build a green ecosystem.

Whether it is upstream material suppliers such as Rio Tinto, integrated energy suppliers such as bp, or downstream steel companies such as HBIS, their roads to net zero require extensive cooperation across the industrial value chain.

Here, executives of the three companies mentioned above outline how they have begun to implement renewable energy strategies and the concrete actions they are taking to meet their net-zero targets.

Rio Tinto

“

We know we cannot achieve our climate change targets alone. Therefore, we are actively working with value chain partners, such as using renewable energy to power mines, introducing zero-carbon emission vehicles for on-site transportation, and using alternative fuels to power ships”— Alf Barrios, Chief Commercial Officer of Rio Tinto

As one of the world’s largest resource mining and mineral product suppliers integrating mineral resource exploration, mining and processing, Rio Tinto put the low-carbon transition at the heart of our business strategy, setting out a pathway to decarbonize our business more than two years ago.

We have pledged to achieve net zero emissions by 2050 and have plans to invest $7.5 billion in capital by the end of this decade to help deliver this strategy.

We are accelerating the decarbonization of our operations, developing products and technologies that help our customers decarbonize, and increasing the production of materials to help enable the global energy transition.

For example, the revolutionary electrolytic aluminium technology ELYSIS can use inert anodes to replace traditional carbon anodes in the electrolytic aluminum process, so that primary aluminium only releases oxygen during smelting and does not directly emit any carbon dioxide.

We are also actively working with our suppliers to decarbonize the industry’s value chain, such as using renewable energy to power mines, introducing zero-carbon emission vehicles for on-site transport, and using alternative fuels to power ships.

Rio Tinto knows we cannot achieve our climate targets on our own which is why partnerships with governments, customers, suppliers, academics and research and technology organizations are increasingly vital.

Therefore, we carry out research and development cooperation with leading companies, universities, and institutions to jointly explore emissions reduction pathways in the industrial sector.

bp Group

“

As one of the first major companies to announce a net-zero goal, our new mission is to ‘reimagine energy for people and our planet’”— Simon Yang, President of bp China

As one of the first major companies to announce a net-zero target, in February 2020, bp set out 10 aims around climate change to enable “bp to achieve net-zero emissions by 2050 or earlier”.

bp’s investment in its five growth engines, namely biofuels, convenience, electric vehicle (EV) charging, hydrogen and renewables and power. has increased from 3% of capital expenditures in 2019 to 30% in 2022. Efforts continue to grow this investment to approximately 50% of capital expenditures by 2030.

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.

At the same time, we have made significant progress in our low-carbon energy business in recent years. The installed capacity of renewable energy projects included in bp’s development plans has increased fourfold, and the final investment decision on renewable energy development projects is expected to be completed in 2025 with 20 GW and achieve the goal of 50 GW by 2030.

“Energy transition is a long-term process that requires taking into account the triple challenges of energy security, economy and environmental protection,” says Yang.

“Although the road is long, the journey is coming. bp is going all out to lead and promote the global energy transition by focusing on the five major growth engines. And actively explore comprehensive low-carbon solutions to give full play to the value and power of integration.”

HBIS Group

“

Comprehensive green and decarbonization of the energy systems is the direction that HBIS Group has been working towards. We have integrated ‘harmonious coexistence of people, steel and the environment’ into our core values ​​and strive to achieve the goal of carbon neutrality by 2050”— Yiren Li, Deputy General Manager of HBIS Group, Associate Dean of World Steel Development Research Institute

As one of the world’s largest iron and steel manufacturers and comprehensive service providers, HBIS Group has been striving to make the energy system fully green and low carbon.

In December 2022, the world’s first 1.2 million short hydrogen metallurgical demonstration phase I project was fully completed at Zhangxuan Technology, marking a major breakthrough for HBIS in promoting low-carbon metallurgy through disruptive technological changes in energy and process design.

Through advancing this project, HBIS accelerated the construction of new green power and green hydrogen infrastructure, developed near-zero carbon electric furnace short process technology, and released the “Low Carbon Emission Product Development Plan (2023-2026)”.

https://cdn.jwplayer.com/players/Xi5ZJIuE-ncRE1zO6.html

In terms of building a diversified energy system, through process optimization, energy efficiency improvement and utilization of waste heat, energy and pressure, the proportion of self-generated power in HBIS’s core enterprises has reached more than 85%, effectively reducing the demand for purchased electricity and accelerating the deployment of distributed renewable power generation.

It is expected that the installed capacity will reach more than 340MW by 2025; actively participating in green power trading, with a cumulative purchase of 878 million kWh in November 2023. Although we have achieved initial scale, our goal is far beyond that.

In addition, HBIS regards carbon capture, utilization and storage (CCUS) as a breakthrough carbon reduction pathway, promoting the transformation of CCUS in the steel industry from reserve technology to applied technology, and launch the first batch of CCUS industrialization demonstration projects.

HBIS adheres to “high-end, intelligent and green” development, integrates “harmonious symbiosis of people, steel, and the environment” into our core values, anchors the “dual carbon” strategic goal, and focuses on “process technology innovation, energy technology innovation, material technology innovation.”

We also demonstrated out industry leadership by releasing the “6+2” low-carbon development technology roadmap, striving to reduce carbon emissions by 10% from the peak in 2025 and 30% from the peak in 2030 and achieve carbon neutrality by 2050.

Adopt a systematic approach to achieve synergies across the entire value chain

The 2020s is a critical decade for progressing toward global net zero goals. Encouraging countries to accelerate emissions reductions in key sectors such as energy and heavy industry during this period is crucial to achieving the carbon neutrality goal.

All stakeholders along the industrial value chain, including policy-makers, technology developers, industrial companies, industry trade organizations, and academia should collaborate to drive large-scale utilization of clean power in industry.

Industrial ecosystem players should seize the opportunities brought by energy transition, actively overcome the challenges, and jointly promote clean energy transformation and green sustainable development.

Industry leaders have kicked the ball rolling, yet we still need to push ahead and scale up the energy transformation at an unprecedented pace across China.