Publication - Publication

Decarbonising Scotland's industrial sectors and sites: discussion paper

Published: 29 Apr 2019
Directorate:
Energy and Climate Change Directorate
Part of:
Environment and climate change
ISBN:
9781787817630

This paper outlines our engagement with industry to date.

20 page PDF

1.4 MB

20 page PDF

1.4 MB

Contents
Decarbonising Scotland's industrial sectors and sites: discussion paper
3. Analysis

20 page PDF

1.4 MB

3. Analysis

Barriers to investment, as raised by Energy Intensive Industries (EII), may be categorised under 3 themes: accessing funding; resource efficiency projects; and enabling infrastructure/pathways to deeper decarbonisation. The analysis below identifies four issues and 'gaps' under each theme and raises a number of questions – in the green boxes – for discussion.

3.1. Accessing funding and the wider financial environment

Issue (barrier or opportunity)

Gap

The lengthy payback periods on investment diverts it elsewhere.

Provision of finance that has a patient capital approach to repayments.

Scottish EII acknowledge potential to go low-carbon if financially viable, but decisions on decarbonisation can lack priority compared to other investment options.

Positioning industrial decarbonisation as an economic investment opportunity for industrial sites, and for Scotland as a whole.

Demand for support that industry needs to remain internationally competitive, is not affordable for the Scottish Government alone.

Knowledge of potential opportunities to secure non-UK funding.

Investment in processes to make products with lower carbon or environmental footprint fails to gain competitive market advantages.

Market benefits from products that possess greater energy/carbon efficiency as a result of investment in manufacturing processes.

  • Provision of finance that has a 'patient capital' approach to repayments

Mechanisms such as the European Private Finance for Energy Efficiency Programme (PF4EE)[31] show that creating economies of scale can open up financing opportunities. If risk is shared, it can prove more attractive for those responsible for rewarding long-term investment or loan guarantees. Patient capital will be a feature of the Scottish National Investment Bank.

How can the challenge to decarbonise Scottish EII attract institutions with a long-term investment focus or innovative finance?

Comment:

  • Positioning industrial decarbonisation as an economic investment opportunity for Scotland

EII have an appetite for an ambitious low-carbon future. But demands on profitability mean that decarbonisation investment decisions often made in multinationals' boardrooms, face competition with non-Scottish alternatives. In addition, there is limited broader knowledge of industry's potential to make significant inroads into emissions reductions by securing more resources.

What steps should be taken to raise awareness of industrial decarbonisation as economic investment opportunity, and influence a wider group of stakeholders?

Comment:

  • Knowledge of potential opportunities to secure non-UK funding

Scottish EII must secure investment from many sources including outside Scotland. Investigation should learn how Scottish industry could access opportunities[32].

What would be the parameters of a review of international support?

Comment:

  • Market benefits from products that possess greater energy/carbon efficiency

Industry highlights a desire for lower-carbon products to be given greater credit in contract awards. Public sector procurement[33], and consumer or business purchasing choices, should account for carbon impact but additional value is rarely realised.

How can manufacturers gain market advantage because of investment that 'greens' production?

Comment:

3.2. Resource efficiency projects

Issue (barrier or opportunity)

Gap

Failing to make optimal use of available programme support.

Awareness/access to support programmes amongst some EII sites & more links with business efficiency.

Despite industrial heat recovery potentially being funded via other available support programmes, eligibility of IHRSP does not include Scotland

Continuity of available match-funding opportunities for IHR projects to progress in Scotland whilst IHRSP is current in England and Wales

Energy efficiency of industrial processes remains lower profile compared to buildings.

Limited evidence on how to tackle process energy efficiency. Definition of Energy Efficient Scotland for industry.

Supplies of recyclate material with potential for more efficient EII processes,

Reliable flow of recyclate, and supply chain awareness to improve material efficiency.

  • Awareness/access to support programmes amongst some EII sites and more links with business efficiency

The Scottish Government publishes an overview of support, but eligibility can be complex. Funded programmes tend to be accessed by projects centred on renewable generation, with limited direct benefit for established EII sites. In addition, energy productivity could accrue as a beneficial side effect from general business efficiency projects.

How can more projects be encouraged to come forward to receive support that is more effective, so that barriers to progression are overcome?

Comment:

  • Continuity of available match-funding opportunities for IHR projects to progress in Scotland

Businesses with sites across UK may favour investment in schemes that provide a single UK framework.

How should Scottish IHR opportunities receive support to progress to delivery?

Comment:

  • Limited evidence on how to tackle process energy efficiency

There is a desire to align energy efficiency support for processes with that for buildings, however, delivery will diverge because EII issues are more bespoke. Obligations to improve may be linked to advice/support and the role of the Building Scotland Fund explored. Experience from consultancy focused on identifying IHR opportunities suggests that energy efficiency opportunities are spotted during the same investigation.

How should industrial energy use be integrated into the Energy Efficient Scotland programme?

Comment:

  • Reliable flow of recyclate, and supply chain awareness to improve material efficiency

Industries have examples, such as glass-making. Where greater availability of quality cullet (recycled glass) would reduce process energy use – value chains could be improved in line with our circular economy strategy, 'Making Things Last'.[34]

How can circular economy practice more directly benefit industrial decarbonisation?

Comment:

3.3. Enabling infrastructure, and pathways to deeper decarbonisation

Issue (barrier or opportunity)

Gap

Constraints on infrastructure, often external to physical site location, that could support energy efficiency/decarbonisation, or use excess heat.

Capacity of infrastructure providers and EII to engage and overcome strategic barriers, including matching excess heat from industry with places of adjacent demand.

For some sectors to deeply decarbonise there is need for either a) significant penetration of CCUS; and/or, b) production and use of hydrogen fuel.

Limits to: EII awareness of technology potential; capacity to participate in demonstration; knowledge of how to deploy beneficially.

Adequate supply of biofuels, synthetic fuels or bioenergy.

Reliable long-term supplies that give confidence to switch from fossil fuels.

Efficiency benefits from increased generation/supply of renewable electricity, or distributed storage of energy.

Generation/storage capacity to enable decarbonisation, and viability of electrifying processes.

  • Capacity of infrastructure providers and EII to engage to overcome barriers, including matching excess heat from industry with places of adjacent demand

It is difficult for industry to influence infrastructure providers who are responsible for the means along which fuel, energy, heat, utility, or essential manufacturing materials are delivered. There will often be complex private and public sector interests, including regulated asset bases, or statutory consents such as planning, involved.

How can EII and network infrastructure providers be influenced, including how to join-up excess heat with adjacent places of demand, to remove constraints?

Comment:

  • Limits to: EII awareness of technology potential; capacity to participate in demonstration; knowledge of how to deploy beneficially

'Clustering' can facilitate infrastructure upgrades, potentially for CCUS, biomass or heat – decarbonising existing emitters and attracting new industry to plug their emissions into. But EII and investors require long-term policy commitment and confidence that these forms of carbon management can become a going concern.

How to align investment planning with anticipated CCUS or hydrogen deployment?

Comment:

  • Reliable long-term supplies that give confidence to switch from fossil fuels

Greater focus by all parties, including infrastructure providers and industry, to shift heat requirements to waste-derived fuel sources.

What opportunities exist to increase reliability of low-carbon fuel supplies?

Comment:

  • Generation/storage capacity to enable decarbonisation, and electrifying processes

Our ES[35] encourages the accelerated development of battery technology. Devolved powers, or influencing UK policy[36], may enable more competitive energy costs and technologies such as Electrification of Heat[37]. To support the development of electricity and gas networks, the Scottish Government has published strategic Networks Vision statements[38].

How can energy generation and storage be used to help industry decarbonise?

Comment:


Contact

Email: sm.watson@gov.scot