Thought Piece

The UK | driving decarbonisation with net zero industrial clusters

Posted: 9 Nov 2023

Resource Type: Thought Piece

In 2019, the UK became the first major economy to pass laws to end its contribution to global warming by 2050. With many industrial areas of the UK still reliant on fossil fuels, decarbonising industry is crucial to reaching this target. Currently, industry accounts for around 25% of all greenhouse gas emissions in the UK, with more than two-thirds of these industrial emissions coming from a small number of energy-intensive industries. 

So, how do we transform industry at scale and at pace? One answer lies in industrial clusters. 

What are net zero industrial clusters?

Industrial clusters (concentrations of related industries within particular regions) are a vital part of the UK economy. They provide high-quality jobs that tend to pay above the average UK wage and are key to local supply chains, as well as exporting goods and services worth around £320 billion. They also offer a unique opportunity to accelerate decarbonisation.

The UK has been world leading in establishing net zero industrial clusters around the country. This model will see all industries in regions such as South Wales, Teesside and Humberside collectively reduce their CO2 emissions to as close to zero as possible, using low carbon energy sources and cutting-edge technologies. Net zero experts from across the professional and business services (PBS) sector are co-located within these hubs, readily available to support firms with reaching their emissions targets.

The UK cluster model stands out globally due to its public-private partnership nature. The UK government, supported by PBS, has been running competitions for private sector industry partners to access support to develop low-carbon exemplar clusters that others can learn from and replicate, both in the UK and internationally.

Stretching from economists to engineers, lawyers to surveyors, PBS experts underpin the development and operation of all net zero infrastructure projects. With one of the world’s largest PBS sectors, the UK is uniquely placed to develop and scale net zero strategies and solutions. 

Supporting and scaling low carbon innovation

To transition to net zero, industry will need to tap into low carbon energy sources and technologies such as hydrogen and carbon capture, utilisation, and storage (CCUS). Hydrogen is widely viewed as a key enabler of the energy transition, and the UK has the potential to be a world leader, aiming to develop 10GW of low carbon hydrogen production capacity by 2030. Industrial clusters can provide an anchor load for hydrogen production and shared capture and storage infrastructure for direct industrial emissions. Developing hydrogen and CCUS at scale is also vital to preserving and creating jobs in the UK’s industrial heartlands.

The ‘Beyond Hydrogen - What’s Next?’ thought leadership event took place in London on 13 July, organised by the Energy Industries Council and Mott MacDonald. At the event, City of London and Mott MacDonald brought together leading experts from across the PBS sector for a roundtable on the international opportunities for UK companies involved in hydrogen and CCUS.

Representatives from the Department for Business and Trade (DBT) were present at the event to gather feedback on the blockers faced by UK PBS firms when it comes to growing and sharing their net zero services. Participants also shared their perspectives on the role that net zero industrial clusters – and the whole PBS sector – has in helping firms and economies globally meet emissions targets. 

Speaking at the event, Adina Popa, CCUS Programme Director at Mott MacDonald, explained that “Professional services are supporting the development of industrial clusters in a variety of ways. For example, technical and environmental consultants are providing strategic studies, regional master plans, appraisal of technical, environmental, and economic benefits, planning and consenting services and developing national policy.”

“Direct design support is being provided by engineering consultants. Similarly, there is a significant role for legal and financial services, for example, advising on transactions, developing legislative frameworks, providing direct finance, structuring commercial arrangements in consortia and mergers and acquisitions. The development of new industries and technologies at pace inevitably requires a range of expertise.”

A replicable model

The ultimate goal of the net zero industrial clusters is to create a low carbon exemplar that others in the UK and internationally can learn from and replicate.

“There has been international interest in replicating aspects of the UK cluster model,” said Popa. “The UK industrial cluster plans were published earlier this year, and there will be a UK wide plan published later this year. The collaboration on the cluster plans and the fact that these are published sets a precedent for others understanding how they can decarbonise and assess the suitability of the cluster solutions to their own operations. This has opened up opportunities for us on CCS projects in Europe and internationally.”

UK professional and business services companies are already deploying their expertise internationally, providing many of the same services as in the UK, but also working with local partners in a capacity building role, or supporting governments developing legal and regulatory frameworks. For example, Mott MacDonald has been providing technical integration and optimisation services for NortH2, Europe’s largest wind-to-hydrogen project. The firm was also the technical advisor to the UK Government on the CCUS Cluster Sequencing competition and Net Zero Innovation Programme.

Roundtable participants agreed that there are many opportunities for UK PBS firms to bring their net zero learnings and expertise to global markets. In the hydrogen sector alone, attendees reported working on projects in countries across Europe, Africa, South America, and Asia.

“We have real oil and gas and renewables expertise in the UK,” said Nigel Holmes, CEO at Scottish Hydrogen Association. “As well as being involved directly in [energy transition] projects, selling those services is a big opportunity.”

“Working with the UK Government is seen as a door-opener for many jurisdictions,” added Popa.

Rory Harding, Vice President - Corporate Development at NeoGreen, said: “There is a unique opportunity available, as the industry is so nascent. In the past, many UK companies may have been reluctant to venture into global markets because of complexity and competition; but, in this new emerging sector, there are real opportunities for UK companies to become experts and cut a groove for themselves. Companies that historically haven’t worked outside of the UK should be encouraged to participate.”

Vision for economic growth

Anchoring the UK as a leader in sustainable finance

Anchoring the UK as a leader in sustainable finance

Challenges to net zero sectors

In any new industry, market, or transition there will always be bumps in the road. Roundtable participants flagged challenges around the growing hydrogen and CCUS markets including de-risking offtake agreements, changing regulations and transportation logistics.

But a secure enabling environment can make all the difference when it comes to scaling net zero solutions and replicating them internationally. 

“The central issue is long-term stability, wherever you’re operating, as well as clarity around demand and uptake,” said Danny Dunne, Deputy Director for Energy Transition and Clean Growth at DBT. “When those things are clear domestically it makes it easier to help organisations prove themselves in niche areas, build an exportable platform and take that overseas. You need that certainty so that companies are willing to step into the breach.”

For PBS firms, net zero industrial clusters also give them the opportunity to build robust portfolios.

“Track record is key when it comes to exporting services from the UK,” said Sophie Banham, Offtake Director, Dogger Bank D at Equinor. “Developers and companies need the work portfolio to demonstrate, globally, that they’ve got the right expertise.”

Laying the groundwork for growth

Despite ongoing obstacles, contributors to the roundtable agreed that the UK is a global leader when it comes to green products, services, and knowledge. 

“We’re ahead of a lot of markets in terms of both what we are doing and our models,” stated Andrew Lee, Managing Director, Engineering, Société Générale Corporate and Investment Banking. 

As companies within these industrial clusters work to reduce their emissions, maintaining momentum is crucial. To do so, governments and business must continue to work together to clear the path ahead.

Powered by an experienced PBS sector, these net zero industrial clusters have the potential to become an international example for low-carbon, clean growth that accelerates the transition to a cleaner and more prosperous economy for all.

While the challenge ahead remains immense, so too does the opportunity.

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