Why DOE Should Prioritize Transformational Investments in Industrial Technology to Catalyze GHG Reductions

Editor’s note: This blog is the first of a series of analyses by a coalition of NGOs engaged in decarbonizing the U.S. industrial sector. It focuses on investment priorities for $5.8 billion in funding for industrial decarbonization in the Advanced Industrial Facilities Deployment Program (AIFDP), passed by Congress as part of the Inflation Reduction Act.

~ ~ ~

The Energy Department’s Office of Clean Energy Demonstrations (OCED) faces a quandary with the AIFDP. Should it prioritize piecemeal, near-term climate technologies or transformative ones? An example in the chemical industry shows why funds should be dedicated to transformative technologies: They have the potential to deliver far greater CO₂ reduction while triggering a cascade of technology adoption applicable across industry groups.

Why Industry Matters

Industrial facilities account for more than 30 percent of U.S. CO₂ emissions, and they make materials for every other sector of the economy, so industrial decarbonization must be a top priority to reach net zero greenhouse gas emissions by 2050. But industry is very complex, heterogeneous, and uses long-lived equipment, so there are relatively few opportunities to change out major equipment. Moreover, industry faces fierce international competition, accounts for 11 percent of GDP, and employs over 13 million people, so approaches to removing fossil fuel dependency and slashing CO₂ emissions need to make economic sense.

Take the chemical sector. In 2021, producing 10 basic chemicals accounted for 190 million metric tons per annum (Mtpa) of CO₂ emissions. The chemical industry is very heterogenous, geographically diverse, has over 70,000 products, and is incredibly capital-intensive. Technology adoption can be slow but when economics, competitive dynamics, and market needs are favorable, adoption can accelerate and cascade through the sector. For example, prior to World War II, acetylene was a backbone of chemical production. But in the 1940s there was a rapid transition to ethylene after successful large-scale demonstrations of “steam crackers,” which produce ethylene and hydrogen by heating ethane with natural gas until its chemical bonds break apart. That touched off a rapid technology cascade throughout the industry.

Two major routes to slash CO₂ emissions in the chemical industry today are 1) decarbonizing energy use in process heat with near-term low-carbon technologies, and 2) proving the viability of transformative process technologies that directly change the way products are made.

The Piecemeal Approach

OCED could support low-carbon technology adoption in a multitude of facilities. For example, process heat accounts for more than 60 percent of on-site industrial energy use and is a good target for reduction. Industrial heat pumps (IHPs) are a viable solution as they are highly efficient, aid electrification, and can service heating (up to 160 degrees Celcius, or 320 degrees Fahrenheit) and cooling needs. A recent report showed that, across a range of processes and industrial groups where IHPs could be used, ethanol production at dry mills stood out as the use case where they could yield the greatest CO₂ reduction by avoiding 90 percent of the natural gas consumption in distillation towers.

There are 180 dry mills in the United States using distillation towers to produce ethanol from corn, water, and enzymes. Each facility would need several 10 to 15-megawatt IHPs. Together, they could avoid 0.046 Mtpa CO2 from each ethanol dry mill with a capital cost near $15 million.

The Transformative Approach

OCED could support a more transformative approach to industrial emissions with a building-block chemical like ethylene. Research consortia are pilot-testing several approaches for producing low-carbon ethylene. For example, electric crackers could reduce CO₂ 90 percent in some estimates by replacing natural gas with renewable electricity as the means to generate high-temperature process heat. With one ton of CO₂ emitted per ton of ethylene, a single 1.5 Mtpa ethylene electric cracker could avoid 1.35 Mtpa of CO₂—nearly 30 times more than the amount that would be saved at an ethanol dry mill using IHPs.

The reduction potential for additional pollutants is also important. By substituting clean energy sources for natural gas, electric crackers could avoid 40 metric tons per year of methane emissions (a greenhouse gas that is 27 times more potent than CO₂) along with 160 metric tons per year of NOx, 9 metric tons of SOx, and 66 metric tons of particulates. That cleaner air is a big upside for people in surrounding communities.

Cascade and Leverage

All told, these examples show that a transformative approach like ethane crackers could achieve 30 times greater CO₂ reduction than a piecemeal approach such as IHPs in ethanol dry mills, and there’s a big upside for the reduction of other pollutants, which would have health benefits in nearby communities.

The threshold for authorizing $15 million for an IHP is relatively low. DOE can support these important demonstrations with general funds that have already been appropriated for DOE. The $1.7 billion cracker, however, has an exceedingly high capital-justification threshold, and taking on the challenges of first-of-a-kind technology requires consortia to spread out the cost. For the cracker, the AIFDP investment can play a critical role in securing approval to prove viability, improve economics, lower risk, and show additional benefits for product production—even if it’s just for a couple of the cracker furnaces.

If IHPs cascaded through all 180 ethanol dry mills, they could avoid 8 Mtpa of CO₂ per year. If all three dozen crackers in the United States adopted the electric cracker, the potential CO₂ reduction would be greater than 39 Mtpa. Leveraging the technology globally could then reduce CO₂ emissions by 21 Mtpa in Europe and 122 Mtpa in the rest of the world. The reduction of other pollutants would also scale.

The step-change innovations required to demonstrate the viability of electric crackers to provide the necessary high-temperature process heat to break the bonds of ethane (800 degrees Celcius, 1472 degrees Fahrenheit) could be leveraged to other high-heat applications in chemicals (e.g., steam methane reformers, ammonia, and synthesis gas) as well as to other industries. Addressing the challenging integration, systems control, and downstream processing would vastly improve economics enabling applications across industry.

A Clear Choice

The AIFDP portfolio should be dedicated to transformative low-carbon process technologies given the far greater impact. It’s vital to improve the economics of solutions central to meeting customer demands for low-carbon products and to speed up the cascade of transformative technologies. It’s also important for field-level results to be transparently communicated so market players can understand the justification cases and lowered risks. Demonstrations can also shed light on other benefits (e.g., the ability to make new products, have better control and higher quality), which would be particularly important for enhancing market pull and cascading technology adoption throughout the value chain.