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The chemical sector faces a host of challenges, many of which directly impact its ability to address decarbonization needs and goals. Facing challenges from gas scarcity and high prices due to ongoing geopolitical conflicts, there is an accelerated need to address fossil fuel dependency — all while maintaining competitiveness.
Throughout 2023, chemicals production has been down worldwide, continuing the trend from 2022. Countries hardest hit include Germany, Italy, Poland, Chile, and South Korea. According to The German Chemical Industry Association (VCI), its Business Confidence Index has dipped below 100 — indicating “pessimism towards future performance” — and its Consumer Confidence Index, while recently trending upward, is “still below the long-term trend.”
High production costs and expensive electricity and gas are straining businesses. Challenges in allocating capital expenditures between innovation and growth leave little room for energy infrastructure transformation, which will be costly yet is a high priority. Complicating matters, chemical plants often share energy sources, infrastructure, and waste management on large sites.
This interconnectedness makes transforming a business challenging because the various chemical players are moving at different speeds to Net Zero. The fastest players want to be climate neutral by 2030 while others want to reach it by 2050, meaning there will not be one solution that meets all expectations. Any changes, especially those related to decarbonization, must consider the broader chemical park's impact and fit to all stakeholders. The chemical industry must find a way to work together, aligning with climate goals, considering resource limits and supply chain resilience, while driving economic progress.
Like many sectors, companies in the chemical industry are focused first on profitability, product innovation, and the bottom line. When opportunities to invest in solutions that would address energy security or environmental impact have arisen, financial returns were negligible or didn’t pay off soon enough — if there was any financial benefit at all. They haven’t traditionally focused on energy efficiency improvements, circularity opportunities, or a decarbonization-first mindset from both the site-operator and corporate level.
There is a historical trend within the sector of companies over-indexing affordability. This overemphasis on mitigating costs has led to neglecting the security of supply, which ultimately leads to an increase in bottom-line costs when there is a disruption in supply. Current trends offer new ways to look at the decarbonization question and shift the paradigm from affordability first to a whole business perspective.
Fortunately, addressing decarbonization more holistically will not only support those profitability needs, but will also help address sector-specific challenges the chemical sector is facing. Developing a decarbonization program in the right way will facilitate solving each of these problems, while also setting a path for organizations to reach their carbon reduction commitments. By tackling energy efficiency, infrastructure transformation, and innovation simultaneously, the industry can navigate the recession and forge a sustainable future.
Thinking circularly fosters a holistic view of resource management, challenging the traditional linear model, and promoting innovation and sustainability across the sector. The chemical sector has traditionally adhered to a linear mindset in their value chain and energy use. Embracing a circular approach offers the industry a chance to break free from historical constraints and create a more sustainable and resource-efficient future. Transitioning to a more circular mindset helps maximize the entire lifecycle of resources, seeking opportunities for enhanced efficiency and optimization.
Circular thinking has often focused on materials – minimizing, capturing, and repurposing them. But circularity is not just about the physical materials and value chain. Circularity can apply to heat, cooling, and water as well — with energy and resources being used, reused, adapted, and fully utilized however possible, leading to energy savings, cost savings, and capex opportunities.
For infrastructure, thinking circularly means closing loops in heating and water use, using heat from high-temperature or low-temperature levels more than once, and then bringing it back to temperature with a heat pump. This saves water and primary energy. Infrastructure changes could involve advancements in heat storage throughout the chemical park, or even a redesign of products and processes to minimize material waste and maximize reuse.
It is also important to utilize new types of feedstocks as part of a circular approach. Materials sent elsewhere to be used as feedstock will alter on-site energy consumption levels, impacting overall energy supplies. This effect may extend to individual chemical sites and other sites with shared resources or processes. Taking a holistic view — considering not only energy, but also carbon capture, materials, and other factors — and integrating feedstock and energy systems will have a domino effect. By reevaluating how to support more energy-intensive processes and how to optimize the use of other resources and materials, a virtuous cycle of overall improvement can be achieved.
Switching the energy approach in a chemical plant is no small feat. While it may deliver cost savings over a 15-year horizon, for example, the journey involves several complex steps, posing significant entry barriers — but each kWh use of primary energy that can be avoided is a success.
The change process starts with assessing utility needs, which demands meticulous measurement. Identifying the most suitable technical solutions further complicates the equation. The procurement and construction of the necessary installations require substantial resources and expertise. Once operational, ongoing maintenance becomes critical for ensuring efficiency and reliability.
The ever-evolving landscape of technological solutions adds another layer of complexity. It's often challenging to discern between proven, emerging, and best-fit solutions for a specific plant.
In this evolving landscape, options like very-high-temperature heat pumps and heat storage solutions are emerging as market-ready alternatives.
Choosing the right path demands a thoughtful evaluation of both traditional and innovative approaches, considering not only immediate benefits but also long-term sustainability and adaptability.
Transitioning from a centralized to a decentralized model, with a centralized backup, is crucial for mitigating risks during energy transitions. This multi-asset approach, combined with the integration of solutions, addresses the inherent complexity of achieving the level of predictability necessary for risk mitigation. Utility-as-a-Service (UaaS) emerges as a key factor to this end. Rather than focusing solely on the pay-as-you-go model for utility services, UaaS becomes a strategic tool to alleviate the capital expenditure challenges associated with infrastructure changes. It helps chemical plants overcome the financial hurdles of procuring and installing new infrastructure.
This innovative strategy empowers chemical plants to navigate complexities while focusing on core operations. It ensures a smoother transition to efficient and sustainable utility solutions, ultimately contributing to the success of each kWh of primary energy saved. The emphasis is not just on cost savings but on strategically reducing risks at every step of the process.
The chemical sector is navigating a complex landscape fraught with challenges beyond the traditional boundaries of industry — energy scarcity, price volatility, and the pressing need for decarbonization. Balancing innovation, energy infrastructure transformation, and decarbonization is crucial yet challenging.
High production costs and expensive energy limit the capital available for essential infrastructure transformation. The industry’s shared resources and varied Net Zero timelines add to the complexity. Historically, a cost-centric focus hindered investments in energy security and environmental impact solutions, increasing costs during supply disruptions. Shifting from an affordability-first approach, the sector must adopt a holistic view that concurrently addresses energy efficiency, infrastructure transformation, and innovation.
Embracing circular thinking can revolutionize the chemical industry’s linear mindset. Beyond materials, circularity can extend to heat, cooling, and water, promoting energy and cost savings. Utilizing new feedstocks and holistic approaches to energy-intensive processes can further enhance overall improvement.
Transitioning energy approaches in chemical plants also requires meticulous measurement, from utility needs assessment to choosing innovative solutions. UaaS is a strategic tool for addressing financial challenges, reducing risk, and ensuring a smoother transition.
By navigating these complexities with a holistic and innovative approach, the chemical sector can strike a balance between innovation, infrastructure transformation, and decarbonization, forging a sustainable future amid a challenging landscape.
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