Five Ways Specialty Chemical Manufacturers Can Reduce… | ENGIE Impact

Five Ways Specialty Chemical Manufacturers Can Accelerate Emission Reduction

Video | Watch Time 21 Min
See All Insights
Ben Moens Managing Director, Sustainability Solutions - EMEA
Mathias Loeser Senior Manager, Sustainability Solutions - EMEA
Specialty Chemicals Industry
Emission Reduction
Net Zero Strategies

This year’s Chemical Innovation Conference gathered leaders, international experts and innovative thinkers from major organizations within the consumer, industrial and specialty chemical sectors.

Our team leaders Ben Moens and Mathias Loeser joined them in Frankfurt on September 28 2022 to share their perspectives on partnering to achieve Net Zero goals:

  1. Organize for an integrated end-to-end solution
  2. Drive disruptive transformation: go beyond today’s best available technologies and galvanize collaborations across different industrial players
  3. De-risk the transformation scale up: innovate on the financing and contracting side
  4. Engage and commit their supply chain on energy and carbon in the same way it’s being done with circularity and material flows
  5. Build transformation excellence: start working from a template, in a top-down approach

View Recording

Video Transcript

Transcript has been edited for clarity

We have Ben Moens from ENGIE Impact here to talk to us about the opportunity for partnerships to accelerate emission reduction. Welcome, Ben.

Good afternoon. Indeed, we will continue the vibe set by Moritz and discuss emission reduction. Maybe first, why are we here as an energy company? Well, a big belief on our end is that to make the energy transition happen we must build more bridges. But, we also believe that here, this forum, which is essentially focused ­on innovation, is the right one, because all of you in your innovation role, have a major role to play in challenging the status quo and creating openness for your companies to connect with new partners. So that's the reason why we chose partnerships as the theme of our presentation.

ENGIE Impact Enables Transformation at Speed and Scale

Just a quick word on ENGIE. We are an international energy group headquartered in France. You might know us from our power and gas supply, but we do a lot more than that as ENGIE. We are a leading renewables developer, growing our installed capacity from 30GW of renewables to 80GW by 2030. We are a leading green hydrogen developer. We are running 70 projects of which 20 electrolyzes more than 50MW. So, we're one of the leading developers in that space. We are also a big biomethane producer, so we truly believe in biogenic solutions as well. And lastly, on carbon capture utilization, to build on the team from Moritz — we are also doing a lot of projects where, we as ENGIE, capture CO2. And, we especially believe in synthetic fuels as a future market for that. ENGIE Impact is a global, independent entity under the Group. We help companies truly accelerate their emission reduction efforts. And we do that with a combination of advisory and transformation support.

Transformation 2.0

Now, to set the scene for the talk, I want us to look at the major transformation that companies and industries have gone through over the past decades. And that's the growth of computing and digital transformation. I want to draw some parallels with where we stand today on energy.

If you go back to the 80s, I mean, I was born in 79. So, I assume I can speak with authority. We had a period of big monolithic mainframe systems. And that's the energy world that we already left behind — the world of central generation and exploration.

We now are in the 90s. If you remember the 90s, there was a time of decline in server computing, when companies for the first time were able to find the right balance between these global requirements and local requirements. And that's where we are today in the energy world, we are establishing more and more local solutions on our sites. And we're trying to see how this helps the energy transition compared to some of the more global solutions like PPAs, VPPAs, import of green molecules, and the like.

We're now in a phase where need to think about building new infrastructure. At the beginning of the 2000s, we had the rollout of broadband and mobile telephony. We are now in this phase where we are establishing the backbone of hydrogen, of CO2 — and establishing new supply chains. And in the past decade, we really didn’t have virtualization, so cloud computing — we went to new ways of doing business. And that was truly the period where we established completely new ecosystems.

My key message is that now in the energy transition, we have to do all of this, and in less time, we can leave no one behind. And just like we did in this transition, we must truly challenge or establish beliefs and especially open up to a lot of collaboration and partnering.

What I want to do is share with you is five concrete pragmatic ways where we observe that we can accelerate transformation by partnering.

Organize an Integrated End-state Solution

One place to start is the aspect of solution integration. Utilities in the chemical sector today are still fairly simple. You get gas, you get electricity, and maybe some onsite equipment. But that world is changing very fast. There are a lot of new onsite utilities, there are renewable generation, electricity, thermal, and all sorts of storage solutions. There's a lot of conversion between energy vectors, you can get from electrons to molecules to heat in all directions.

So, the complexity is increasing massively. The reality is that somebody will have to manage that complexity. And you as a chemical sector are very used to managing complexity when it comes to material flows. So, a key question will be who will do that for you on the energy side. We truly believe there's a role for a solution integrator. Think about where to partner with the solution integrator, and for what reasons.

We believe that the solution integrator will have to do a couple of things right.

  1. First, it's looking at dependencies between technologies and finds the synergies between those. Today through electrification you can tap into onsite renewables, and it can drive the economy well. There are also things like carbon capture, that do not only deliver you fuel but also potentially feedstock. So, there are a lot of big questions about how you manage these dependencies and how you capture the synergies between technologies.
  2. The second aspect is looking at the underlying solution providers of all these different technologies — they typically will help you only with one. So, it's very important that you also have somebody who will orchestrate for you the coherent implementation of these different technologies.
  3. You also need somebody who helps you build the foresight on your transition. We always say you have to think through at least until the Net Zero end state — because all the choices you make today have to make sure to future proof — from a technology choice, from a sizing of assets, avoiding that you make certain technology lock-ins that expose you to future expensive commodity markets. So, all of that you need to think about.
  4. There's also an aspect of thinking in terms of the total cost of ownership. It's not just an equipment question, you also need to look at the sourcing, you need to look at the carbon cost and take all that into account to find your lowest cost solution, but also see where you will be exposed in the future to certain commodity risks that are different from those you have today.
  5. Lastly, this transition will come at a net cost. We all know that. Today you can do a couple of things — energy efficiency, maybe certain electrification that has a positive business case — but ultimately, it will come at an additional price. So, the solution integrator should also help you bundle that into a portfolio approach and make sure all of it gets funded.

Drive Disruptive Transformation

The second thing, where I think partnering makes sense is when you think of how you handle your transformation. And the message is. go bolder, get out of your comfort zone, and disrupt more.

Go Beyond the Best Available Technologies

The first thing you will probably not argue with is we will have to go beyond the best available technologies today. So, in that sense, always say your strategies should be one of scale fast, fail fast. Scale fast on the things that are proven and find a partner who can help you implement that scale, go quicker, and help you mobilize the resources so you can get it done as soon as possible. But on the failure fast part, which is also very critical, you're working with partners who — where you share the learnings — you agree that you can fail, and where you can test new technologies and build the knowledge before 2030 and be ready for the next stage in your transition.

Enable Industrial Symbiosis

The second thing where partnering is key — is driving industrial symbiosis. What I mean by that is to find collaborations with different players. Here's an example of a project in the port of Canton, Belgium, it's an e-methanol project where we capture CO2 from steelmakers. As ENGIE we put the electrolyzer, the oxygen gets back to the steelmaker for oxy-combustion. We converted them to methanol, which is used by Cargill for biofuel production. So, it's a small ecosystem that we're generating there. Why is that relevant? Because we can valorize all the byproducts of that project — we can share the risks, we can neutralize costs, and eventually, you're building shared infrastructure. Again, it's a concept you know well in the chemical sector because you have a lot of chemical complexes. We must make sure that these are not getting in the way of transition. The solution integrator role will challenge those and make sure that these complexes are not getting in the way of moving fast.

Shape New Supply Chains

The third thing is looking at what the future energy market will look like. It's very simple. And most of, for instance, in Western Europe, we know that we have a structural shortage of renewable electricity. So, there will be a need to start importing molecules from Chile, Australia, the Middle East, and North Africa. So there as well, you have a role as the chemical player to take a stake in that to support these projects and make sure they get done and act as a partner in these big transitions.

Nurture Ecosystems and Innovation Platforms

And then lastly, working with ventures, partnering, and taking stakes will also be critical in your transition.

De-risk the Transformation Scale Up

It's not only about technological innovation. What we see for our clients it's as important to also innovate on the financing and contracting sides. Because many of these projects come with a lot of technology risks — not knowing how to run new types of equipment. There's a limited experience. There's exposure to maybe new commodities, certain feedstocks that you don't have today, et cetera. So, what we advise is to really think through how much of that risk you want to carry as a company, and to transfer part of that risk to third parties. And what we see with a lot of companies today that are far advanced in their transition, is the idea of starting to separate the energy activities more from the operational activities. And why do they do that? It is because they can attract external funding more easily. They can also have that energy company transact with all different technology and equipment providers. And that energy company can also, in a very bespoke way, make transactions with the operating company so that you can manage how the cost of that transition ultimately lands on your P&L. A key message is, do not just think about technology innovation, also look at how you innovate contracting and financing. That can remove a lot of hurdles.

Engage and Commit Your Supply Chain

The next thing is how you work with your supply chain. And, again, in the chemical sector, you are very mature in engaging your supply chain on topics like circularity and material flows. My message is, to do the same on energy and carbon. And it comes with, a couple of attention points and things to do.

Signal Expectations

It's a lot about signaling expectations so that you are very clear about your suppliers and your clients. What are your plans for the energy transition? What are your plans for emission abatement? Start to measure more, report more, and, in the end, have a better understanding of which parts in your supply chain are ready to move along with you.

Build Capabilities

Secondly is the notion of building capabilities. Today, you're very much focused on innovating within the boundaries of your company. But there's a role for you to play as well to make sure parts of your supply chain come along with you. And that you get ready to make that transition.

Enforce and Incentivize

And then a third point is how you make the economics eventually work. Because if you want to get in at Net Zero, it will come at a cost, somebody will have to carry it. You have to start today by thinking long-term about incentivizing your supply chain to make certain steps. How to reward, how to punish, and how to eventually make this transition financially attractive for everybody and evolve all the way downstream to your final customer?

Collaborate to Drive Action

And lastly, it's about collaboration. You see that other sectors are more advanced than chemicals in terms of creating associations where there's a lot of collaboration on setting certain standards, on making sure there's a good exchange on technologies, that there's a more concerted action towards the energy transition. Buyer alliances are emerging to give that demand signal to upstream players as investments. I think that the chemical sector in general can do a lot more and get out of your company boundaries and start to collaborate more with your peers.

Build Transformation Excellence

And then lastly, it's also about how you organize your transformation. We all know that the topic of emission reduction is something where a lot of the different business functions have their own opinion, and it takes a lot of alignment to get anything done. Especially when you start to involve your business partners in your supply chain. We truly believe that there's an opportunity around emission reduction to work in a much more agile approach. And the way that we look at it is to start a flywheel where you first work on a couple of your pilot sites to drive that foresight, get the initial conclusions with these different stakeholders, but then really start working from templates and avoid that every single site will come with its own solution and will have to do its own contracting and find its own partners locally to get it done. Work more from a top-down approach, and more template driven, and it will allow you to go faster in your transition.

Recap and Perceived Hurdles to Partnering

Now, I’ll cover what we often see standing in the way of doing these things. This, first of all, needs sponsorship and governance. Make sure you have a senior leader not just at your side, but also from your partner whom you know is willing to put the vision behind this partnership and collaboration and can also take you through the rough patches — I think that is critical. The governance, you know, I said that to a very couple of people at the conference here. We are always recognized as an energy player that we're still very much into a commodity, local conversation, and dynamic with our chemical clients. I think it's important you start to overturn these governance structures, that you do things more structurally, more strategically and that you change a bit the way that we can engage across our respective businesses. To wrap it up, the big need is to take the initiative away from local incremental approaches, organize more programmatic, do it bigger, and make sure you can engage on that level with your future partners.

Questions & Answers

Q: My question is about green hydrogen. Can you comment on the hierarchy of use from your point of view? What do you think it is best used for? A second related question is, how do you see the transportation — is liquid organic hydrogen carrier a niche application or it will fly?

A: In terms of let's say, merit order for green hydrogen, I think the first applications we see will be either as part of a feedstock or indeed, as part of a precursor of some valuable molecules like e-kerosene, synthetic fuels. That I would say is number one. Number two, selected transportation options. But, not only for heavy-duty maritime applications, that’s where we see it. And then lastly, down the line is the application of hydrogen as a fuel. I think that right now hydrogen is just too valuable to burn it. So that's roughly the order I see. And then your question on how to transport it. We as ENGIE are also building these future supply chains and investing in countries like Chile, the Middle East, and Australia to ship significant volumes to Europe. We believe in two carriers the most. First of all, there’s e-methane. We believe that there's a possibility to liquefy CO2 in the industrial areas, ship it to the area where we produce green hydrogen at the lowest cost, and then do methanation steps to bring it back as synthetic methane — with the advantage that synthetic methane can just be used in the existing assets of any offtaker. The second one is ammonia. So those are the two most promising options we see.

Q: Tell us where you can help as ENGIE Impact.

A: Our corporate purpose is really to accelerate the transformation. We look at all sorts of hurdles that are standing in the way. There are certain technical barriers that clients need to surpass. But that’s not the biggest hurdle. It's ultimately primarily about getting it funded and changing your perspective on the cost of the transition and the return you want to get out of it. And find novel approaches to financing this whole transition, and invite other funding partners to do it on your behalf, where you avoid investments that are competing for any other investments you're doing as a company. A lot is on the operating model. It’s about ways of working, about the way you make decisions as a company, it's about having the right leadership involvement and support, and having a vision for this transition. There's still a lot of work to overcome barriers. We can help with our perspective with a view of certain solutions, but also with the view, we have from working across different sectors on this topic. We see that the practices are very different, not just across sectors, but across companies. So, there's a lot to be learned from across companies and we can share the best practices.

Q: How will you produce all the electricity, which is required to produce clean hydrogen, green ammonia, and e-methane — this all requires a lot of energy?

A: As ENGIE, we reorganized the group last year so that we could really double down on renewable development. We really increased our ambition towards 2030. But in aggregate, if you hear some of the numbers of sector plans and sector strategies, and you do the quick math, then there is a gap. There is no way to produce electricity in 2030 with the numbers that are on the table. So what are the options here? It means that either we need to go to other generation sources, or we must change our beliefs on what roles certain assets will bring to generation. I don't think it will come to revising the ambition. For instance, the role of nuclear might still shift towards 2030, and I think that awareness is gradually building as we get closer to 2030.

Get in touch

Let’s discuss how you can implement decarbonization across your value chain.