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XI.a Industrial processes costs

Methodology

There are 2 levers for the industrial sector: A) industry output, B) energy intensity. Lever A sets sectoral growth rates. Energy intensity, on the other hand, controls four other drivers: i) energy demand multiplier, ii) fuel split (i.e. electrification), iii) process emissions intensity and iv) CCS (Figure 1). Of these five drivers, fuel split and CCS are defined for total UK industrial figures while the remaining are defined at sectoral/fuel level. The chemicals, metals, and minerals sectors are represented separately while the remaining sectors are lumped together under ‘other’ category. The Figure 1 below presents the overall structure of the industrial sector.

Figure 1: Industry Worksheet Method Diagram

Costs

In order to account for the costs due to changes in output levels, we have used capex and opex data that we received from BIS, based on Annual Business Inquiry (ABI) 2007. From these, we have calculated the unit costs per unit of output.

In order to account for the costs of technologies with different energy intensities, we have made assumptions in terms of how much they would be higher from the no-effort (level 1) case. In low cost case, effort level 2 costs are 0.13% higher than effort 1 level, whereas level 3 ones are 2% higher. In the high cost case, these are 0.25% and 4%.

CCS is calculated separately, working back from emissions saved (both through specific process emissions and other) through deployment of CCS technology to calculate an energy equivalent which can then be costed.

Issues / Worries

  • CCS costs seem too low
  • The capex and opex data we used from ABI may already include some energy efficency technology costs.
  • The fact that the energy intensity lever has explicit assumptions regarding electrification, CCS uptake, process emissions intensity and energy demand multiplier jointly, it becomes hard to make use of the existing analysis, which are driven by MAC curves. Also, there does not seem to be good data on existing capital stock/assets in industrial sectors.
  • It would be good to disentangle the 'other sectors' and link them with the wider energy system. For example, by representing food and drink sector we can capture the impacts of different lifestyles (less meat consumption etc).

Possible new data sources

  • The Carbon Budget team is carrying out some analysis regarding abatement potentials in the industrial sector. There could be some information useful for our purposes.
  • The Carbon Trust might have some data for future technologies. This needs to be checked.