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Core Working Groups workshops: “Industry & Innovation”

21.06.2023 | Workshops

The workshop, centred on the theme of Industry & Innovation, aimed to facilitate collaboration between the IAM COMPACT modelling team and policymakers, industry, and civil society representatives. By engaging with senior energy and climate policymakers, we have identified key priorities for Europe's industrial sector. CWG’s contributions are envisaged to directly influence our research.
During this workshop, we sought valuable insights on our research agenda, realistic scenario design, and potential applications of our analysis. We discussed two related modelling studies:

1.    What are the implications of EU industry decarbonisation, considering possible off / re-shoring scenarios? This study is led by Wuppertal Institute. 

2.    What is the contribution of earlier stage technologies if they undergo rapid cost reductions? This study is led by Imperial College London. 

At the start of the workshop, a brief introduction of IAM COMPACT as well as the aims of the workshop were discussed by Bruegel. Then, study leads briefly presented the background and approach of both studies, before splitting into two break-out rooms.

Room 1: EU Industry 

Topics for discussion:

•    Off- and re-shoring expectations in various industrial sectors.

First, the proposed scenarios were shown, consisting of the “Baseline” without any relocation of industries; Scenario 1 “Open Trade” that will analyse the global economic optimum of production of steel, aluminium, fertilizers (ammonia), chemicals; and Scenario 2 “Strategic Independence” will assume industrial production in EU does not decrease in any sector. CWG members commented that the scenarios represent two extremes, with Scenario 1 being less realistic, as in reality there is no “open trade” -as indicated by CBAM, or GASSA. 

Then, the different possibilities of relocation were presented, noting that import of intermediate products (e.g., DR) cannot be currently covered by IAMs. CWG participants highlighted that this will probably be the most common type of relocation, as methanol, ammonia, DRI / HBI will be mostly imported instead of Hydrogen, and thus should be integrated in the study, if possible. They remarked that pure Hydrogen may not be as important in terms of trade, as steady supply will always be needed for production processes (e.g., ammonia production), and thus storage of H2 becomes important, which maybe not be economical. In case H2 is imported, losses on H2 transport should also be considered – in makes more economic sense to you H2 as an intermediate without converting it. Thus, again, the import of intermediates might be important. Also, H2 import costs are not the only important variable, as industries also need to comply with EU delegated acts (e.g., for underground storage). In case of relocation of ammonia production, food supply chains will also be impacted, and as such studies should try to integrate a whole-system perspective to assess economic feasibility. 

•    Modelling assumptions

  • Should there be a restriction on the colour of the hydrogen used? 
    CWG participants suggested no restrictions on the colour of H2 - if blue H2 is economically more viable then we should let the models show this, but carbon footprint should be considered. They noted that currently Germany provides subsidies for both blue and green H2, and industrial transition will need as much H2 as possible. Despite this, CCS for steel won’t be enough to zero residual emissions, and thus initiatives for green H2 are necessary. They also underlined that pyrolysis for H2 production remains a blind spot in many modelling studies, and that infrastructure could be a bottleneck in H2 uptake, as not only pipelines but also ships are needed, and if possible should be captured by models. 
  • Is Hydrogen independence in a strategically independent EU scenario a suitable assumption?
    We were advised to not force production locally, as the amount and diversity of suppliers will be enough to ensure security.

•    Key impacts: Socio-economic, environmental, and more.

  • Re-shoring: There is no coherent regulatory framework, which created high uncertainty in terms of its path-dependence and political economy. Potential drawbacks are increased emissions within EU, and lack of required labour force. 
  • Climate and environmental impacts, in particular local emissions are important for public perception (e.g., air pollution around TATA steel plant in the Netherlands) 
  • Social: local resistance and employment
  • Regulatory: permitting, and stable regulations to foster investments 
  • Bottlenecks of capacity & construction, engineering of heat pumps, DRI plants 

    Room 2: Innovation

Topics for discussion:

•    Technologies expected to experience significant cost reductions.
•    Impact of rapid cost reductions, including:  

  • Investment requirements for achieving the 1.5-degree target. 
  • Carbon sequestration achieved through carbon dioxide removal technologies.

The session was facilitated via Miro, which helped us gather the necessary feedback.
















The discussion was focused on two research questions:

1.    How models could capture imports of intermediate products to produce H2 (e.g., DRI, HDI), cost of imports, whole systems perspective to assess viability of green H2?

The was a lot of focus on the hydrogen production, noting that deployment is limited but needs to be increased, along with innovation for hydrogen storage and distribution – e.g., in Belenux despite many hydrogen projects (and import coalitions, ports within the region, etc.), there is almost no storage infrastructure. Stakeholders mentioned various innovative technologies that could drive the transition, and could be explored through modelling – some of which were:

  • Innovation for H2 storage & distribution, scaling of ammonia and methanol production, biochar and pyrolysis, derisking low carbon investment and technology transfer, CCS push 
  • Scaling of ammonia and methanol to further increase the hydrogen deployment 
  • Hydrogen cost reduction through renewable energy cost in future
  • Innovation on the demand side reduction especially in industrial sector to reduce the peak load in power sector 
  • Technologies storing electricity, which are expected to be deployed, but currently receive less attention compared to hydrogen
  • Biochar and pyrolysis deployment probable increase in the future
  • Hydrogen liquefaction as a way to reduce costs 
  • Hydrogen deployment: There is need for more policy push towards hard to abate sectors; ensuing H2 for power for grid flexibility through storage.
  • Modular technologies also could see a cost reduction in the future as modular components can reduce construction costs and duration.
  • Present-stage CCS not enough, CCS needs push in easier to abate sectors to help push innovation

2.    What forces might drive down technology costs at rates faster than previously assumed?

  • Policy signals, as policy uncertainty and unclear signals act as a barrier to the investment in CCS technology.
  • Proper policy roadmap is important for innovative solution to get deployed at the large scale
  • De-risking low carbon investment and technology transfer