Industrial Sector Lagging in Energy Transition: Faster Pace Paves the Way

Feb. 1, 2024
Accenture's "Powered for change" report, with input from 1,000 executives, warns that most heavy industry sectors are well behind first-line 2030 goals. Embracing digital transformation and green energy will improve price parity for decarbonized products.

Heavy and light industrial energy users must not just tag along but be leaders of the pack when it comes to driving lane changes into decarbonization pathways. Otherwise, the long road to net zero just gets longer.

The global industrial sector accounted for 9 gigatons of carbon dioxide emissions in 2022, basically one-quarter of all energy-related CO2 emissions, according to the International Energy Agency.   Fleet electrification, microgrids, and building energy efficiency upgrades will only get us so far unless the world’s builders, drillers, and processors find ways to shift into a higher gear.

The winding way seems daunting and distant, but it is possible with focused, intensified commitment and innovation, so says the new “Powered for change” survey report from global professional services firm Accenture released this week. The summary, building on input from 1,000 executives in 14 industries ranging from utilities to heavy industrial and beyond, provides context on how sectors such as steel, metals, mining, cement, freight, chemicals, and logistics, can pick up the lagging pace on reaching net zero by 2050, as intended by signees to the Paris Agreement in 2015.

Right now, however, most heavy industry sectors are well behind even the first-level goals aiming for achievement by 2030. This year is essentially the mid-point between the Paris signings and those first benchmark deadlines.

Absence of Decarbonization Strategies Slowing Heavy Industry’s Momentum

Coming out of the early turns, some of the wheels are mired in a low pace of change.

“60% of construction emissions come from cement,” noted the Accenture study looking at one key component of heavy industry. “With less than 1% of cement or steel produced today being 'green', heavy industry has a long way to go to achieve the scale that will bring down costs. The light industry needs to help fund a solution by identifying segments and developing propositions for early adopters of low-carbon products and services willing to pay green premiums.”

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Truly, some players within those sectors, including cement producers, are ramping up decarbonization strategies—just not as much as needed nor quickly enough, the Accenture survey revealed, with research indicating that only 18% of industrial companies are cutting emissions at the pace required to reach net zero in operations by 2050.

In fact, one-third of those firms are cutting emissions too slowly, while about half are actually participating in rising emissions. A “wrong way” sign is needed right here, judging by the report’s concerns.

Read the full Accenture "Powered for Change" report here

“Our Destination Net Zero research also shows that the most successful decarbonizers have a very broad-based strategy, employing 15 or more of 20 best practices (decarbonization levers) in parallel,” reads the Accenture report. “But those businesses are in the minority, representing less than 5% of our sample of the world’s 2,000 largest companies.”

Money Makes the World Go Greener

And it’s all about the Benjamins—money makes the energy transition go round. Accenture’s research and S-curve modeling indicate that an early and aggressive heavy industry commitment to low carbon energy and hydrogen can surely aid in the journey, but green products—those produced via clean energy and decarbonization methods—require dramatic efforts to reach price parity with traditional fuel resources.

Trillions of dollars can go into clean energy investment to help reach scale and eventual price parity, but Accenture’s report cautions that it is simply not happening at the scale and pace that net zero goals require.

The time to reset course is now, they say.

“By the 2030s, heavy industry will need access to plentiful supplies of low-carbon electricity and hydrogen to decarbonize.  According to our analysis, for example, European Union chemicals companies will require approximately nine times the current total low carbon demand to meet 2050 net-zero targets,” reads the Accenture study. “The total clean energy demand of EU cement, steel, and chemicals manufacturers, plus the power requirements for electric vehicles, equates to 836 nuclear plants, up from 101 today, or an onshore wind farm capacity of 1900 GW—ten times the capacity today—equivalent to the size of Spain.”

The momentum is strong in some quarters and yet far from it in others, according to the report. “Only 48% of light industry executives told Accenture they are effective in working with their supply chain to develop joint decarbonization plans. Eighty percent of heavy industry executives believe they will have to charge a price premium of plus-20% if they are to make low-carbon products and services commercially viable in the next five to 10 years.”

Only 5% of oil, gas, and power providers are expecting a shift within their own businesses to support the decarbonization of heavy industry before [CG1] 2043. Yet many in this group anticipated meeting Scope 1 and 2 emissions targets by the beginning of 2050.

“It is crucial that we move from commitment to action. Actors across the industrial value chain—from oil, gas, and power providers to heavy industry such as steel, metals and mining, cement, chemicals, freight, and logistics, to light industry that includes pulp and paper, aerospace and defense, automotive, industrial equipment, life sciences, and consumer goods— need to come together to kick-start collaboration,” Stephanie Jamison, Global Resources Practice Chair and Sustainability Services Lead at Accenture said in a statement within the report’s foreword.

Beefing Up the Digital Core and Streamlining Supply Chains

Building the value chain argument in the clean energy revolution will be crucial. Building a strong digital core, including the implementation of generative artificial intelligence (AI) tools, will pay dividends by helping speed, productivity, and efficiency gains in operations and supply chains, according to Accenture respondents.

“Reducing the costs of low-carbon power and hydrogen to fuel this industrial energy transition is possible utilizing a range of measures including improved asset design and scaling up green energy production,” the report stated.

According to Accenture’s analytics, green hydrogen (created by electrolyzers powered by carbon-free energy) will reach cost parity with gray (more carbon-intensive) hydrogen production if those clean energy prices drop to $30/MWh by 2050.

“How can we turn those estimates into reality? By scaling early and fast,” the report states.

Nearly half of heavy industry executives surveyed by Accenture believe that advanced manufacturing of standardized equipment at scale will play a significant role in improving the decarbonization investment business case as early as 2026.

About the Author

Rod Walton, EnergyTech Managing Editor | Senior Editor

For EnergyTech editorial inquiries, please contact Managing Editor Rod Walton at [email protected].

Rod Walton has spent 15 years covering the energy industry as a newspaper and trade journalist. He formerly was energy writer and business editor at the Tulsa World. Later, he spent six years covering the electricity power sector for Pennwell and Clarion Events. He joined Endeavor and EnergyTech in November 2021.

Walton earned his Bachelors degree in journalism from the University of Oklahoma. His career stops include the Moore American, Bartlesville Examiner-Enterprise, Wagoner Tribune and Tulsa World. 

EnergyTech is focused on the mission critical and large-scale energy users and their sustainability and resiliency goals. These include the commercial and industrial sectors, as well as the military, universities, data centers and microgrids. The C&I sectors together account for close to 30 percent of greenhouse gas emissions in the U.S.

He was named Managing Editor for Microgrid Knowledge and EnergyTech starting July 1, 2023

Many large-scale energy users such as Fortune 500 companies, and mission-critical users such as military bases, universities, healthcare facilities, public safety and data centers, shifting their energy priorities to reach net-zero carbon goals within the coming decades. These include plans for renewable energy power purchase agreements, but also on-site resiliency projects such as microgrids, combined heat and power, rooftop solar, energy storage, digitalization and building efficiency upgrades.