Energy Transition

Here's how industrial clusters in China are moving towards energy self-sufficiency

Renewable energy in industrial clusters help curb Scope 2 emissions.

Renewable energy in industrial clusters help curb Scope 2 emissions. Image: Getty Images/iStockphoto

Vee Li
Energy Sector Lead, China Climate Action, World Economic Forum
Peiyang Guo
Chief Analyst, SPBG, Trina Solar
Yiran He
Programme Specialist, China Climate Action, World Economic Forum
Tori Liu
Public Affairs Director, Trina Solar
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Transitioning Industrial Clusters Towards Net Zero

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  • Industrial clusters can be heavy emitters, but they also provide the most significant opportunities for decarbonization.
  • Targetting Scope 2 emissions - gases emitted indirectly from purchased energy- through greater use of renewable energy and heat on-site can help lead the clean energy push.
  • Sites in China's Qinghai Province are leading efforts to make this transition.

As COP27 wrapped up late last year, we saw an urgent call to abate emissions and deliver the targets pledged over the years. The industrial sector, responsible for approximately 30% of global CO2 emissions and 37% of global final energy use, needs to be decarbonized more than ever. That’s even more true if we consider Scope 2 emissions – gases emitted indirectly from purchased energy.

Industrial sectors always band together to create greater economic opportunities: what’s referred to as “industrial clusters”. By co-locating in one geographical area, members share common infrastructure, facilitate easy access to resources, lower production costs and leverage policy as well as financing innovation. Yet clustering can also create negative impacts by making the area a significant carbon emitter, as it becomes both energy-intensive and resource-dependent.

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As the “world’s factory”, China sees a higher percentage of carbon emissions and energy consumption from industry than many other countries. In 2020, the industrial sector in China accounted for about 70% of total final energy use. China has over 25,000 industrial parks across the country. And if we look further into it, industrial parks at or above the provincial level – which account for around 10% of the total number – produce 31% of China’s total carbon emissions. Decarbonizing these carbon behemoths will contribute a lot to the net-zero transition of not just China but also the global community.

The four net-zero pillars

Decarbonizing these big emitters is not easy. Some industrial clusters represent a single industry and gather companies from upstream to downstream, while others incorporate multiple industries in one location. In both scenarios, they usually consume a great volume of energy and produce a correspondingly huge amount of emissions. However, their size and intra- or inter-industry nature also catalyze integrated, large-scale and systematic solutions to decarbonization. To accelerate this synergy, a dedicated global initiative, tasked to transition industrial clusters into a net-zero future, was launched during COP26 by the World Economic Forum in collaboration with Accenture and Electric Power Research Institute.

The initiative has identified four solutions that can expedite the transition:

  • Systemic efficiency and circularity
  • Direct electrification and renewable heat
  • Carbon capture, utilization and storage
  • Hydrogen
Four pillars for the industrial cluster initiative.
Four pillars for the industrial cluster initiative. Image: Accenture/World Economic Forum

The initiative aims to leverage those solutions in an integrated manner to reduce carbon emissions. The first pillar aims to increase circularity, integrate processes within a cluster and provide cost-effective system benefits outside. The CCUS pillar aims to capture carbon from energy and hydrogen production, use it in other industrial processes, and store it where feasible. And the hydrogen pillar leverages nearby zero-carbon sources to produce low-to-zero carbon hydrogen for use as an alternative for these hard-to-electrify scenarios.

The second solution – direct electrification and renewable heat – is especially aimed at generating “low-cost, renewable electricity and heat on-site” and pursuing “shared infrastructure”, such as microgrids and storage, in order to reduce Scope 2 emissions. Green electricity is a key component of shifting these giant energy consumers to a net-zero future because falling renewable prices due to extensive adoption expedites not only direct electrification but also accelerates the net-zero transition to powering the clusters by getting rid of emitted greenhouse gases from Scope 2.

China’s green spearhead

China has been leading renewable energy investment worldwide for approximately a decade. In 2021, with over $380 billion invested in renewables, it ranked first worldwide. One of the most significant efforts in this renewable surge is powering industrial clusters with green and renewable electricity.

Alongside heavy-emitting clusters looking for decarbonization pathways, the country has applied green electricity to industrial clusters since their inception. In 2015, China’s environment ministry encouraged local governments and businesses in written form to launch net-zero pilot projects. Many public and private sector players joined the game by rapidly kicking off their net-zero industrial cluster design and construction.

One of the highlights of these net-zero industrial clusters is their ambition and action to generate and use renewable electricity to tackle the thorny issue of Scope 2 emissions. Aiming to adopt 100% green electricity, clusters start the net-zero design by locating their businesses in geographical areas with an abundance of renewable energies.

Take Qinghai Province as an example. It is located in northwest China, a region known for its abundant wind power and photovoltaics (PV). In 2021, the region accounted for 29% of national wind power capacity and 39% of PV. The Qinghai grid has a much higher proportion of renewable in-feed; at 85%, the proportion is substantially higher than the national average of less than 30%.

Greening the green industries

The high proportion of renewable in-feed in Qinghai enables the easy procurement of green electricity. This greatly helps Qinghai and other provinces to marry those energy-intensive clusters. Trina Solar’s photovoltaic industrial cluster in the provincial capital Xining is one of the most illustrative cases.

As a renewable-focused company, Trina specializes in manufacturing PV products. Given that making PV products per se would emit a considerable volume of carbon emissions, and 95% of the emission comes from electricity consumption, how to green the “green industry” is a big question mark.

Trina locates its net-zero PV industrial cluster in the province of Qinghai, covering the full supply chain from industrial silicon, multi-crystalline silicon, wafer, and cell, to module. It leverages the easy procurement of renewable electricity from the provincial grid and has established its own on-site solar station to neutralize remaining emissions. Altogether, the cluster facilitates tremendous carbon emission avoidance.

Scope 2 synergies

By clustering businesses to address Scope 2 emissions, industrial clusters can also create synergies on other fronts. For example, the renewable electricity surplus generated by on-site solar power stations can be used for decarbonizing surrounding industries. Stations built on uninhabited drylands can alleviate wind erosion of the soil, preventing desertification resulting from increased aridity due to climate change. Also, products from these net-zero clusters provide evidence for their larger carbon footprint, facilitating broader Scope 3 decarbonization (all indirect emissions, excluding Scope 2, in the value chain); this helps the economy move towards a more sustainable business model.


What's the World Economic Forum doing about the transition to clean energy?

Industrial cluster decarbonization can go hand in hand with energy transition if the synergy with green electricity continues to be scaled up. Industrial clusters originally band together in order to create economic and social value, but at the cost of adverse emissions impact. With Scope 2 decarbonization solutions, they can become invaluable contributors on the environmental front too.

Xinhong Qin, Community Lead, Business Engagement, World Economic Forum and Shouqing Zhu, Head of China Climate Action, World Economic Forum also made contributions to this article.

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