Project Summary

Dispersed industrial sites account for nearly 10% of UK carbon emissions, and there is no coordinated plan for decarbonising small to medium enterprises. Indus is developing a novel approach to decarbonising industrial heat by clustering industrial sites. This allows for shared infrastructure investment and co-location of renewables on site, and improved network planning.

Indus is establishing a network-led framework to support commercial development of zero carbon industrial parks. Through market testing with local authorities, industry stakeholders, and gas networks, this whole systems approach to accelerating decarbonisation of industrial sites is an innovative step forward in the fight against climate change.

Innovation Justification

Indus is innovative as it delves into an underexplored solution to industrial decarbonisation. It offers the opportunity to solve the decarbonisation of industrial heat by considering a whole system approach to the concept of clustering dispersed small to medium industrial businesses as zero carbon industrial hubs. Failing to do so, could ultimately lead to uncoordinated and inefficient business and infrastructure investment, risks stranded assets or missed Net Zero targets.

The project addresses Challenge 4 and Theme 1 by developing and testing a novel framework and potential for customer-facing tools for network operators to offer to the industrial market to enable commercial development of zero carbon industrial hubs. The framework will cover the full range of planning, contracting, and operating interactions between the DNO and the relevant industry stakeholders, as well as gas networks and transmission networks where appropriate. It will include business process definitions; example operating models; and commercial offers (e.g. flexibility and connection agreements with DNOs) and will explore the demand for digital offerings. 

To maximise market acceptance, we will work with relevant stakeholders through an advisory board, and help developers, industry, LAs, and IDNOs that manage the local site networks, to align their own operating models and processes with this framework. Considering insights from Discovery Phase and continuing to meet Theme 1 partner requirements, Indus will include an additional energy network licensee, Cadent, as a partner. As a potential developer of hydrogen networks, Cadent will help complete the picture from a whole system perspective.

The Discovery Phase tested the hypothesis that a clustering process could deliver benefits for electricity customers. It showed this approach is replicable across UKPN’s licence areas with potential to deliver network benefits of circa £33m by 2050. As part of the Alpha Phase, we will engage with other DNOs to refine benefits’ estimates and validate the replicability across GB; estimating provisional benefits of ~£154m.

Indus has already engaged with multiple stakeholders in Peterborough and UKPN’s licence areas and plans to broaden this engagement in the Alpha Phase; working through the wider geography of New Anglia and Peterborough. The project builds on work done through the national Industrial Decarbonisation Challenge programme in the Black Country and is a significant evolution on this approach. The focus on a network-led framework and whole systems approach with the gas network is completely novel and potentially transformative, given the Local Network Operators’ (LNO) unique role in zero carbon infrastructure provision.

The technical knowledge required for Indus delivery needs to include industrial decarbonisation solutions (Ameresco), energy infrastructure solutions (UKPN and Cadent), regulations and business models (Guidehouse). This knowledge needs to be combined in new ways (Camirus) in specific geographical and industrial contexts (Peterborough, New Anglia and M3MAS).

Discovery Phase moved the proposition from CRL4 to 5. Alpha will move it from CRL5 to 6. TRLs and IRLs are not appropriate to this project as it is a system innovation applying to multiple technology integrations. 

Alpha Phase will also establish a method for DNOs to understand and predict likely development of industrial demand in their licence areas. It is vital to develop such a solution within RIIO-ED2 period to be able to influence decision making in the decarbonisation of industrial heat processes and prepare the business with a credible plan for RIIO-ED3. There is currently no alternative funding stream to cover this, and it is a novel solution that is unlikely to be developed as part of business as usual (BAU) activities in RIIO-ED2.

In Beta the project will develop the tools and apply the framework to a landmark commercial industrial development (‘use case’) selected with stakeholders during Alpha. 

Impacts and Benefits

The following benefits were identified and quantified in Discovery: 

Financial - future reductions in the cost of operating the network (£33 by 2050)

·       Currently networks do not have full visibility of future electrification potential as industry decarbonises. They typically respond to individual industrial connection requests on an application-by-application basis. To decarbonise process heat through electrification, each industrial site would need to invest in its own low carbon energy infrastructure (e.g. heat pump) and secure required capacity through the network. To reduce energy costs and peak load, they also need to invest in other renewable energy infrastructure (e.g. batteries and onsite solar). The cost of additional network capacity, in the form of network reinforcement, is measured in £/MVA. 

·       Compared to the counterfactual scenario, Discovery analysis indicates Indus could avoid the need for 395 MVA additional network capacity in UKPN’s licence areas and 1,844 MVA of capacity across GB. This stems from industrial parks sharing renewable energy solutions to decarbonise heat (e.g. heat pump) in a coordinated way. The shared energy solutions reduce overall capacity requirements through lowering the design margin (%), improving the coefficient of performance of the heat pump, as well as introducing peak diversification (%). The avoided MVA results in approximately £33 million of cumulative discounted net financial benefits for UKPN till 2050 and £154 million across GB.

Environmental - carbon reduction – direct CO2 savings per annum (1,600t CO2e by 2050)

·       The network has embodied emissions in the infrastructure itself. Avoiding 1,844 MVA of additional infrastructure could reduce the embodied emissions of GB’s networks by 7,500 tCO2e resulting in £460k worth of savings, of which UKPN’s share is 1,600 tCO2e or £98k.

In the Alpha Phase we will focus on the quantifying the value from these other benefits described:

Financial - cost savings per annum on energy bills for consumers

·       Reducing connections costs and avoiding related network reinforcement could save consumers money on their energy bills.

·       Indus also offers industrial customers the opportunity to reduce overall energy use (MWh) through access to shared renewable energy infrastructure (e.g. waste heat from neighbouring industry, batteries and onsite solar arrays). This will be measured in MWh of consumption. Additionally, industrial customers can make savings through reducing the need to invest in their own onsite energy solutions. This will be measured in the £ difference between the counterfactual capital requirements for decarbonisation of the use-case site vs. the capital requirements for the Indus solution. 

Environmental - carbon reduction – indirect CO2 savings per annum

·       It is anticipated that Indus could also accelerate industrial decarbonisation, resulting in additional emissions savings per industrial site decarbonised. 

·       Indus could also require less on-site industrial energy infrastructure to support the decarbonisation of industry e.g. fewer HPs, therefore resulting in lower embodied emissions. 

Revenues - improved access to revenues for users of network services

·       The shared energy infrastructure at Indus sites could allow industry to participate in providing flexibility services, which offers them access to new revenue streams. This can be quantified through the cost of procuring flexibility to the network. 

·       Indus could also provide industrial parks with the opportunity to participate in system balancing depending on the type of onsite energy infrastructure implemented. This can be quantified through the cost of procuring system balancing to the network.

New to market – products, services and processes

·       Indus will develop a new DNO framework that enables commercial industrial developments that reduce the costs of industrial decarbonisation for everyone. Specifically, this will include new forms of business process definitions, methods for planning network capacity, operating models, and commercial offers (e.g. flexibility and connection agreements) and will explore the demand for digital offerings to support industrial park developments.