National Energy System Modelling of Industry : Optimising the Transition Towards Carbon Neutrality

Industry is a major user of energy and emitter of fossil CO2. At the same time, Sweden targets net-zero greenhouse gas emissions by 2045. Current policies to reduce greenhouse gas emissions and mitigate climate change, and the transition of the energy system it requires, will present major challenges for industry. Energy system optimisation models (ESOMs) are an important tool (of many) for improving the understanding of the sociotechnical transition required to reduce emissions. At the same time, previous modelling efforts rarely stretch the analysis further than net-zero emissions and lacking technology representation have historically led to over-reliance on carbon dioxide removal technologies. The general aim of this thesis is to support industry’s transition toward carbon neutrality. This will be achieved by (i) improving the representation of industry in ESOMs and (ii) applying the suggested representation to TIMES-Sweden and exploring different pathways for Swedish industry to reach net-zero or net-negative CO2 emissions using scenario analysis. The model representation is based on a detailed representation of tradeable materials. This detailed representation allows for easier modelling of demands and prepares the model for analysing the impacts of circular economy and material substitution. Regarding its ability to explore pathways to net zero emissions, the model representation was improved in two ways. First, the model has an improved technology representation that for each industrial process step includes a minimum of one option using biofuel/biomass, one option using carbon capture, and one electrification option. This makes the model capable of reaching net-zero emissions with minimum reliance on carbon removal technologies. Second, the suggested model representation is specifically derived to recognize and capture opportunities for process integration, industrial symbiosis, and sector coupling aspects in national energy system models. This allows for a more accurate estimate of the technoeconomic impact of industry on the energy system from the use of, for example, waste heat from biorefineries or storage potential from the production of hydrogen on site. The scenario analysis shows that it is possible to reach net-zero emissions with technologies that are already commercially proven if carbon removal technologies are allowed to offset emissions. In fact, using fossil fuels in advanced CCS technologies and offsetting residual emissions with low-cost BECCS from biorefineries is the most cost-efficient pathway to net-zero emissions. Meanwhile, reaching net-zero emissions without carbon offsetting relies on less mature technologies. For Sweden, the key for reaching net-zero without carbon offsetting is the successful development of largescale electrolysis and advanced biorefineries. In all of the studied cases, sector coupling for efficient production and use of biofuels was found to be important to achieve a cost-efficient transition. Biorefineries integrated with the forest industry in combination with heat pumps and efficiency improvements have the potential to shift 175-200PJ of biomass and black liquor from final energy consumption in the forest industry to input in biofuel production. Increasing the availability of biofuels reduces the need for hydrogen electrolysis. One other measure that would improve resource efficiency is to recognise the negative emissions contribution caused by renewable carbon stored in plastics, which would reduce the need for carbon removal technologies and increase incentives for producing renewable plastic. The Swedish industry could also improve sustainability in international markets by exporting renewable olefins. Using biofuels and fuels produced from CO2 by products derived from biorefineries could enable increased export of up to 3.5 Mt of olefins. Making such exports competitive requires a carbon fee on fossil plastic of approximately 190 to 270 EUR/t of CO2, while also requiring policies to account for the negative emissions caused by renewable carbon stored in plastic. In summary, the most critical aspect of decarbonising industry is the successful development of technologies that produce renewable fuels. Meanwhile, technology development that leads to increasing rates of electrification or the use of alternative fuels (e.g., waste) is still important to reduce the dependence on fuels based on renewable carbon (from biomass or atmospheric CO2). This is important because biomass will likely be highly contested and power-to-fuel solutions that rely on direct air capture to supply CO2 are among the most expensive options available. Thus, the need for technology development is broad. Current policies in Sweden and the EU are sufficiently targeting the technology-push aspect of technology development relevant for industry, but technology-pull policies to maintain the competitiveness of these new technologies are lacking