Insight
Decarbonisation of industrial sites and facilities – How we can commit through future state planning
credit xiaoke chen
The Paris Agreement has led to companies committing to the Science Based Targets initiative (SBTi), with the aim of reducing their short-term carbon footprint by more than 40%, and long term by up to 100%* In 2023, the number of companies committed to SBTi reached 4000**.
March 26, 2024
However, achieving these ambitious goals cannot be done through continuous improvement, energy management, and simple business cases alone. Instead, companies need to develop a master plan that incorporates “future state planning”.
What is future state planning and how do we implement it into our workstreams?
Future state planning involves designing a future state where the goals of significant carbon reduction can be achieved. This may include full electrification and novel production processes, also with focus on how we believe the technical opportunities and surrounding society will be in the future. The future state also needs to address the needed robustness, possible expansion of production capacity, resilience and sustainability of the future site.
Once the future state is designed, a plan can be made. The plan needs to include many factors, including how sufficient electrical capacity is ordered in due time, that improvement of equipment that does not belong to the future state is not prioritized, and that equipment that has reached the end of its life is not replaced with similar equipment, but rather with equipment that matches the future state design.
In that way, the desired future state can be achieved in a cost-effective and effective way, with minimal negative effects on production.
Shifting our mindset from payback time to achieved benefit
Evaluation of carbon reductions cannot be based on simple ROIs (Return on Investment). Simple ROI measures return of money, not the achieved benefit. Initiatives with great ROIs might increase carbon footprint or have very low reductions. Carbon reductions might cost something, and we need to include the company's IRR to truly evaluate if the benefit wanted is worth the investment. Companies are working with carbon pricing and are willing to invest in decarbonizations.
If such an approach is implemented in companies, better decisions can be made, because the cost of carbon becomes an integrated part of evaluation of investments. One should however pay attention to the potential pitfall of neglecting or decreasing focus on other sustainability aspects without internal pricing such as social responsibilities and water consumption.
In summary, decarbonizing industrial production facilities and sites requires a comprehensive approach that goes beyond simple business cases and energy management. Companies need to develop a master plan that incorporates future state planning, designing a future state where ambitious carbon reduction goals can be achieved through measures such as full electrification and new ways of production.
*Source: SBTi CORPORATE NEAR-TERM CRITERIA, Version 5.2, March 2024.
**Source: sciencebasedtargets.org : Target dashboard
"Companies are working with carbon pricing and are willing to invest in decarbonizations.
If such an approach is implemented in companies, better decisions can be made, because the cost of carbon becomes an integrated part of evaluation of investments."
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