According to the World Bank, the industrial sector plays a vital role in the global economy, producing about one-quarter of global GDP and accounting for 23% of total employment. However, the industrial sector is also one of the largest emitters of CO2. Last June, the International Energy Agency (IEA) reported that in 2018, the industry sector accounted for 37% of total global final energy use and 24% of global GHG emissions. As many countries pursue net-zero emissions targets and the pressure to act on climate change builds, the industry sector faces dual challenges – keeping up production while reducing carbon emissions. Based on the IEA’s Sustainable Development Scenario (SDS), the industry sector will need to reduce emissions by 1.2% annually to 7.4 GtCO2 by 2030. To achieve this goal, innovation will be necessary to expand the use of clean energy and reduce emissions in industrial processes. McKinsey’s recent report pointed out that industrial companies can reduce CO2 emissions through a combination of decarbonisation technologies and identified electrification of heat as an effective way for industrial companies to bring their emissions close to zero.
One company that helps the industry sector capture its waste heat and convert it into electricity is Kanin Energy. For the past year, Kanin Energy, a project development company, has been developing waste heat to power facilities that leverage the Organic Rankine Cycle (ORC) technology to reduce fuel consumption and CO2 emissions of industrial partners. Through the development of onsite clean energy power plants, Kanin Energy uses captured waste heat to help industrial partners monetise their resources and generate high-quality, baseload, emission-free electricity for grid sale or onsite use with no additional CO2 emissions. By focusing on the deployment of existing technology, Kanin Energy aims to replicate the success of Sunrun, which used the “solar lease” business model to eliminate the upfront cost of systems and deploy solar panels at scale. For Kanin Energy’s CEO, Janice Tran, a Calgary native who grew up in Alberta, Canada – where heavy industries like oil and gas primarily drive the economy – the potential to harness industrial waste heat and convert it to clean power has provided an opportunity to leverage her background from Wall Street and Silicon Valley to create a long-term solution that decarbonises the industrial sector.
Integrating clean energy in the industrial sector through business innovation
For Tran and her team, the genesis behind Kanin Energy came about after seeing that as much as 20 to 50% of industrial energy consumption is discharged as waste heat; given the significant energy footprint of the industrial sector, deploying existing technology provides a significant opportunity to tackle industrial emissions. Alongside the climate impact of reducing industrial emissions, Tran said in an interview that “focusing on deploying clean energy, such as ORC technology, to produce emissions-free electricity is also good business from an economic perspective”. A recent report by UC Berkeley highlighted that in the case of the United States, deploying existing technology would not only help achieve 90% clean electricity by 2035 but also put US$1.7 trillion in investment into the U.S. economy over the next 15 years, supporting about 530,000 more jobs each year and avoiding at least US$1.2 trillion in cumulative health and environmental damages. For these reasons, Tran has positioned Kanin Energy as a project developer to focus on deployment and business innovation as a way to address structural bottlenecks in the industrial sector and improve upon the slow adoption of clean technology within their operations.
According to Tran, one of the biggest barriers to market adoption of clean technologies, such as waste heat to power, has been the misalignment of capital for these projects. Despite waste heat to power technology being around for a long time, Tran said that “this type of technology was being sold as an energy efficiency concept, which required industrial companies to pay for these projects from their corporate budgets, usually requiring 24-month paybacks or less, so these projects often did not make the cut”. To address the lack of progress in the deployment of waste heat to power technology, Tran said Kanin Energy circumvents these barriers by developing them as “clean energy infrastructure projects” instead of “energy efficiency projects” to attract patient project finance and developers. In determining the project’s feasibility, Tran noted that Kanin Energy conducts further due diligence of the regional regulatory environment, carbon market and available tax incentives to put together a proposal that allows her team to develop onsite power facilities and enable their industrial partners to monetise from waste heat with no upfront costs.
Developing baseload power from waste heat to improve resiliency and reduce costs
In recent years, climate change and extreme weather patterns have increased interruptions to electricity services. According to the U.S. Energy Information Administration (EIA), U.S. power customers experienced an average of 3.2 hours of interruptions during major events in 2019, with recent events in Texas highlighting the need to improve resiliency in the U.S. electric grids and energy supply systems. For large industrial businesses, such as manufacturing enterprises, a single hour of downtime could cost US$5 million. For this reason, Tran said that “as rolling blackouts and interruptions are becoming common, having the ability to generate power independent of the grid means less business interruption and greater control over energy bills”. Moreover, in regions where the grid is primarily fossil fuel-based, such as Alberta, Canada, the Midwest and the Southern United States, Tran noted that heavy industries would benefit from developing waste heat to power projects. According to Tran, this would be because “many facility owners would be able to reduce their carbon emissions by using the onsite generation of emission-free electricity to decrease their overall draw from the grid – reducing energy and fixed delivery charges as well”.
As grid modernisation efforts ramp up, the deployment of demand response programmes continue to increase globally, particularly in the United States, to better manage the time-use of energy consumption, Tran highlighted that Kanin Energy’s industrial partners would also be able to participate in such programmes to further reduce their energy costs. She said, “Kanin Energy’s projects are designed to complement demand response programmes because waste heat to power generation is constant and onsite, generating over 5MW of baseload power for critical operations, which would allow the facilities to load shift and activate demand response to support their local utility.” As a result, large industrial emitters would reduce their peak load and enable local utilities to optimise their power distribution and supply customers with more electricity being generated from renewables to help them decarbonise the grid. In places where the grid is primarily fossil-fuel-based, Tran mentioned that large industrial emitters that produce emission-free electricity from waste heat could also play an essential role in enabling their regions to meet climate goals.
Policy reforms could pave the way for faster industrial decarbonisation
Although waste to power technology carries the strong potential to improve industrial energy efficiency, independent research from the KTH Royal Institute of Technology and the University of British Columbia (UBC) has highlighted that the economic environment still remains a real challenge in developing these projects. Both studies mentioned that technology is often too expensive or not sufficiently well known by the industrial players and that supporting policies from national governments or organisations could play a crucial role in pushing these projects forward. For example, in Canada’s case, the UBC study recommended policies, such as constant carbon pricing signals, reverse auctions for integrated utilities, raising the procurement cap on project size and increasing development incentives for transmission companies and developers to benefit from the profits, which could make waste to power projects more attractive for private investors. On the policy front, Tran agreed that measures are needed and said that “recent policies by the Canadian government to put forward Clean Fuel Standards and a federal carbon price were a step in the right direction as these initiatives allow large industrial companies to justify their investments in climate mitigation strategies and long-term decarbonisation projects to shareholders”.
Meanwhile, in the United States, the recently adopted “Consolidated Appropriations Act, 2021” included a 26% investment tax credit (ITC) for “waste energy recovery property”. Tran said the new ITC for waste heat was a big win but noted, in the case of the United States, it should be complemented by more robust market-based policies like carbon pricing and clean fuel standards that incentivise industrial plants to become cleaner and more efficient in their energy usage. According to Tran, an excellent way to improve industrial energy usage could be through the combination of waste heat to power and carbon capture technology. In an industrial plant, the emission-free electricity produced from waste heat would act as the baseload source for operating carbon capture technology, which often requires large amounts of power. By integrating waste heat to power and carbon capture technology together, Tran foresees that large industrial plants could significantly reduce their carbon emissions and decarbonise in the future.