Building the Clean Economy: LPO investments in industrial decarbonization projects help lay the foundation for a decarbonized economy.
The Department of Energy’s (DOE) Loan Programs Office (LPO) is working to support industrial decarbonization throughout the U.S. to achieve the nation’s climate goals. Accelerated by incentives in the President's Bipartisan Infrastructure Law and the Inflation Reduction Act, consumer pressure, and first movers in the private sector, industrial decarbonization will be important for the shift to a net-zero economy by 2050.
LPO can support decarbonization projects across industries, serving as a bridge to bankability for breakthrough projects and technologies and de-risking them so they can be developed at commercial scale and achieve market acceptance.
Why Industrial Decarbonization?
Achieving the Biden-Harris Administration’s goal of a net zero economy by 2050 will require between 700 billion and one trillion dollars of public and private sector investment in industrial decarbonization, as well as strong demand signals for low-carbon products, according to DOE’s recently published Industrial Decarbonization Liftoff Report.
Emissions from eight industrial sectors—chemicals, refining, iron and steel, food and beverage, cement, pulp and paper, aluminum, and glass—account for about 14% of total U.S. emissions. Most of those emissions come from producing heat for industrial processes, processing materials that release carbon dioxide, and generating electricity.
Specific industrial decarbonization levers vary across industrial sectors and in technological maturity and cost. Innovative low-carbon industrial technologies and processes are emerging but will require considerable investment to reach technological and commercial maturity. Electrification, which eliminates the need to burn fuel, and increased energy efficiency, which reduces overall energy needs, are also projected to play notable roles. Abating remaining emissions may also require scale-up of carbon capture, utilization, and storage (CCUS), although breakthroughs and cost reductions in innovative technologies could minimize that need.
The federal government has introduced incentives to accelerate industrial decarbonization. Incentives include the 48C Advanced Manufacturing Tax Credit, tens of billions of dollars in available funding for industrial decarbonization research, develop, demonstration, and deployment, and the Industrial Heat Shot and Clean Fuels & Products Shot category of the DOE’s Energy Earthshots Initiative. Customers expect companies to seize these opportunities to address emissions, and some companies are making bold moves to accelerate commercialization of decarbonization technologies with public sector incentives.
However, there are numerous barriers to industrial decarbonization. Challenges include a small portfolio of existing technologies ready for commercial deployment, high cost and complexity of implementation, high cost of capital, lack of competitive short-term returns, and absence of enabling infrastructure.
Types of Projects LPO Can Finance
LPO has a critical role to play in reducing these barriers for technologically mature and commercially ready projects across industrial sectors including chemicals, refining, iron and steel, food and beverage, cement, pulp and paper, aluminum, and glass. LPO can finance early deployments of innovative technologies and processes, continuing to lower costs and de-risking projects and technologies to pave the way for subsequent projects and follow-on investors.
Possible projects may include, but are not limited to, industrial decarbonization via:
- Raw material substitution: Using alternative raw materials that reduce lifecycle carbon emissions of the industrial product. Examples: clinker substitution to reduce carbon intensity of cements, using recycled or bio-based materials
- Alternative production methods: Using innovative processes to reduce carbon emissions from production. Examples: Low-temperature processes, mechanical separations, novel chemistries
- Industrial electrification: Electrifying industrial processes that currently depend on fossil fuels, especially alternatives for fossil fuel derived heat
- Clean onsite generation and storage: Building small modular reactors, siting renewables and storage, or employing other methods to ensure reliable, low-carbon energy is available on site to power industrial processes
- Energy efficiency: Retrofitting or building industrial facilities to operate more efficiently
- Clean hydrogen: Retrofitting or building industrial facilities to operate on clean hydrogen instead of fossil fuels, or producing clean hydrogen for industrial use
- Alternative fuel (non-hydrogen): Retrofitting or building industrial facilities to operate on alternative fuels, or producing alternative fuels for industrial use
- Carbon capture and storage: Retrofitting existing facilities to capture point-source carbon emissions, especially on high purity streams