From Mega-clusters to Mini-clusters – What Next for Industrial Decarbonisation?

11 May 2023

February’s cabinet reshuffle which saw the Department for Business and Energy and Industrial Strategy (BEIS) split into the Department for Energy Security and Net Zero; the Department for Science, Innovation and Technology; and the Department for Business and Trade, came on the same day and rather eclipsed the announcement of a new phase of UK industrial decarbonisation policy aimed at dispersed sites.

Dispersed sites are defined in the Industrial Decarbonisation Strategy as facilities located more than 25km from one of the UK’s six large coastal clusters, and the announcement was significant for the net zero transition because dispersed sites emit almost half of UK industrial emissions, about eight percent of total national emissions.

Local Industrial Decarbonisation Plans: if all you have is a cluster policy, everything looks like a cluster

In a previous blog for UKERC, I argued that Government needed to think beyond the coastal clusters if it was to decarbonise industry as a whole. February’s announcement proposes to do this through a £5 million Local Industrial Decarbonisation Plans (LIDP) competition, to be launched in summer 2023. Broadly, LIDPs allow energy intensive industrial sites outside of the coastal clusters to join together with key stakeholders, such as local authorities and research organisations, to form ‘local industrial clusters’ through which to develop local industrial decarbonisation plans. In addition to mega-clusters, therefore, we will now have mini-clusters, but will this assist in the decarbonisation of dispersed sites?

What makes decarbonising dispersed sites so challenging?

In an article published last month in Sustainability Science Ahmed Gailani, Peter Taylor and I characterise the challenges facing UK dispersed sites on the road to decarbonisation. These are multi-facetted and cross cutting, as sustainability challenges often are.

While mega-clusters have been earmarked for early access to key decarbonisation technologies such as carbon capture and hydrogen, it is unlikely these networks will extend to provide national coverage for dispersed sites in the medium term. In the interim, there are limited decarbonisation options for dispersed sites and not all technologies are yet commercially available. The problem is compounded by poor data availability. There is incomplete representation of decarbonisation options in the N-ZIP model used to create the most recent government decarbonisation pathways for industry, and a focus on modelling options for the heaviest emitting sectors and places – that is, the current mega-clusters.

Alongside, technology and data gaps, there are organisational and institutional disparities between dispersed sites and clusters. Dispersed sites are not simply mega-clusters reproduced on a smaller scale. The sector is highly diverse and contains a high proportion of small and medium enterprises with limited capacity and capital to engage with the complexities of implementing new technologies  themselves or bidding for government funding. Sector organisations and trades unions have customarily provided intermediary bodies through which to amplify the voices of industry to policymakers, but it is difficult for these bodies to give a clear message when the optimum route to decarbonisation varies between localities according to their proximity to a mega-cluster.

Moreover, mega-clusters often have a strong networks built up over decades and good relationships with key stakeholders, making it relatively straightforward to set up cluster organisations and bid for government funding. The number, diversity and geographical spread of dispersed sites makes this a more challenging task, with knowledge of the sector limited and no one institution charged with its decarbonisation. This is beginning to change, with cities leading the way: the deeper devolution deal recently agreed between the Government and West Midlands Combined Authority contains specific provisions on industrial decarbonisation. But the leading role that cities are taking, while welcome, also points to another reason why dispersed industry may prove hard to decarbonise. Over the last century, industry has for the most part moved out of UK cities. The places with the most drive and capacity to engage proactively with industrial decarbonisation, therefore,  are not necessarily the places where dispersed industry is based.

Can Local Industrial Decarbonisation Plans assist?

In a follow-up study for UKERC, I am exploring the potential for LIDPs to address these challenges. From initial stakeholder interviews, it is clear the competitive route introduces challenges. Some places are ready to seize the opportunity, and have been waiting for the right funding call. Others, while recognising the need to decarbonise industry, have no ready-made vehicle to bid through and need to prioritise limited resources elsewhere. A third group, while potentially interested in applying, are not sure if the industrial base in their area is sufficient to justify the effort required to pull together a competitive bid. In short, the issues around capacity, data availability and lack of institutional responsibility that we identify in our article, continue to cause issues for decarbonising dispersed sites.

From a global perspective, this is not a bad problem to have. The UK was the first major economy to launch an Industrial Decarbonisation Strategy, and questions about decarbonising dispersed sites are coming to the fore only because the strategy for decarbonising coastal mega-clusters is relatively mature. Few other countries are similarly advanced. Local industrial clusters will be an important next step in decarbonising the sector, but just as for mega-clusters, they are unlikely to work for all places. At some stage on the road to industrial decarbonisation, it appears, we will still need to think beyond clusters.