POWER-TO-X

7 tips to build a successful industrial cluster

Experts at the latest meeting of our Power-to-X Leadership Council on 10th April 2024 shared insights about how to develop industrial clusters with renewable energy and green fuel production. Here, we share seven of their top tips for successful schemes.

RICHARD HEAP

April 15, 2024

  • Our Power-to-X Leadership Council visited an industrial cluster in Hamburg
  • We then heard tips from industry experts about how to plan industrial clusters
  • Clusters can help match supply to demand and unlock investment in power-to-X

 

If you want to build an industrial cluster including renewable energy and power-to-X production, you cannot run away from complexity. You must run embrace it.

On Wednesday 10th April, we met in Hamburg, Germany for the latest gathering of our Power-to-X Leadership Council of senior industry executives. This gave us the chance to tour the Hamburg Green Hydrogen Hub project on the site of the former Moorburg coal plant with Luxcara and Hamburger Energiewerke; and then discuss the biggest issues facing developers as they seek to progress power-to-X projects.

One of the biggest talking points in this meeting was how companies could develop industrial clusters. These complexes tend to include renewable power generation, industrial off-takers, and green fuel or biogas production – and, according to those with expertise of putting together these clusters, ‘complex’ is definitely the word.

One attendee explained that putting together their cluster was like a jigsaw puzzle, whereas another compared it to the classic video game Tetris where you have to fit all of the blocks together against a time limit. He said that early in a game of Tetris you can move quickly and be very dynamic but that, as the game progresses and speeds up, the pressure increases to be more precise. The complexity of building your industrial cluster increases as you add in more elements and companies.

But our experts also identified seven key factors that would help make a success of an industrial cluster development including green hydrogen or similar production.

They said the following factors were essential to success:

 

1. Identify the best locations for energy prices and resources: An essential first step is ensuring that you choose an attractive area for a ‘green’ industrial cluster, with plentiful renewable energy resources and low energy costs. This can put the planned cluster on a strong financial footing from day one. Basing your cluster near to essential infrastructure can make a huge difference too. 

2. Ensure you have the backing of willing political stakeholders: Industrial clusters combining electricity and fuel production with industrial uses can be an important source of local jobs and investment. Therefore, it makes sense to prioritise early work to secure political support, as this can help to unlock local financial incentives and expedite the permitting process. This may also mean you need to closely align your interests in a public-private partnership.

3. Engage with local communities to answer their concerns: Building new energy or fuel generation capacity and industrial operations can provoke a wide range of reactions from communities, both positive and negative. It is important to work with communities to explain how the cluster would create jobs and spur local investment, as well as hear and answer their concerns.

4. Find the right investors and energy off-takers: Industrial clusters require financial investors that are confident about taking risks on long-term projects, as well as off-takers who can use the energy or fuels produced – as well as any potential waste products created elsewhere in the cluster. Finding strong partners can help developers to de-risk and progress their clusters. 

5. Correctly configure the various assets: Our experts explained that the core value of an industrial cluster is in correctly configuring assets so they combine efficiently. For example, operators can find tremendous synergies when they find ways to enable power-to-X production to support key chemical processes such as pyrolysis and protein extraction. Including a variety of processes, and helping them fit together, can create an agile and future-proofed cluster.

6. Focus on ‘no waste’ as a core principle: A perfect industrial cluster would be one where all materials produced, even as waste, could be used locally. This means a focus on ‘no waste’ from the cluster can be a valuable goal, whether it means water, nitrogen, oxygen, hydrogen, heat or other products created by the industrial processes. This helps you to reduce your costs and make the cluster more economically attractive, and find new value streams.

7. Understand that an industrial cluster can be a virtuous circle: Another expert speaker explained that an industrial cluster done right can act as a magnet for ongoing local investment. Strong renewables generation can support green hydrogen and other types of production, which then attracts industrial players that help create local jobs and investment. This then grows support among politicians and the public, which makes it easier for the owner or developer to win support for further renewables and power-to-X capacity.

 

Industrial clusters are not straightforward projects, but they can help to create the conditions needed for green hydrogen and power-to-X production to find its place, and expand its influence, in the economy. It is strategic work, and it will not always be easy, but the long-term benefits can be enormous.

Due to the confidential nature of the Power-to-X Leadership Councils, we cannot share details of individual speakers’ contributions here. However, if you would be interested to find out more, we would love to catch up and help you get involved.

 

Tamarindo’s Power-to-X Leadership Council is a unique working group that brings together leading P2X developers, financiers and off-takers to discuss and tackle some of the complex challenges facing early green hydrogen and green fuels projects. Click here for more: https://tamarindo.global/power-to-x/