North West Business Leadership Team STFC, Daresbury Laboratory, Sci-Tech Daresbury, Keckwick Lane Warrington WA4 4AD

Telephone: 01925 864186 email: [email protected]

www.nwblt.co.uk

Sir Mark Walport Chief Executive UK Research and Innovation Polaris House Swindon SN2 1FL

26 February 2019

Dear Sir Mark Wallport

Industrial Clusters Mission – North West Industrial Strategy Challenge Fund – Industrial Decarbonisation

The North West region is delighted to respond to UKRI’s request for a letter of support for the Industrial Clusters Mission. In this letter we will set out the decarbonisation challenge in the region, the engaged partners, the delivery model and the funding position.

The North West Cluster comprising the Liverpool and Manchester City Regions and is one of the most vibrant clusters in the UK with a wide range of energy intensive industries. We have already begun to address the many challenges of industrial decarbonisation and the region is characterised by a number of existing complementary initiatives, whose maturity and staggered implementation timescales, we believe, with Government support, will allow the North West to meet the challenge of becoming the UK’s first zero carbon industrial cluster by 2040.

These activities are not bespoke to our region however and we are working closely with colleagues in North Wales via the activities of the Mersey Dee Alliance such that we optimise and share learning and maximise the replicability of our successes to other parts of the UK.

Innovation will be key to the success of our plan and the region is also supported by a network of experts in the field of industrial decarbonisation, from our major Universities and from the private sector.

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Regional background The North West region has a long tradition in manufacturing and the Port of Liverpool has served, and continues to serve, as a key international transport hub for imports and exports. The last 40 years has seen the North West build on its traditional strengths in chemicals, textiles, shipping and engineering and diversify into modern high technology sectors including ICT, biotechnology, pharmaceuticals, aerospace, and telecommunications. The region now has the largest concentration of advanced manufacturing and chemicals production in the UK. Manufacturing has remained at the forefront of the regional economy and it retains its position (in GVA terms) as the leading UK manufacturing region.

Our challenge With this concentration of successful and growing manufacturing companies, comes the significant challenge of industrial de-carbonisation - the region of north Cheshire alone uses 5% of UK power. Our challenge of developing the UK’s first zero carbon industrial cluster by 2040, will be achieved through harnessing the renewable resources of the region to deliver a multi- vector industry. The delivery of this energy securely, will enable existing industry to decarbonise, whilst simultaneously accelerating GVA growth in the region, increasing productivity and driving inward investment to capitalise on the region’s attractive proposition of zero carbon, low cost energy, skilled workforce and quality of place.

We will pioneer the deployment of low-carbon energy resources including wind, solar, smart grid, tidal and small modular nuclear. Our closely coupled energy and industry network within the region, will enable the development of a hydrogen economy to existing and developing industries. Additionally, further decarbonisation will be realised through the deployment of carbon capture utilisation and storage (CCUS) via a uniquely viable low cost and risk approach, facilitated by existing infrastructure.

By 2030 this industry and innovation led approach will reduce carbon emissions by tens of millions tonnes per year and create at least 33,000 new jobs. This will set the region on a trajectory to 2050 emissions targets growing employment levels as the collective benefits are achieved.

The negotiations held for the challenge Previously, the North West region was characterised by key players working as individual collaborations within LEP or project boundaries, with periodic sharing of knowledge or best practice via industry or public sector energy fora.

The negotiations for this challenge have led to the formation of a single entity, encompassing the decarbonisation activities of Liverpool, Cheshire and Greater Manchester, combined with existing industrial clusters in the areas of Hydrogen, CCUS, large scale Smart Grid, Small Modular Nuclear and Tidal technologies. This is the North West Cluster, which comprises senior industry figures at Chair, CEO and Senior Exec level, who themselves represent the interests of many senior industrialists (see below and letters of support), together with senior members of the City Regions, Local Enterprise Partnerships and academic community.

This consortium has chosen the North West Business Leadership Team (NWBLT) as the natural focal point, around which to coalesce the various interests. The NWBLT is widely respected and has extensive experience of enabling clear visionary thinking for the region as whole, ensuring consideration and alignment with neighbouring projects to deliver outcomes of regional and national significance.

The North West Cluster have now formed a steering group, to co-ordinate industrial carbon reduction initiatives across the region chaired by myself. The group will meet frequently to develop a Business Plan to establish a net zero carbon industrial cluster by 2040.

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Our industrial support:-

NWBLT Hynet Centurion Cheshire Energy Hub LCR Low Carbon Arup Cadent Element Burns & McDonnell Inovyn Energy Atkins CF Fertilisers Inovyn BGS Pilkington BASF Eni ITM Power C-Tech Innovation BOC Linde Electricity NW Essar Storengy Cadent Orsted Orsted Peel Group EA Technology Arup Siemens Progressive Encirc SP Energy Networks Energy Peel Group Essar Cadent Urenco National Grid Alstom Encirc Peel Environemental ABB /Protos Scottish Power Energy BRE Networks Storengy MTC / AMRC Urenco Cammell Laird Jaguar Land Rover Unilever

Our industry-agreed method for delivery As discussed, the regional leadership has aligned to create an innovative, sustainable and low- cost multi-vector energy system delivering decarbonisation, energy security, growth, prosperity and opportunities for all. Within this energy system, we will create a zero carbon infrastructure with, CCUS and Hydrogen at the forefront of our activities (inevitably given the scale of the challenge and our own ambitious targets), supported by a wide variety of other industrial low carbon reduction initiatives including large scale industrial Smart Grids, Small Modular Nuclear and innovative Tidal technologies.

A brief summary of these key initiatives is as follows:-

CCUS and Hydrogen

The North West is recognised as having the lowest cost opportunity for CCS in the UK – utilising the depleted Hamilton Gas Field in the East Irish Sea. HyNet1 has received Government funding under the CCUS Innovation Competition to undertake a pre-FEED study for CCUS initially supporting existing business (Essar and CF Fertilisers) with the ability to connect Protos and attract inward investment.

The NW Hydrogen Alliance http://www.nwhydrogenalliance.co.uk/ has formed as an umbrella organisation to support hydrogen and CCUS initiatives in the North West. Hynet https://hynet.co.uk/ - Cadent led initiative to decarbonise gas networks across the NW – providing the potential for a 20% blend in the general gas network and 100% supply to industry – centralised hydrogen generation would be supported by CCS.

This project has been split into multiple phases to ensure lowest risk, no-regrets deployment of CCUS infrastructure which is hydrogen production ready:

• Phase 1: Industrial CCUS with anchor sources at CF Fertilisers Ince Plant (400 kTCO2 / yr) and Essar Oil’s Stanlow Refinery (800 kTCO2 / yr). Storage in repurposed Liverpool Bay fields owned and operated by Eni. Financial Investment Decision in 2022 and Operational by 2024.

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• Phase 2: Hydrogen Production using Autothermal Reforming (ATR) at Essar Oil’s Stanlow Refinery site, producing 6TWh of low carbon hydrogen (1,600 kTCO2 / yr). Just over half of hydrogen production will be utilised for industrial fuel switching, with the remainder blended into the distribution network. Financial Investment Decision in 2022 and Operational by 2025.

• Phase 3: Further expansion of the regional hydrogen economy (to include further fuel switching and fuel cell applications for transport) and the storage of emissions captured from other industrial facilities in the North West and South Wales (up to 15MT CO2 / yr). Operational by the late 2020s.

The project benefits from superb economics measured on a £/TCO2 abatement cost due to the close proximity of storage sites, largely repurposed existing infrastructure and the low cost of CO2 capture, particularly from the fertiliser plant. We are confident that the overall costs of CO2 capture, transport and storage from the HyNet project will be competitive against any other CCUS project in the UK.

To facilitate the project, industrial partnerships have been formed and substantial project funding has already been unlocked to undertake technical and project development in four key areas:

• CCUS: pre-FEED and Environmental Scoping commencing Mar ’19 (£900k plus substantial self-funding from Eni). Partnership of Cadent, Progressive Energy, Essar Oil, CF Fertiliser, Peel and University of Chester with support from Eni.

• Hydrogen Production: pre-FEED of ATR commencing Mar’19 (£750k). Partnership of Progressive Energy, Johnson Matthey and SNC-Lavalin with support from Essar Oil.

• Hydrogen Fuel Switching: Feasibility study of fuel switching of existing industrial facilities (£300k currently in grant funding application). Partnership of Progressive Energy, Pilikington Glass, with support from Essar Oil, Solvay, Unilever, Jaguar Landrover, Novelis, Ibstock, Peel and Cadent.

Centurion https://bit.ly/2OyblZE - Innovate UK supported project for 100MW power-to-gas energy storage project supported by INOVYN, Storengy and ITM. The project gives rise to the potential to utilise surplus renewable electricity generated from offshore wind in Liverpool Bay to generate hydrogen via electrolysis which can then be stored in the existing Storengy salt caverns. The INOVYN complex in has a number of unique assets and capabilities which have the potential to position the site at the forefront of the UK energy revolution. The site has a ‘super connection’ to the UK grid capable of importing or exporting power to the grid equivalent to 1% of UK electrical power usage and can deliver to site occupiers electrical supply at any required voltage. A number of power generation facilities already exist on site including Runcorn EFW, one of the largest energy recovery facilities in Europe, and the 800 MWe Rocksavage . The site is currently home to a number of significant energy user, generators and distributors including Mexichem, Vynova, Banner Chemicals, BOC, Intergen and Runcorn MCP.

• Project partners ITM Power, INOVYN, Storengy, Cadent and Element Energy have secured funding from Innovate UK for a feasibility study to deploy a 100MW Power-to-Gas (P2G) energy storage project, ‘Project Centurion’ at INOVYN Runcorn

• The project explores the electrolytic production, pipeline transmission, salt cavern storage and gas grid injection of green hydrogen at an industrial scale. The feasibility study will explore the system design and costs and will assess the business case for deployment.

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• The vision for Project Centurion is to demonstrate a 100MW P2G energy storage system which can produce low carbon hydrogen for heat, decarbonisation of industry, and transport fuel.

• Once successfully demonstrated, such systems can make a significant contribution to the decarbonisation of the electricity and gas networks, and by coupling these two networks together, allowing the UK energy system to accommodate increasing amounts of renewable energy, reducing curtailment and constraints. As well as contributing to decarbonisation, P2G systems can improve security of energy supply and improve the UK balance of payments by producing indigenous fuel offsetting the need to import fuel.

• Once built Project Centurion will be the first-time a P2G system injects hydrogen into the public gas network in the UK at scale. It will be the first time the electricity and gas system would be coupled in the UK to provide energy storage for excess electricity; and it will be the largest water to hydrogen electrolyser system in the world (based on current deployments).

Large scale Smart Grids

Initially devised by the Cheshire Energy Hub http://www.cheshireenergyhub.co.uk/ to promote a multi-vector approach to support incumbent industry and to encourage inward investment, the Energy innovation District https://energyinnovationdistrict.com/ brings together a large number of strategically vital energy intensive manufacturers and energy supply chain companies, with the aim of developing a multi-vector energy trading platform, which will use the existing public networks for distribution, whilst simultaneously driving investment in new low or zero carbon generation. EID members were successful in a bid https://bit.ly/2DRtGuq for funding under the UKRI Smart Energy Systems competition to develop a concept and design for a local, smart energy system (the "E-Port Smart Energy Master Plan"). It will show how energy use across electricity, gas, heat and transport energy vectors can be optimised to permit energy intensive industries to benefit from low-carbon, low-cost energy - improving their competitiveness in the global market while improving the lives of local people, particularly those in fuel poverty through access to the same low-cost, low-carbon energy sources.

Small Modular Nuclear

U-Battery https://www.u-battery.com/ - URENCO in partnership with Wood, Cammell Laird and Laing O’Rourke are developing a micro modular reactor at the Capenhurst facility where it also operates three plants producing enriched uranium to support stations across the world. Protos will deliver a private electrical grid that will connect several energy generation assets and storage with energy intensive industry. This will also form part of the E-Port Smart Energy Masterplan.

Mersey Tidal

Liverpool City Region Combined Authority (CA) is developing a multi-gigawatt tidal energy production facility to harness the in the and Liverpool Bay. The project has reached full business case production stage with a project timeline to deliver power from 2029. The system will deliver large-scale, dispatchable clean power to service the City Region and the wider North West. It is being designed as part of an integrated energy system including other forms of clean generation such as offshore wind and hydrogen generation and storage. Significant work is underway to model the City Region’s energy requirements in light of demands to cover transport, heat and process energy.

The City Region is also working with Inovyn and partners on further developing the hydrogen infrastructure at its Runcorn facility to supply hydrogen for transport and process projects across the North West as it is the City Region’s policy to support the development of a world-leading cluster for hydrogen and CCS across the region to mirror the recent success of the North’s

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offshore wind cluster. This cluster has delivered billions of Pounds of investment in infrastructure and led to new industrial and commercial supply chain developments to support the industry and latterly to significant export opportunities

The North West Cluster has made significant progress so far, which means that we are in the strong position of having a series of synergistic carbon reduction initiatives, whose delivery timescales offer a clear and natural Road Map, to the delivery of a zero carbon industrial cluster. For example:

2019/2020 - Energy Innovation District – formal government recognition, establishment of energy trading platform followed by pending pre-committed private sector investment

2019/2020 – Hynet Pre-Feed – Environmental scoping, Hydrogen production and Fuel switching

2020/2024 – Hynet Feed (1) – Industrial CCUS

2020/2025 – Hynet Feed (2) – Hydrogen production using ATR

2020 – Mersey Tidal business case completion

2029 – Mersey Tidal Power-On date

We believe that using this staged complementary approach, the region will benefit from renewable energy generation and storage; a hydrogen economy including transport, industry, heat and power; CCUS to decarbonise existing industry and enable new ones, thereby providing the region’s population with higher quality jobs and living standards.

Through the leadership of NWBLT, we will ensure that the required integration between distinct projects is delivered effectively to enable the synergistic outcomes from such an ambitious proposal. The challenge will be solved through a clear Business Plan, built up with a series of individual but inter-related stages covering innovation, research & development, academia, skills development, energy, infrastructure, transport, industrial, manufacturing, commercial and residential projects.

Agreements following negotiations

There is strong industry appetite to invest in decarbonisation in the region, as evidenced by the significant support and engagement of our major industry already in industrial de- carbonisation. This goes significantly beyond letters of support – many of the organisations above are already contributing match funding to project development activities, and many are actively engaged in specific engineering assessments of their own industrial processes / facilities.

However, a willingness to invest substantial capital in the transformation is entirely dependent on returns and retaining international competitiveness. Many of the project partners and supporters are owned by international companies who can choose to deploy their capital anywhere in the world. They will invest in UK industrial de- carbonisation only if it delivers a return commensurate with global commercial returns.

Our negotiations have served to bring together a range of interests (sometimes competing) into a single voice to represent the North West. These discussions have identified previously unknown synergies, economies of scale, shared learning and a willingness to collaborate outside of our previous narrow silos. Subject to an appropriate

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regulatory and operational environment, we are confident that appropriate levels of match funding can be secured, as detailed in our appendices of letters of support and financial commitments in excess of £500m.

I look forward to discussing our proposals with you further, in due course.

Yours sincerely

Richard Carter Chairman

The North West Business Leadership Team Life Presidents: Sir Alan Cockshaw BSc HonDEng FEng FICE FIHT Neville Chamberlain CBE • Chairman: Richard Carter • Chief Executive: Emma Degg

Registered in : No 2501469 7