Energy Transition & Decarbonization in Ethylene Industry - Opportunity for Radical Innovation

Energy Transition and Decarbonization requires us to look at all the options based on current ground realities:

1. A large capacity base (>190 million MTA) that exists today, and nearly 40% of that started-up since 2005
2. Many plants started-up since 1960s are still in operation
3. A number of plants (with a capacity of nearly 20 million MTA) are in different stages of development that will start-up by 2025/26 timeframe

The vintage of these assets along with local site-specific economics, infrastructure and regulatory conditions will determine the approach for decarbonization. The industry can potentially be served well by exploring radical innovative technologies that can shape the future of ethylene production in 2030s and beyond. The radical innovation approach will require a thought process different from the conventional approach, given the nature of ethylene industry.
Ethylene is energy intensive industry with large emphasis on economy of scale and has high capital intensity. These plants take anywhere from 5 to 10 years from initial phases to start-up. All these reasons contribute to high entry barriers for this business and high sunk costs make the exit equally difficult.
The other characteristic of the industry is none or little radical innovations due to high risk and costs, in combination with cyclical business nature leaves little appetite to invest capital in new technologies. Most of the focus historically has been on the incremental improvements or innovation aimed at improving productivity. The long investment cycle leaves no appetite for testing out innovative ideas.
Ethylene also has a very few specialized technology providers with low paid-up licensing fee. These providers focus on low risk, low-cost ideas and look for opportunities for co-developments with owners/operators and have limited resources dedicated to radical innovation.
This has led to an industry that is oligopolistic in nature.
New innovations come across a huge barriers in the early stages, and these include:

• Competing with economies of scale with current technologies
• Perceived risks
• Ability to integrate with current asset base
• Cost and duration of development

Energy transition and decarbonization has created a special opportunity for radical innovation. This window of opportunity is short to meet the timeline for committed reduction targets and investments required in new capacity to meet future product demand. 
At Apex PetroConsultants, we have historic and recent experience in assessing innovative technologies and advising clients during development and decision making process.