Industrial Heat Electrification: Decarbonizing Global Energy Consumption
Today, industrial activities account for 37% of global energy consumption, spanning sectors such as chemicals, manufacturing, and pulp and paper, with two-thirds of this energy use stems from heat generation, amounting to over 20% of global energy consumption. Approximately 80% of this heat is produced by fossil fuels. As climate targets become increasingly stringent, decarbonizing industrial heat has emerged as a critical challenge requiring immediate action. However, limited technological availability, high costs, and the financial risks associated with large-scale investments present significant barriers.
This article explores the potential of heat electrification as a means to decarbonize industries, examining use cases across sectors, current and future technologies, and strategic considerations for original equipment manufacturers (OEMs).
Decarbonization and Heat Electrification: An Overview
The net-zero transition represents one of the most pressing challenges of our time. Over 5,000 businesses worldwide have committed to emission-reduction targets. For example, the European Union aims to cut emissions by 55% by 2030 and achieve net-zero by 2050. Achieving these ambitious goals requires an accelerated timeline for green power development. However, grid infrastructure struggles to accommodate increasing intermittencies from renewable energy sources and distribution on low- and medium-voltage grids, which serve most industrial sectors.
To date, many European nations and grid operators have announced significant investments in power infrastructure to support net-zero ambitions. Crucially, the technologies needed to electrify industrial heat and reduce emissions are already available and can be integrated into existing systems. While alternative decarbonization pathways, such as hydrogen and carbon capture and storage (CCS), demand substantial infrastructure investment, electrification offers a promising solution with a potentially positive net present value (NPV).
The potential for decarbonization varies across industries based on their temperature requirements. High-temperature processes, such as those in the chemical and steel industries, demand reliable energy sources and proven technologies to ensure continuous operations. By contrast, low- to medium-temperature processes, such as those involving process steam and hot air, present more immediate opportunities for electrification.
Rising Wholesale Gas Prices and Industry Decarbonization
Australia has witnessed a significant increase in wholesale gas prices over the past few years, a trend projected to continue over the next decade. This escalation is driven by growing global demand, geopolitical instability, and supply chain constraints. These rising costs place substantial financial pressure on energy-intensive industries, accelerating the urgency to transition away from fossil fuel dependence.
Higher gas prices create a strong economic incentive for industries to adopt electrification technologies and renewable energy sources. By doing so, companies can not only reduce their energy expenditures but also achieve compliance with tightening environmental regulations. This economic shift is expected to expedite industry decarbonization in Australia, as businesses prioritize investments in energy-efficient and electrified heat systems. Electrification technologies, such as heat pumps and electric boilers, stand out as viable alternatives to mitigate both environmental and financial challenges posed by the volatile gas market.
Industries such as manufacturing, food and beverage, and agriculture rely heavily on low-temperature heat (below 200°C). Manufacturing and food and beverage sectors alone could achieve electrification rates of 62% and 44% of total energy demand, respectively, by 2030. Conversely, industries like chemicals, iron and steel, and nonmetallic minerals require significant amounts of medium- and high-temperature heat (above 200°C), making electrification more challenging.
Overall, the potential for industrial electrification is vast. Projections estimate that approximately $4 billion could be invested in electrification initiatives in the European Union and the United Kingdom from 2024 to 2030. Both emissions-light and hard-to-abate industries face competitive pressures and financial challenges, but the opportunity for transformation is substantial.
Heat Electrification Technologies
Current heat technologies primarily consist of boilers and process heaters or furnaces. Boilers, which are predominantly gas-powered, dominate low- to medium-temperature heat applications, generating steam or heating thermal oil. High-temperature heat is typically produced using process heaters or furnaces. Electrification technologies, including heat pumps, mechanical vapor recompression (MVR), electric boilers, turbo heaters, and induction heaters, can address a wide range of industrial heat applications.
Electrification however requires substantial infrastructure development to support decarbonized heat technologies. For instance, a pilot e-cracker with a capacity of 25 megawatts (MW) would need approximately 16 wind turbines (each with a capacity of 5 MW) and battery storage to manage renewable energy intermittencies. Scaling up to industrial-size e-crackers (600 to 800 MW) would necessitate two to three times the power capacity and additional infrastructure upgrades, such as new transformers and grid connections. These projects often require collaboration with utility partners and can involve lengthy permitting processes.
Emerging technologies are now playing an essential role in industrial decarbonization efforts, with innovative solutions, like those developed by Graphite Energy for example, providing new opportunities for industrial heat applications. By storing heat generated from renewables, industries can ensure a consistent and reliable supply of high-temperature heat without relying on fossil fuels. This approach is particularly significant in industries with fluctuating energy demands or those requiring high-temperature processes. For this reason, the market for thermal energy storage globally is expanding rapidly, presenting lucrative opportunities for companies willing to invest in these advanced systems. As countries strive to meet climate targets, such technologies will be indispensable in transforming energy-intensive industries.
Temperature does matter in choosing options. For low-temperature processes (up to 150°C), heat pumps are an effective and mature technology. MVR systems extend the range to higher temperatures, while electric boilers can cover temperatures up to 500°C. Turbo and induction heaters can achieve even higher temperatures, exceeding 1,000°C in some configurations. These technologies, combined with thermal energy storage systems, enable industries to leverage intermittent renewable electricity effectively.
The food and beverage industry offers a prime example of the potential for heat electrification. Approximately 40% of energy demand in this sector is devoted to steam generation, with over 80% of steam currently produced by conventional boilers or combined heat and power (CHP) systems. Thermal energy storage presents a viable solution for decarbonization, particularly in breweries. A typical brewery producing 500,000 hectoliters of beer annually requires about seven gigawatt-hours (GWh) of energy for steam production in processes like mashing and boiling at temperatures up to 120°C. An additional two GWh is needed for fermentation processes at up to 95°C, and around five GWh is required for bottle cleaning and pasteurization at up to 70°C. Thermal storage or heat pump technologies can fully decarbonize these operations, offering significant energy and cost efficiencies.
What can we do?
OEMs must navigate several strategic questions to determine the best approach to decarbonized heat technologies:
Portfolio Choice: OEMs can choose to specialize in a single technology, focusing on reliability and cost-efficiency, or offer a broad portfolio to support comprehensive decarbonization strategies. For example, combining heat recovery, heat pumps, MVR, and e-boilers can optimize energy systems in industries like food and beverage.
Technology Innovation: OEMs with strong technical expertise and a willingness to take risks can pioneer high-temperature electrification technologies. While this approach offers high rewards, it involves significant risks due to the current immaturity of many high-temperature solutions.
Market Focus: Geographical regions and regulatory environments play a critical role in determining market opportunities. Regions with favorable fuel pricing and carbon schemes, such as Europe, present more immediate opportunities compared to areas like North America, where fossil fuel prices remain low.
Go-to-Market Strategy: Building trust with industrial players is essential for promoting electrification technologies. OEMs should offer structured decarbonization roadmaps, technical advisory services, and digital solutions for optimized operations.
Decarbonizing industrial heat is a formidable challenge but also a critical opportunity to address global energy consumption and CO2 emissions. By leveraging existing infrastructure, investing in electrification technologies, and adopting strategic approaches, industries can make meaningful progress toward net-zero goals. For OEMs, answering key strategic questions and aligning with evolving market demands will be essential to staying ahead in the race for industrial decarbonization. Ultimately, electrifying industrial heat offers a pathway to a more sustainable future, aligning business objectives with global climate imperatives.
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