Long-term solution to emission reduction lies in electricity industrialization
In a bid to combat climate change, several initiatives and policies are being implemented to promote the use of low-emissions materials and create a guaranteed demand for them. These include "Buy Clean" initiatives, green procurement programs, and carbon border adjustment mechanisms.
To further incentivize the transition, tax credits, rebates, and grants can help reduce the capital and operational costs for using clean industrial heat. This financial support is crucial in the face of significant additional costs that firms may face when switching from gas utilities, upgrading interconnections, and making high upfront capital investments.
However, the process is not without its challenges. The average wait time for new interconnection requests in the U.S. has risen to nearly five years, and roughly 80% of these requests are eventually withdrawn. This highlights the need for improvements in the interconnection process and grid infrastructure.
Fortunately, there are opportunities for cost savings and efficiency gains. In regions where wind and solar are abundant, wholesale electricity rates can drop below $10 per megawatt-hour. Roughly one-third of the heat needed for industrial processes is at temperatures below 200 degrees Celsius, which are well within reach of efficient electric heat pumps. Similarly, nearly half of the heat needed for industrial processes is below 500 degrees C, a range covered by commercially available technologies like resistance, infrared, and induction heaters.
Improved efficiency is crucial to electrifying the industrial sector. A 25% improvement in energy efficiency and 15% in material efficiency could offset 40% of the added electricity demand from electrifying eligible processes. Technologies like industrial thermal batteries can now reach up to 1700 degrees C, sufficient to meet 75% of the U.S.'s industrial heat demand and two-thirds of China's.
Advanced conductors and grid-enhancing technologies can also expand throughput on existing lines, allowing firms to lower costs and draw on electricity during cheaper, surplus hours. On-site renewables can further help in this regard, as they allow firms to generate their own electricity and lower costs.
State-related institutions like the German state development bank KfW have historically supported the financing of research, development, and implementation of technologies for electrifying industrial heat supply. Climate protection agencies like the Climate Protection and Energy Agency of Lower Saxony provide guidance and support for municipal heat planning, facilitating such projects. These institutions continue to be capable of supporting future projects with combined funding options and subsidies for heating system transformations.
Funding for research, development, and deployment of high-heat technologies is needed from governments, green banks, and public-private partnerships. Repurposing grid infrastructure around retired fossil fuel power plants can also free up capacity, further aiding the transition.
A new report from Energy Innovation argues that cleaning up the industrial sector with direct electrification supported by renewables is not only a viable strategy, but essential. With over 2,600 gigawatts of new generation waiting in interconnection queues in the U.S., more than twice the country's current installed capacity, the industrial sector consumed over a third of the world's energy and was responsible for a comparable share of global greenhouse gas emissions in 2022.
The electrification of the industrial sector presents a promising path towards a more sustainable future, offering benefits such as avoiding the inefficiencies of combustion, improving local air quality, and supporting new job creation by shifting investment from fossil fuels to electricity.
