By ESG Analyst Anaelle De Serres
Considering the urgency of climate change and the emergence of renewable energy, most industries and companies have been on the lookout for solutions to lower their carbon emissions and energy consumption. Electric vehicles are becoming more popular, renewable energy prices are dropping and more individuals take advantage of ways to heat their homes and supply their water in a more environmentally friendly way. However, there is one sector that has yet to embrace electrification to reduce emissions: the industrial sector. Indeed, manufacturing plants are gigantic consumers of fossil fuels in their operations, as they are often required to run productions to that scale. More specifically, industrial heating accounts for over 20% of total global CO2 emissions, an astounding amount that could be reduced through the electrification of the sector. Is it foreseeable to assume such a transformation, like the auto industry seems to be undergoing?
Out of the total emissions from the industrial sector, two-thirds are consumed during heating processes that are required to manufacture products from most industries. The use of fossil fuels in all heating processes accounts for 90% of the emissions from the industrial sector, therefore electrification of these processes could have a tremendous impact. Many governments are considering this as one of the most important sectors to electrify, especially as prices of green electricity have been more attractive, and countries are trying to pull away from non-renewable energy which tends to fluctuate more. For example, integrating electricity into yet unexplored sections of the economy like industrial heating is a crucial aspect to the agenda of President Biden’s goal of a net-zero economy by 2050. However, there are some challenges that hinder the process of electrifying factories. First, it is difficult to make a case for electrifying heat sources for many industrial manufacturers, as the cost of using electricity for generating heat is much higher than burning natural gas, for instance. For large factories that have operations running almost continuously, it is difficult to rely only on electricity as a source of heating as a simple power outage could result in very costly operational disruptions. A lack of confidence in the reliability of electricity has been a source of resistance, especially for industries that require continuous sources of heating. Moreover, changing a source of power in a production line involves restructuring the operations, and project managers often wait until the end of the life of equipment to do so as it would otherwise create unnecessary additional costs. If the opportunity of electrification is not well developed yet, managers are not incentivized to choose this option for cost reduction reasons. Finally, almost all industrial sectors use different methods that each require a different capacity, temperature, physical size, etc.; thus implying that one innovation that could fit all is very difficult to reach.
Startups have been exploring solutions, and some propose innovations that are very promising. For reaching temperatures that do not exceed 200°C, the most prominent solution is the use of heat pumps. These products use electricity and low-temperature heat from a primary source to generate heat at a higher level, up to 200°. The primary source can stem from electricity, water, or excess heat recovered from other sectors like data centers, for example. This technology generates 4 to 5 times more heat than traditional heaters for the same energy input, thus lowering the cost and maximizing energy use for manufacturers. A startup exploring this technology is AtmosZero, which aims to provide a completely decarbonized steam boiler that can continuously heat at a low waste and lower cost. The industries that could benefit from heat pump technologies include breweries, pharmaceuticals, and textiles; as they do not require heating over 200°C. This solution could be scaled and have an impact on the emissions caused today by industrial heating through the burning of natural gas and has already received financial incentives that make the market attractive. On the other hand, it becomes more difficult to find a solution to create heat with a temperature of up to 1500°C – 2000°C, which is a necessity for major industry sectors like steel, cement, or chemical production. Another notable innovation addresses this gap; it was created by Rondo Technology, a startup that has received investments from other large competitors of the energy sector like Rio Tonto, Microsoft or Amraco. The technology consists of building a battery that stores electricity in the form of heat and uses thermal radiation to heat bricks that create the box to temperatures up to 1,500°C. Moreover, this battery incurs only 2% of lost heat per day and therefore could be used in industries that need constant heating and are for now the most challenging to electrify. Moreover, Rondo leverages AI to distribute the heat more efficiently and could therefore save on costs. Both these cutting-edge technologies are easy to add to the existing grid of manufacturing plants and factories and thus do not require a change in the infrastructure of each. Other innovations include electric-arc furnaces used in the steel industry, which consist of recycling scrap metal to create the steel instead of producing it from iron ore or coal. Some manufacturers have also changed their production processes to make the chemicals necessary without needing the heat, such as in the manufacturing of cement: instead of leveraging heat to create a chemical reaction, some producers use reactors that use high speed of movement. Other companies use volcanic rocks for better storage for the heat or molten tin that flows through a substance made of graphite and therefore creates energy. These examples demonstrate that there exists a path towards electrification of large industrial sectors, and solutions that exist can be leveraged and scaled to make an impact on global emissions.
Why has it not yet been accomplished? The industrial sectors require amounts of heating that are so large that completely electrifying these entails a dramatic expansion of electricity generation to meet the new demand. To be truly effective, the electricity used for heating needs to come from a renewable source, which further adds a challenge when it comes to scaling electrification on a global scale. Accomplishing the electrification of factories across industrial sectors requires the collaboration with government through subsidies, a joint effort of companies to transform their traditional production lines, and a radical change in the competitive landscape of each industry. It will also lead to the creation of synergies between companies that create excess heat or other forms of energy, which can be used by others who use it as inputs of production. It is a transformation that is definitely foreseeable in the future, however, it requires more development in order to truly be embraced by manufacturers and integrated on a global scale.
Bibliography
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