As Europe hunts for speedy ways to do without Russian energy amid the Kremlin’s war in Ukraine, some industries are charting the path ahead with successful switches from natural gas to electricity. Manufacturing fuelled by power instead of gas is emerging in sectors such as food and chemicals and in countries including Belgium, Denmark, and Germany.
The global energy, food and cost of living crisis deepens as winter in the northern hemisphere approaches. European households and industry are struggling to cope with the sharp rise in energy prices driven by the disruption to fossil gas supply in eastern Europe. This situation has worsened as the threat of shortages in fossil gas, prioritisation of supply to specific parts of the economy has led sectors such as steel making to shut down production due to rising cost of electricity.
A new study finds that there is potential for reducing gas demand by up to 25% in industries including chemicals, glass and food production. Targeting primarily low to medium heat processes in these sectors, the findings by researchers at Climact identifies how cuts in fossil gas can be achieved over the next 5 years and the cost benefit for companies based on current energy prices and supply volatility. The study also highlights some of the investment incentives that policymakers in the EU and member states could target to encourage greater switching to electric alternatives such as heat pumps.
The main findings of the study
Chemical and food industry
- Chemicals & food sectors have been identified as the main consumers of natural gas in EU industry, responsible for 52% of its use.
- The key alternatives to gas for chemical & food sectors are heat pumps and electric boilers.
- Electric boilers are similar to gas boilers in terms of investments but have higher operating costs for a common grid connection. Decentralized electricity generation (e.g. PV production) can potentially be a way to reduce the electricity bill compared to grid- based electricity.
- Heat pumps, especially high-T° ones, have high capital expenditures partially due to low market penetration and standardisation. On average, a low-T° heat pump is 3 times more expensive (8 time for high-T°) than a gas boiler.
- Thanks to a higher energy performance, heat pumps consume about 4 times less primary energy than a boiler for the same useful output. It enables low and more resilient operational costs. Hence, for low-T° needs, replacing gas boilers by heat pumps is profitable after a few years, even if the gas boiler did not reach the end of its useful lifetime yet.
- There are various mechanisms and subsidies (EU and national levels) to support companies for such investments. These can help to make such investments profitable.
- The “worst-case” scenario of a consistently high energy price over the course of the decade renders heat pump comparatively more interesting than gas boiler due to their lesser primary energy consumption. Under such a scenario, high-T° heat pumps even become competitive with gas boilers.
- Numerous pilot projects on low-T° heat pumps have already demonstrated their economic viability. Investments in high-T° heat pumps projects need to be scaled, some large actors (e.g. BASF) are leading the way in this direction.
- Glass sector has been identified among large consumers of natural gas in EU industry, responsible for about 7% of its use.
- The key alternatives to gas for glass sector are full and hybrid electric furnaces.
- In glass making, electrodes can easily be incorporated in existing lines of productions, resulting in a hybrid furnace. This electric boosting makes a relatively implementable solution for gas reduction et short-term.
- Full electric furnaces can cause quality degradation (not a problem for container and fiber glass which makes up for most glass production) and are electricity intensive which requires a reliable power supply.
- There are various mechanisms and subsidies (EU and national levels) helping companies to invest and operate such assets.
- As there is no significant gain in energy efficiency, electric heating shows higher operating costs than gas heating. Nevertheless, to meet their climate targets, some actors (e.g. AGC) already begun to increase the share of electricity in their primary energy mix for production lines. They could benefit of substantial national subsidies for their capital investments.
The full report is available here.