We must act now to decarbonize industrial heat power sources

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09 November, 2021




Rutger van der Zanden, James Goudreau

Understanding the market dynamics for industrial heat

Despite this impetus, there are significant barriers in place preventing a transition to low-carbon energy sources. These are largely economic, with fossil fuels being highly competitive in most markets, especially in the absence of a meaningful price on carbon.

Significant investment is required to support the deployment of low-carbon fuel sources across all industrial processes. The International Renewable Energy Agency (IRENA) estimates it would take approximately USD $3.7 trillion (€3.2 trillion) worth of investment to achieve this by 2050 to fulfil a 1.5 degrees Celsius scenario. Renewable heat options often come with higher upfront costs and long payback periods – a fly in the ointment for industrial end-users looking to switch to renewable sources.

Furthermore, the market remains opaque. G-20 countries are responsible for almost 80% of fuel use in industry, but there is not enough clarity on specific market conditions to determine where renewable heat options are genuinely viable for industrial end-users. WBCSD and Bloomberg NEF have attempted to bring clarity to this issue by producing a report which outlines the most attractive markets in the G-20 to decarbonize industrial heat, specifically, low- to medium-temperature industrial heat.

China, France, Germany, Italy, South Korea, and the UK lead the way. These markets offer the best conditions, policies, and resource availability to support decarbonization. Unfortunately, the US and India, which represent the second- and third-largest portion of demand for low- to medium-temperature heat respectively, were deemed less favorable markets, partially because neither market has much national-scale policy driving renewable heat uptake. Meanwhile, decarbonizing heat in countries such as Russia, Saudi Arabia and South Africa proves particularly challenging.

The technological solutions to decarbonize heat

Commercial viability of renewable heat can be achieved in the near term

In Practice