In my Strategy Talk, “The Fast Track to Net-Zero for Energy-Intensive Users”, which kicks off this year’s Innovation Summit World Tour, I cover a topic that’s not getting enough attention: industrial process electrification.
Frankly, I am amazed that more companies are not taking this seriously, because today there is a real threat to business continuity. Industries now face a remarkably high level of uncertainty about the availability and high cost of the fossil fuels that power most of their processes.
This comes at a moment when the world has set a new global record for CO2 emissions, over 36 gigatons coming from energy combustion and industrial processes, according to the IEA (2021). And if we listen to researchers, we only have eight short years to move like mad and save ourselves from >1.5°C temperature rise and a climate change disaster. If we don’t greatly reduce emissions by 2030, it will be too late.
The good news, which helps address both of these problems, is that industrial energy players have the opportunity to electrify many energy-intensive processes that have been traditionally powered by burning fossil fuels.
To shed some light on this topic, I invited Jean-Yves BODIN, EcoStruxure Marketing Director at Schneider Electric, to answer some burning questions about the status of energy in industry, the electrification of industrial processes, what’s changing, and the effects of those changes on the energy landscape and other major energy players.
Frederic Godemel: According to the latest IEA World Energy report, industry is responsible for a big chunk of global CO2 emissions, about 26%. What does society get in return for these emissions?
Jean-Yves BODIN: Industry is one of the four sources of CO2 emissions, along with buildings, transportation [and] power generation. And it’s roughly a quarter of the total global emissions from industrial activities using primary energy, with most of the 26% of CO2 emissions coming from energy-intensive industries.
The most energy-intensive being oil and gas companies, cement industries, and metal industries like aluminum, for example.
So, the focus is on those heavy industries that produce materials and goods we are using every day, like your pen, your laptop, your car, your refrigerator. Everything comes from those industries, including the building materials we need to create and maintain our infrastructure.
FG: As we see the industry transform, are these fossil fuel-fired industrial processes still necessary?
JYB: These processes themselves are necessary because they are producing final goods we all use. And these processes require a lot of energy. What is happening now is that some of these processes are being electrified, meaning the energy that powers these industrial processes is electricity instead of a fossil fuel.
I will take the example of green hydrogen. Producing hydrogen in the past was done through a purely chemical process. Today, we see a lot of green hydrogen initiatives using electricity to run electrolysis of clean, demineralized water to produce hydrogen. This is an example of using electricity to transform the process itself.
FG: What makes electrification a better alternative than fossil fuels?
JYB: It’s important to understand that until now, fossil fuel had been the cheapest and the most accessible type of energy for use by heavy industries.
Let’s take the oil and gas industry. For them, it’s obvious because they have an abundance of feedstock to power their processes. It means they can use gas and oil to power turbines that run their processing refineries or petrochemical plants.
Or we can look at other heavy industries like mining, where historically it has been cheaper and easier to run big gas turbines than it is to connect to the grid, which in some cases is not even accessible because the mines are in very remote places. So fossil fuels have powered those processes for decades.
Now, however, electrification has improved in terms of cost thanks to the development of renewables. These costs have decreased significantly over the past years, and we expect this trend to continue.
So, while green electricity is becoming more affordable, the OEM manufacturers continue to develop electrical equipment. Take the example of a gas turbine. Today it is easier than ever for an industrial operator to replace a gas turbine with an electrical motor because the manufacturers of big electrical motors are bringing these to market.
It’s true for heating equipment, too. You know that a big part of energy consumption is dedicated to delivering heat and steam for many industrial processes. Now we see huge projects to develop heat pumps for heavy industries like petrochemicals. Before long, more and more large capacity electrical equipment like this will become available on the market.
When we look at smaller capacity equipment, we already see a large collection of technology available in the range of up to 10 Megawatts. We see a lot of electrical furnaces, electrical boilers, electrical motors, electrical reboilers, and more.
Another reason industrial process electrification is becoming an attractive alternative to fossil fuels is government incentives. Following the Paris agreement, many governments are putting public funding on the table to support decarbonization—and electrification is identified as one of the best levers for lowering the carbon intensity of heavy industries. For example, in Europe it’s the clean energy package, in the US you have the new Inflation Reduction Act.
FG: Considering those points alongside cheaper, cleaner electricity, can we say that a paradigm shift is the next step on a sustainability journey for big industries?
JYB: Yes. When we examine the forecasts developed by the International Energy Agency and others, we clearly see electricity as the main energy vector in 2050. Simply put, all net-zero scenarios require massive electrification.
It will take time because, considering our starting point, this represents a big transformation for the brown field (existing installations). But in parallel, an electricity-first mentality will evolve as a standard in green-field projects (new installations). We will see partially or fully electrified plants become more and more common.
However, it is also important to consider the source of the electricity, as there are sometimes complexities to sourcing low-carbon electricity.
For instance, if you are in Poland, which relies primarily on coal-fired generation, it makes little sense today. So, we see industrial process electrification being developed especially well in countries where green electricity is sourced from nuclear or from renewable generators.
Sourcing renewable energy can also post a challenge for industrial energy users, which is why we see many of these companies signing renewable power purchase agreements (PPAs), and themselves investing in on-site renewable generation.
FG: So it seems we face a situation where change requires not only willingness but the right circumstances and environment. When those two things exist, where does an industrial energy user start electrifying?
JYB: Today, you have two categories of processes that can be electrified, which are the main consumers of energy in any industrial plant. Those are motion-related processes and heating-related processes (heat and steam). Depending on the industry, you will have a different proportion of motion and heat.
If we look at motion, it means driving compressors or pumps. If we talk about heating, it means furnaces, boilers, steam crackers, etc.
Today, most of the electrification technology exists for small to medium-sized capacity up to 10 MW, and you have a lot of players offering this kind of equipment. Heavy or large-scale capacity is under development now.
Take an example: We are currently doing a project with the offshore platform for an oil and gas customer, an FPSO (floating production storage and offloading). Here, we have developed a design that is fully electrified and with a lower cost. And because its processes are electrified, instead of using fossil fuels, the CO2 footprint is much smaller than the initial footprint.
FG: Industrial processes moving from fossil fuels to electricity will obviously require more electricity. Where is that extra electricity going to come from?
JYB: Short term, this electricity comes from renewable sources like wind farms and solar farms that can be developed specifically within the industrial site, or which can be in the form of power purchase agreements through a developer connected to the grid.
Let’s consider the steel industry. The steel industry can be highly decarbonized by replacing fossil-powered blast furnaces with electric alternatives. We made a simple calculation for Germany, which is the largest steel producer in Europe with roughly 42 megatons of steel. If you consider a full electrification of the steel industry in Germany, it will require 20% more renewable capacity than the total power capacity of the entire country.
That’s a gigantic step because you cannot just develop so much new capacity. It means we have to have a steep curve of investment in new renewable capacity to cope with this kind of requirement.
A big petrochemical plant can be a consumer of one to two Gigawatts, which is enormous, but it will go through a stepwise road map. It does not happen overnight, nor in a single step. With today’s refineries using something like 50 MW of electricity, the rest is coming from fossil fuel energy. It will take many years to achieve a target of full electrification.
FG: So it follows that industrial process electrification affects grid operators. What does it mean for them?
JYB: It’s going to be a challenge and an opportunity. I say “challenge” because of the size and the level of capacity required, and “opportunity” because it means grid operators will have very large prosumers who can be leveraged to manage grid requirements in terms of demand response mechanisms, for example.
The industry players electrifying their processes can also experience a paradigm change in this respect, by introducing and monetizing some flexibility and participating in the overall energy system, including with grid operators.
FG: Who else is going to be affected by these changes?
JYB: Three categories. First one is the OEMs of process equipment like the manufacturers of furnaces, boilers and motors.
The second category is the EPCs, because in many cases, you have large EPCs involved in industrial process engineering. EPCs will need to get used to designing and engineering more electrical processes and electrified processes, which will be a change of habit for them.
The third category includes the aggregators, who will bring flexibility to those industrial energy users and expand their own portfolio. Today, aggregators already have industrial customers in discrete manufacturing, and in the metal industry—aluminum for example—they will build a broader portfolio of customers from oil and gas, mining and other segments. These they will be able to leverage for the sake of the grid.
FG: Thanks for this insightful conversation, Jean-Yves.
I believe it is important that industries and energy players understand the massive transformations that industrial process electrification will create in terms of new green power sources, new ways of operating industrial plants with electrified processes supporting business continuity in uncertain times, and new ways to participate in the prosumer-centric energy future.
I’m looking forward to presenting more on industrial process electrification at the Innovation Summit in my session, “The Fast Track to Net-Zero for Energy-Intensive Users.
If you’d like to attend to more of these talks, we have an entire agenda to review at our Innovation Summit World Tour 2022 website.