The Cost of Electrifying the Industry in Europe: a Comparison of Available Technologies across Different Scenarios

The industrial sector accounts for about one fifth of the greenhouse gas emissions in the EU, and its decarbonization is among the key priorities of the European strategies towards a net-zero energy system. Most industrial sectors heavily rely on natural gas to produce heat at different temperatures that support industrial processes. A part of the heat, especially at low and medium temperatures, could also be produced by alternative technologies relying on electricity, including heat pumps, electric boilers and mechanical vapor recompression systems. However, the economic sustainability of these options is strongly influenced by the spread between the cost of electricity and natural gas, that shows a significant variability over time and across EU countries. The aim of this analysis is to evaluate the economic performance of electricity-based technologies in substitution of natural gas in existing industrial sectors across EU countries. The tecno-economic analysis will build on existing data on heat demand for different temperature levels across industrial sectors and EU countries, as well as on historical industrial prices of natural gas and electricity for the industries over the years. The evaluation will also include different capital and operational expenditures, as well as carbon pricing and other policy mechanisms where relevant. The results of the study help to identify the main parameters that influence the economic performance of low-carbon alternatives for heat production in EU industries. The results can help policymakers and other stakeholders by providing evidence on the required strategies to boost the competitiveness of the industry in EU countries, as well as provide input to other researchers dealing with energy system modelling and tecno-economic analysis in the industry.