This group brings together the best thinkers on energy and climate. Join us for smart, insightful posts and conversations about where the energy industry is and where it is going.


At four times the cost of heat electrification will not decarbonize industrial processes anytime soon

image credit: Heliac
Jakob Jensen's picture
Chief Commercial Officer Heliac

I am the commercial director in Heliac. Heliac produces solar-generated utility-scale heat for district heating and industrial processes up to 200C. The low-cost, scalable method enables heat...

  • Member since 2020
  • 15 items added with 8,694 views
  • Nov 17, 2020

Legislators, investors, and journalists seem to believe that we can decarbonize the world through electrification. While it's possible to electrify most (land) mobility and low-temperature heat generation, there's no plausible profitable path to replace burning fossil fuels with renewable power production since the cost of electricity on average is 4.4 times the cost of heat.

The only option for electrification of heat is to use heat pumps with efficiencies (aka COP) sufficiently high to offset both the difference in the cost of electricity vs the cost of heat and the cost of buying, installing, and maintaining the heat pumps. However, as the price of heat pumps increases with increased COP and temperature ranges, this option is limited to processes where temperatures are lifted 30⁰C-40⁰C to max output temperatures of 80⁰C-90⁰C.

Solutions capable of reaching 220⁰C can target industrial processes consuming 10% of global energy demand. Several solar heat solutions are already today able to produce sustainable scalable heat at this temperature level. Great opportunities, potential, and impact may be realized the day legislators, investors, and journalists start understanding this.


Matt Chester's picture
Matt Chester on Nov 17, 2020

Are these costs on a per site scale or just to decarbonize industrial processes across the entire sector? I ask because I wonder whether certain applications are specifically well-tuned to electrification and can be targeted first? 

Jakob Jensen's picture
Jakob Jensen on Nov 18, 2020

As far as I can see, the most well-tuned sectors for electrification are the ones needing only low-temperature heat that can be supplied by efficient heat pumps that can off-set the price difference between electricity and heat.

Those industries that need both high and low-temperatures may benefit more from reusing waste-heat than from heat pumps.

Also, industries that have significant power need outside peak hours may benefit from electrifying buying power from wind turbines at night time. In this case, the industries will need to keep their existing heat-producing systems running (i.e. also keep the associated opex) to mitigate days with not enough wind.

Nathan Wilson's picture
Nathan Wilson on Nov 19, 2020

Of course you can't run a factory on an intermittent heat source like solar; applications for process heat (e.g. production of cement, glass, fuel/chemical processing, etc) are always run 24/7 to maximize output and avoid costs of pre-heating the system. Hydrogen can produce carbon-free heat, but it costs more than electricity due to efficiency loss in its production and the high cost of transporting & storing it.

But wait, there is another way to decarbonize the heat sector. Nuclear power (like fossil fuel) also makes heat for a small fraction of the cost of electricity.  And as described in this article on Canadian process heat applications, some nuclear designers think that market could develop soon.

For mid-to-high temperature applications, nuclear heat is a third to half the cost of electricity.  But when the heat is needed at low temperature, such as for district heat application (e.g. 100C), nuclear can supply heat for only about a tenth the cost of electricity, because it's really the waste heat being utilized, aka combined heat and power.  

To utilize combined heat and power, we need district heat networks, which use hot water as the energy carrier, and bring heat to homes and businesses.  This can be much cleaner than electric heat using heat pumps, because heat is an extremely seasonal load.  During the winter demand peak, the oldest and least efficient fossil fuel fired power plants are brought on-line to augment supply, so that electricity is typically much dirtier than the year-around average (solar PV of course makes this worse by being absent much of winter).

Heat networks also would eliminate the noise pollution produced by air-source heat pumps (ground source pumps are more expensive and un-maintainable).

Heat networks were built in many European cities back during the oil shocks of the 1970s (when American cities were switching to fossil gas); they are also popular in China and Russia. 

Matt Chester's picture
Matt Chester on Nov 19, 2020

Heat networks in Europe have the advantage of having been built years ago, so there's only maintenance costs to think of and not the build out costs. What would the cost to build district heating in an existing urban area in the United States, for example? I imagine it would be something on the scale-- in terms of construction time and costs-- that might scare some people away from even considering it (fair or not). 

Nathan Wilson's picture
Nathan Wilson on Nov 23, 2020

Deploying district heat networks will cost about the same as a fossil gas or hydrogen network.

So there is an existence proof that it is possible (and not just in dense cities with extremely cold climates).

Note that the historic context in which the existing gas grids were built:

- fossil methane gas was/is much cheaper than oil (as hot water is much cheaper than hydrogen).

- fossil methane gas usage was/is much cleaner than coal burning (as hot water from combined-heat-and-power is much lower CO2 emitting than methane burning).

So given that replacing gas heat with electric heat pumps simply moves the gas consumption from the home to the power plant, I would argue that resistance to heat networks is simply another method to maintain the fossil fuel dependence status quo.

Here is an example of a Chinese city converting their existing coal-fired district heat network to emission-free nuclear power.  It can be done.

Jakob Jensen's picture
Jakob Jensen on Nov 20, 2020

True that solar cannot address hi-temperature heat. But industrial processes run at 120C-220C and consuming 10% of global demand can be addressed. Solutions for this already exist. Many of them still struggle with costs being too high compared with fossil fuels. However, this is not the case for Heliac's novel solution.

Combined heat and power for district heating is great. In Denmark (where I am from), district heating based on CHP covers the heat demand for 60% of all households.

Installing district heating creates lots of jobs. It's also an opportunity to upgrade city infrastructure: Digging up half the cities for district heating piping can be combined with renewing sewage systems (very needed here in Denmark as climate change increase precipitation a lot), laying fiber for high-speed data transmission to the homes and workplaces,  and upgrading power cabling.

Waste heat from nuclear may be a viable solution but it's facing significant challenges as all plans for new nuclear plants tend to face significant not-in-my-backyard opposition, and as it takes ages to actually build a new nuclear plant once this opposition has been overcome. 

Nuclear's challenges may be both unfair and reduced over time (likely decades to change public opinion) but given the urgency of reducing carbon emissions, other solutions need to be put in play first.

Daniel Duggan's picture
Daniel Duggan on Nov 20, 2020

District heating works well in high population density, long winter locations, however it’s just not economic for cities and towns having lower densities and milder winters.  Lower cost gas heating is being phased-out not by economics, but by building codes which mandate the use of heat pumps in all new residences and commercial buildings.  In truth, the heating requirement of a new Class-A insulated building is so low, a complex heat pump based heating system is not competitive with simple gas heating under any circumstances, the move to heat pumps is driven entirely by legislation.

Gary Hilberg's picture
Gary Hilberg on Nov 20, 2020

Daniel - depending on scale, heat pumps can make lots of sense since most buildings also need cooling.  With this dual use, the single refrigerant coil can heat and cool thus simplifying the installation - one coil module, one source of energy.  For residential and small commercial this is viable and economic across the world.  If the building can eliminate all on-site gas, the infrastructure savings would offset any higher cost, the challenge is low cost equipment for natural gas hot water heating - heat pump driven electric water heaters are new and every expensive.  Also many want gas for cooking.  As with many issues, driven by personal choice. 

For larger scale building that currently use chilled water loops, I am unaware of how the heat pump will be implemented.  Many large commercial air handlers have a cooling with reheat to control humidity - so it is a more complex solution.  

Michel Lamontagne's picture
Michel Lamontagne on Nov 20, 2020

Isn't the whole point of creating high insulation building to bring them to a level where heat pumps can do the work, thereby puting electricity at about the same price point as gas?  In particular in areas where the heat pump is required for air conditioning anyway?  That being said, the short life of a hard working heat pump is not a good point in their favor.

Daniel Duggan's picture
Daniel Duggan on Nov 25, 2020

My comments relate to homes in Northern Europe where cooling is almost unknown, in summer we open a window.  When mains gas is available it is always less costly to heat with gas.  Add lots of insulation and mechanical ventilation to a home to get to an A-rated status; the annual heat requirement is so low, a complex heating installation is not justified.  My domestic gas costs 3.8c.kWh including taxes, my electricity is five times more expensive, and a heat pump is many times more expensive than a simple 90% efficient gas heating system.  Also, heat pump based systems are very often not procured correctly (the components purchased don’t match), poor installation is all too common, and expert commissioning of a complex heat pump, solar, biomass, hear and electricity storage system is a very rare occurrence.  Home owners are sold very expensive and complicated heating systems by promises of warm homes and savings but all too often the result is insufficient heat on cold days, long warm-up times, high electricity bills, and in many cases, expensive repairs to a system the home owner does not fully understand.  Compressor replacements every seven years appears to be the norm, and refrigerant legislation changes all too frequently resulting in retrofits which can cost $10,000 on a system which cost $50,000 only a few years previously.  Based on many years of experience, I have little positive to say about heat pumps in domestic homes.

Gary Hilberg's picture
Gary Hilberg on Nov 20, 2020

Worldwide, the largest CHP facilities are industrial mainly in chemical/fossil fuel processing.  All of the major refineries and downstream chemical plants have high pressure steam loops that tier down to lower and lower pressures as the energy is used in their processes.  The source of the steam is primarily natural gas driven gas turbines exhaust heat with much of their direclty produced electricity being used on-site or sold to the local electrical grid.  This provides high quality heat and an extremely efficient process, much higher than the most efficient combined cycle gas turbine (63%), depending on the application of the heat - in excess of 80%.  The facilities closely track their processes and heat uses working very hard to minimize waste.  Hopefully these facilities will not be shut down for many years to come as our current conversion efficiency for electrical power remains close to 33%!  This is a great example of how the blanket elimination of fossil fuels in electricity generation would dramatically increase emissions & costs when we tried to generate high quality waste heat for manufacturing.  Remember that the production of bio fuels and plastics will require similar high temperature processes.  

Michel Lamontagne's picture
Michel Lamontagne on Nov 20, 2020

Solar can be stored as hydrogen or methane after electrolysis, a process that is getting more efficient every year.  Methane is natural gas.  Hydrogen may be more complex to adopt.  It seems like a viable alternative for industries with high temperature requirements, if the solar field costs are not too expensive.  Nuclear reactors face the challenge that they are extremely costly to build.  There is very little incentive to invest in them if less contentious alternatives exist that repay the investment faster.

District heating is density sensitive.  In most of America it probably doesn't make economical sense, in particular for large areas of the US and Canada, and probably much of Europe, where individual winter heating demand is relatively small  even if the overall demand can be high, since these are large countries.

Michel Lamontagne's picture
Michel Lamontagne on Nov 20, 2020

Energy prices are more location sensitive than the table shows.  And tarifs are modular, not average.  In Quebec the price paid by large users for electricity according to the 'L' tarif is about 0,04$ per kWh, not 0,1$/kWh as the table shows.  So 2x instead of 4.4 times.  This is true in other areas as well.  Solar in the newest contracts in Spain and the Emirates is sold at less than 0,02$ per kWh.  This is probably enough to use the solar electricity to produce hydrogen intermitently that can be used for continuous thermal processes.  If you add a carbon tax to integrate the real cost of carbon externalities, there should be many places in the world where thermal processes can be done with electricity.  Probably the three largest sources of industrial CO2, Concrete, steel and aluminium production have carbon free alternatives.  So it could be done soon if the will was there.

Mark Silverstone's picture
Mark Silverstone on Nov 20, 2020

Thanks for this information.

One comment and one question:

I wonder why the price of electricity in Norway is not listed here. I am guessing that the cost of electricity in Norway is much less than what appears in the figure.  Other industries, most notably aluminum smelting and gas compression, thrive in the relatively low cost electricity environment in Norway.

Given the higher costs for electricity and the high cost of carbon sequestration and storage (CCS), I wonder how the relative costs stack up, given, for example, a cost of $90 per tonne of CO2 for CCS?  Which is less cost prohibitive, say, for cement manufacture? How about for other thermal processes?

Jakob Jensen's picture
Jakob Jensen on Nov 21, 2020

I did not include Norway because the site where I found the data, did not mention Norway.

Electrification based on renewable generation also needs to consider the cost of storage. Including the cost of storage for more than a few hours, this will likely not be competitive with fossil fuels for the next many years.

This is why, at Heliac, we look for solar-generated heat production instead. Much cheaper to store at lower temperatures either in standard water tanks or in pressurized water tanks for temperatures above 100C..

Ned Ford's picture
Ned Ford on Nov 21, 2020

You are neglecting several factors.  First, the huge wave of new renewable generation is already producing electricity at a quarter of the costs you are accustomed to thinking about.    Those costs won't become available to heavy industry for a while, because it is obviously more profitable to offset a six cent KWh than it is to offset a heat source which costs the equivalent of 1.5 cents.

The global records to date are 1.1 cents per KWh for windpower, and 1.35 cents per KWh for solar.   Those are public prices, and there are probably better prices being put into contract which are not public or not public yet.

As we grow into a mature wind and solar resource we are going to see wind and solar produce power above the immediate load.   This is happening today, but only for a scant few hours per year, which isn't enough to justify building an industrial facility, but it is enough to show us what the future will look like.  This is obviously the electricity which will be available to be stored, once we get to the point of wanting to build storage to facilitate renewables.  But before that happens a lot of industrial processes will discover that they are able to conform their energy needs to the time that wind and solar excess generation become available - provided the power is sold at a discount.   The discount in principle will be whatever is less than the added cost of storage at the time.   Other factors will also engage, including the fact that some of this dirt cheap renewable power will be built to serve industrial processes, simply because that allows them access to low prices before lower prices become available on the grid.

There will be movement of some heavy industry.   They have done it in the past and they will do it in the future.  There's a lot of cheap land in a lot of windy and hot places.   The total U.S. and global need for electricity to displace all fossil fuels is about 1.8 to 2 times the current electricity consumption, and that requires about 3% of the world's dry land to be covered with wind and solar generation.  Nearly all of that land can and will be dual use, since wind and solar equipment do not require most of the actual surface.

Finally, for now, the conversion from fossil fuels to electricity is often much more efficient than expected.   I've listened to steel representatives claim that carbon steel can't be made without fossil fuels, but Brazil has been doing it for decades, and we can certainly draw a little CO2 out of the atmosphere to mix with the iron if that becomes the best cleanest and cheapest way to do this.

Those portions of the energy mix which depend on fossil fuels only need to be thinking about this today if they don't want to be left behind.  We will convert all electricity, all gasoline, all furnaces which use natural gas, heating oil or propane, and a lot of other transportation resources before we start seeing easy solutions for heavy metal melting and similar heat-intensive industry.   Those industries are about seven to ten percent of all energy, and if they wind up being the last fossil fuel users, that's not a problem.

Just be sure that there are solutions, even if we wind up making duplicate fossil fuels from air and water using renewable electricity.   Those fuels promise to be cheaper in the long run, if we don't find better alternatives.  I think in terms of climate solutions, but I remind everyone that fossil fuels are deadly and cause an unacceptable amount of disease now that we have cheaper clean alternatives.

I also have spent 35 years trying to draw attention to economically viable alternatives to fossil and nuclear power, and today they are so abundant that we can afford to leave the heavy heat industries alone for a decade.   After that, the ones which aren't moving to renewables had better watch out, because other countries are going that way and most likely they will reduce costs as they do so.

Stephen  Roloff's picture
Stephen Roloff on Nov 25, 2020

The data in this chart is misleading, since it assumes a static pricing environment and does not take into account the benefits of energy storage. It also contradicts the many studies that have identified electrification as the most effective format for decarbonizing industry, e.g.

PV and wind prices are dropping monthly, and aggressive builds in e.g. Europe have led to massive curtailment. Emerging technologies like Perovskite cells promise to further increase efficiencies and reduce pricing in solar.

These trends will continue to reduce costs in instances where industry is deploying dedicated renewables. When grid-connected, the benefits stack includes savings and new revenues that need to be taken into account for an honest comparison.

There is no panacea for the energy transition (especially overhyped hydrogen), and a wide range of technologies must be deployed on an application-by-application basis.

Matt Chester's picture
Matt Chester on Nov 25, 2020

There is no panacea for the energy transition (especially overhyped hydrogen), and a wide range of technologies must be deployed on an application-by-application basis.

Couldn't agree more-- we're not looking for a silver bullet, rather adding tools to the warchest that can help in different situations and applications

Jakob Jensen's picture
Thank Jakob for the Post!
Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.
More posts from this member

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »