As we look ahead to 2023 and beyond, we reflect on one of the most turbulent years for energy affordability and security in recent history. The decades-long obsession with running businesses and homes on fossil fuels has now yielded calamitous consequences, not just for the planet but for our pockets too. The war in Ukraine has shifted our thinking on the ‘energy trilemma’ of energy security, affordability and sustainability. Previously, the trilemma was a competing triarchy, but we now have a convergence. What is sustainable is now cheaper, and what is secure is now sustainable. It is no longer: ‘What are the costs of net zero?’. It is instead: ‘What are the costs of not hitting net zero?’
This winter will be difficult for businesses across Europe. Industrial users will have to cut back operations or risk insolvency. We need to reduce our energy demand and speed up the integration of renewables without negatively affecting industrial output. Already, policymakers have used their fiscal levers to shore up the near-term affordability outlook. However, this cannot last while supply is uncertain. We need a long-term plan to disincentivise fossil fuel use and encourage more sustainable forms of power generation from businesses. And to achieve that, we need a recognition of where our energy consumption goes.
Industrial heat requirements
Manufacturing’s global demand for gas is voracious. In the EU alone, manufacturing accounts for 30pc of overall gas demand. An often-overlooked fact, however, is that heat is the world’s largest energy end-use, accounting for 50pc of global final energy consumption. Industrial processes used to produce steel, glass, chemicals, food and other important resources require extreme heat, often generated through burning fossil fuels such as carbon-rich coke or coal. These processes are responsible for 51pc of the energy consumed for heat, and industry contributes the single largest source of greenhouse gas emissions (GHG) today, emitting 40pc of emissions globally. As a result, industrial heat accounts for the majority of GHG emissions from industrial processes.
The only cost-effective solution the businesses associated with these industries have right now to decarbonise is ending their dependence on gas and electrifying their processes with efficient thermal energy storage. This means moving over to use solid-state thermal batteries that harness surplus power and available industrial heat for use on demand as secure, green steam and heat. Why? Because energy costs will carry on rising and will remain elevated in the coming years. By charging in off-peak hours when electricity is cheaper, thermal batteries provide on-demand and carbon-free steam and can help save energy costs while reducing CO₂ emissions by 43pc. Thermal energy storage is a particularly attractive proposition as it also allows for very long-duration energy storage and enables the electrification of most heat applications.
However, the majority opinion is that charging more batteries on electricity will place significant strain on grids around the world. The IEA reports that a successful energy transition requires increasing annual investment in transmission and distribution grids to €820bn ($813.6bn) by 2030. This will necessitate a litany of existing and future technologies, including advanced batteries and low-carbon power plants, and other innovations that make our grids smarter and more flexible. To keep up with the rising flexibility needs of renewable power generation, storage capacity will need to grow, on average, by 38pc annually. And as hard-to-abate industries look to decarbonise operations, industrial consumers will be a big portion of the storage ramp-up.
But we do not have to wait for these costly upgrades to infrastructure. The beauty of thermal energy storage is that it can improve overall grid utilisation through both supply- and demand-side energy storage, which reduces stress on the grid, and as a consequence reduces excessive infrastructure investments. Energy storage is a readily available solution now to help facilitate a successful net-zero roadmap for industry as it is cost-effective, easily implemented and, crucially, readily deployable.
Policy incentives needed
Yet while solutions are here and available now, the policy environment does little to incentivise adoption of these technologies. Our policymakers talk as if electrons are the only thing worth storing and hydrogen is the answer to all our problems. Further, at a more basic level, tax on electricity consumed by German industrial users was equal to €20.50/MWh in 2021 compared with the gas tax, which was equal to €5.50/MWh. Taxing electricity at a lower rate than gas would be a good start. Then there is the myriad of network charges, which, based on existing precedent and the wider benefits and averted network costs effected by the electrification of industry with thermal storage, should be eliminated for businesses willing to take up the technology.
There are solutions and there are barriers to effective adoption, as there always are with new and emerging technologies. But we must act fast, as 2050 is the end-date, not the target. Roadmaps now are only as good as the actions that will facilitate them. I hope 2023 is the year of technology-adoption and starts the real push towards the electrification of heat and the decarbonisation of industry.
Christian Thiel is the CEO at the technology company, Energy Nest.
This article is part of our special Outlook 2023 report, which features predictions and expectations from the energy industry on key trends in the year ahead. Click here to read the full report.