The industrial sector gives form and function to our everyday world, from skyscrapers to smartphones. But this comes at a heavy environmental cost. In 2022, industry consumed over a third of the world’s energy and was responsible for a comparable share of global greenhouse gas emissions.
Despite this enormous impact, efforts to reduce industrial emissions have historically lagged behind other sectors. They’re often labeled “hard to abate” due to the complexity and diversity of each industry’s needs and technologies. But a new report from Energy Innovation argues the opposite: Cleaning up the industrial sector with direct electrification supported by renewables is not only a viable strategy, it’s essential.
Electrified equipment avoids the inefficiencies of combustion, improves local air quality, and supports new job creation by shifting investment from fossil fuels to electricity. With our research we identify three critical challenges that must be addressed to electrify industry more widely: cost barriers, grid readiness, and technology awareness.
Heat is the big energy draw
The majority of industrial fossil fuel use goes toward generating heat.
Roughly one-third of the heat needed for industrial processes is at temperatures below 200 degrees Celsius, which are well within reach of efficient electric heat pumps. Nearly half is below 500 degrees C, which falls within a range covered by commercially available technologies like resistance, infrared, and induction heaters.
The highest temperatures, over 500 degrees C, are concentrated in sectors like steel, cement, and chemicals. As a consequence, these are tougher to electrify, but not impossible.
Technologies like industrial thermal batteries can now reach up to 1700 degrees C, sufficient to meet 75% of the U.S.’s industrial heat demand and two-thirds of China’s. They can store heat for hours or even days, letting factories use cheap electricity when it’s abundant, and solving the intermittency issues of solar and wind sources.
Efficiency helps smooth the transition
Industrial electrification would require large increases in electricity generation: 62% in the U.S., 105% in China, and 122% in India. But not all of that demand needs to be met with new generation. Improved efficiency is crucial to electrifying the industrial sector, making this grid expansion more palatable.
For example, just a 25% improvement in energy efficiency and 15% in material efficiency could offset 40% of the added electricity demand from electrifying eligible processes. This eases pressure on the grid and lowers costs across the board.
Cost remains a core barrier
Industrial operations are acutely cost-sensitive. In most countries, electricity remains several times more expensive than fossil fuels per unit of energy. Even with electrical technologies’ intrinsically greater efficiency, that cost gap can be hard to close.
Energy rates vary based on customer size, location, and access to wholesale or retail pricing. In regions like the U.S. Midwest and parts of Texas and California, where wind and solar are abundant, wholesale electricity rates can drop below $10 per megawatt-hour. These low prices, paired with smart load management and storage technologies, can make electrification more cost-competitive.
Still, firms may face significant additional costs in the form of exit fees from gas utilities, expensive and opaque interconnection upgrades, and high upfront capital investment.
Energy Innovation estimates that fully electrifying technologically mature U.S. industrial processes could require $289 billion in capital investment by 2050. However, efficiency gains could shrink that cost by more than a third.
Grid capacity and interconnection delays
Meeting this new demand will require a much larger and more flexible grid. In the U.S., over 2,600 gigawatts of new generation are waiting in interconnection queues, more than twice the country’s current installed capacity. The average wait time has risen to nearly five years, and 80% of requests are eventually withdrawn.
This bottleneck isn’t just a supply-side problem. Electrified buildings, electric vehicles, and data centers are pushing up demand, meaning that industrial firms face tough competition for grid access — unless proactive reforms are made.
Policy can clear the path
Accelerating industrial electrification will require a mix of financial, regulatory, and planning policies. For instance:
Incentives: Tax credits for using clean industrial heat, rebates, and grants can reduce capital and operational costs. And “Buy Clean” initiatives, green procurement programs, and carbon border adjustment mechanisms such as the EU’s can create guaranteed demand for low-emissions materials.
Clean power access: On-site renewables allow firms to lower costs and draw on electricity during cheaper, surplus hours. And the technology options vary, and include enhanced geothermal systems or small modular nuclear reactors, thermal batteries, and real-time electricity pricing.
Some facilities may also benefit from co-locating with renewable energy sources.
Grid modernization: There is grid capacity to spare, if we’re willing to get creative. Grid infrastructure around retired fossil fuel power plants — U.S. coal plant energy generation is down 60% from its peak — can be repurposed to free up capacity. Advanced conductors and grid-enhancing technologies can expand throughput on existing lines.
Meanwhile, streamlining interconnection rules to speed up the queue; and restricting fees for transitioning from fossil fuel systems to electricity will reduce delays, project risks, and financial penalties for decarbonizing.
Investment in innovation: Many high-heat technologies have been shown to work in new contexts, like electric steam crackers for chemical manufacturing and plasma torches for cement production, but they need further demonstration support to reach commercial scale. For instance, electrolysis, already used in aluminum production, could eventually enable emissions-free steelmaking at scale, but remains in the lab.
Funding for research, development, and deployment needs to come from governments, green banks, and public-private partnerships with companies and academic institutions to help innovation, optimization, and scaling. Similarly, training and education support is necessary to ensure there will be a skilled workforce familiar with the operation and maintenance of these electrified technologies.
An opportunity in electrons
The industrial sector certainly poses a major climate challenge, but it’s a similarly massive opportunity. Electrifying industry not only slashes emissions, but also improves air quality, supports grid reliability, and creates new jobs in clean manufacturing and the power sector.
With the right mix of policies, industrial electrification can be a central pillar of a resilient, low-carbon economy. The technologies exist, and the economics are improving. What’s needed today around the globe is the political will to plug industry into the clean energy future.
Nik Sawe is a senior policy analyst at Energy Innovation. The opinions represented in this contributed article are solely those of the author, and do not reflect the views of Latitude Media or any of its staff.
