Electrify everything!
Challenges and
opportunities associated with increased
electrification of industrial processes
Johan Rootzén
Department of Economics
University of Gothenburg
SE-405 30 Gothenburg
Sweden
johan.rootzen@economics.gu.se
Holger Wiertzema
Department of Space, Earth and Environment
Chalmers University of Technology
SE-412 96 Gothenburg
Sweden
Keywords
energy-intensive industry, decarbonisation, steel, cement, chem-
ical industry, electrification, energy systems
Abstract
The aim of this study is to assess the potential for and chal-
lenges associated with increased industrial electrification. In a
carbon constrained world, as all sectors of the economy seek
to lower emissions, competition for energy carriers with a low
climate impact (biomass/biofuels, ‘green’ electricity and hydro-
gen) will grow. Thus, how integration in this case of electrified
industrial processes is managed and how interlinkages and in-
teractions between both the supply side and demand side of the
electricity system is handled will be key to the overall outcome
with respect to overall systems costs, total capacity needs and
security of supply. Estimates of EU industry electricity demand
in 2050 vary considerably. Depending on assumptions with re-
gards to for example overall industry activity levels, choices of
energy carriers and process technologies, estimates of indus-
trial electricity demand in 2050 available in the literature vary
from 1,000 to 4,430 TWh (from approximately 1000 TWh in
2020). Based on experiences from two recent research project
and a review of recent literature we outline and discuss five ar-
eas which will be critical to the potential for and outcome of a
move towards increased electrification of industrial processes
in the European Union. We discuss how high geographical
concentration of industrial loads in particular regions, in com-
bination with significant changes on both the supply side and
demand side of the electricity system (i.e. transports and resi-
dential heating) post 2030 will pose significant challenges. But
also describe, how new options for process designs, produc-
Magnus Brolin
RISE Research Institutes of Sweden
Gothenburg
Sweden
Jesse Fahnestock
RISE Research Institutes of Sweden
Stockholm
Sweden
tion planning, optimisation and automation may provide ben-
efits beyond CO2 emission reduction and how careful proactive
planning provide opportunities for synergies.
Introduction
Under the Paris Agreement the signing parties have set out
to ‘holding the increase in the global average temperature to
well below 2 °C’, and ‘to pursue efforts to limit the temperature
increase to 1.5 °C’ above pre-industrial levels. Studies of miti-
gation scenarios that could meet these goals often highlight a
twin challenge for the electricity sector: cutting emissions
nearly to zero (or even net negative emissions) within two to
three decades, while expanding to electrify and consequently
decarbonize a much greater share of global energy use (Jenkins
et al., 2018). With a steady cost decline for renewable power
generation technologies (IRENA, 2018) and continuous im-
provements in the performance of energy storage and informa-
tion and communication technology the zero-emission trans-
formation of electricity supply – while certainly demanding
(see e.g. Johnson et al., 2018) – seems to be within reach. The
parallel and rapid development in the area of electric mobility
makes the decarbonisation of (or at least parts of) the trans-
portation sector also appear less challenging than previously
anticipated. Similarly, would low- and medium-temperature
heating, cooling, and lighting demands in both the building
sector and industry, from a technical standpoint, be relatively
straightforward to decarbonize through electrification (Fried-
mann et al., 2019). Meeting the targets laid out in the Paris
Agreement would however also require decarbonisation of
“harder-to-abate” sectors, e.g. heavy industry (in particular ce-
ECEEE INDUSTRIAL SUMMER STUDY PROCEEDINGS  415
6-040-20 ROOTZÉN ET AL 6. DEEP DECARBONISATION OF INDUSTRY …

ment, steel and chemicals) and heavy-duty transport (heavy-
duty road transport, shipping and aviation) (Davis et al., 2018;
ETC, 2018).
Most studies devoted towards the challenges associated with
decarbonizing industry tend to reach similar conclusions (see
e.g., Bataille et al. 2018; Fleiter et al., 2018)). The general mes-
sage is that while there still is an untapped potential for further
emission reductions through presently available measures and
technologies, reducing CO2 emissions beyond a certain point
will involve significant investments and substantial changes to
conventional manufacturing processes. A range of technologi-
cal and process abatement options, in different development
stages, that could, potentially, contribute to reducing emissions
from manufacturing of CO2 emission-intensive commodities
(e.g. steel, cement, chemicals and plastics and pulp and paper)
have been proposed. Four different categories of abatement
strategies – with different characteristics with respect to for ex-
ample choices of energy carriers, process designs and the avail-
ability of CCS – are most commonly proposed (see e.g. Riss-
man et al., 2020): direct electrification, indirect electrification
(hydrogen/Power to X), Biomass/biofuels and CCS. Figure 1
provide a brief overview of the applicability and emissions re-
duction potential for each of these technological options in the
iron and steel and cement industries.
Emphasis in this work is on the potential for and challenges
associated with increased electrification of industrial processes.
Special attention will be given to the steel and cement indus-
tries – here collectively referred to as the basic materials indus-
try. In a carbon constrained world as all sectors of the economy
seek to lower emission – competition for energy carriers with a
low climate impact (biomass/biofuels, green electricity and hy-
drogen) will grow – thus how integration in this case of electric
processes is managed and interlinkages and interactions across
sectors are handled will be key to the overall outcome.
Outline and challenges
Achieving the target of net zero greenhouse-gas emissions by
mid-century, will require rapid and radical changes across all
sectors of the economy. Measures to reduce emissions associ-

IRON AND STEEL CEMENT

Increased EAF and Electrifying heat supply to

scrap based production. precalciner or whole process
Direct electrification (Iron ore electrolysis an (replacing fuel burners with
alternative in the longer plasma torches)
term)

Hydrogen direct
Indirect electrification reduction could
deliver near zero CO2 Limited applicability
(Hydrogen/Power to X)
emission iron and
steel

Biomass partially Biomass partially

Biomass replacing fossil input replacing fossil fuel
(fuel/reductant) input

CCS Partial capture or Targeting precalciner or

combination of stacks whole process

Emission reduction
Low Moderate High Very high
potential:

Figure 1. Abatement opportunities and gross estimates of the abatement potentials in the steel- and cement-industries.

416  INDUSTRIAL EFFICIENCY 2020

6. DEEP DECARBONISATION OF INDUSTRY …
Interlinkages
with an Development
electricity of support
system in infrastructure
transition
Trends in investments in
material
demand
Industrial
electrification
Figure 2. Scope of the study – five areas critical to the potential for and outcome of a move towards increased electrification of industrial
processes in the European Union.
ated with the production and use of basic materials will not
happen in a vacuum but will be one of many disruptive changes
in the complex economic, social, and technical dynamics that
govern societal demand for energy and materials. The focus
here is on the development in five areas related to the produc-
tion and use of basic materials which will be critical to the po-
tential for and outcome of a move towards increased electrifica-
tion of industrial processes in the European Union:
• Development of energy infrastructure for industry electri-
fication.
• Interlinkages with an electricity system in transition.
• Trends in material demand.
• Electrification driving changing patterns in global competi-
tion and production.
• Unlocking investments in low or zero CO2 emission pro-
cesses.
The analysis in this study is predominantly based on the syn-
thesis of data from two projects:
• Industry’s Electrification and Role in the Future Electricity
System (Brolin et al., 2017) which was aimed at investigating
changes in policy, technology, and markets that could result
in an increasingly important role for electricity in industrial
processes and a more dynamic role for industrial companies
on the electricity market.
6-040-20 ROOTZÉN ET AL
Changing
patterns of
competition
and
production
Unlocking
low or zero
CO2 emission
processes
• The Mistra Carbon Exit project, which identifies and analy-
ses pathways to net zero greenhouse-gas emissions in the
supply chains of buildings, transport and transport infra-
structure, and particularly the technical roadmaps which
explore different possible trajectories of technological de-
velopments in the supply chains of buildings and transpor-
tation infrastructure including primary production of steel
and cement (Karlsson et al., 2020a; 2020b; Toktarova et al.,
2020).
Both projects combine quantitative analytical methods, i.e.
technical assessments (Brolin et al., 2017), scenarios and styl-
ized models (Karlsson et. al., 2020a), with participatory pro-
cesses involving relevant stakeholders in the assessment pro-
cess. We also draw from a recent study by Lehtveer et al. (2020)
which uses key performance indicators to explore the impact of
different scenarios for the European energy system transition
on the physical energy infrastructure, and the associated eco-
nomic and social systems. A review of previous work analysing
different future trajectories of technological developments in
the EU basic materials industry and the role of electrification
of industrial processes in particular provides the basis for the
further assessment and discussion.
Results
In the following we begin with an overview of lessons learnt
from previous studies of opportunities and challenges related
to increased industrial electrification in the EU. We then pro-
ECEEE INDUSTRIAL SUMMER STUDY PROCEEDINGS  417
6-040-20 ROOTZÉN ET AL
vide assessments and discussions of the five areas (see Figure 1)
related to the production and use of basic materials which will
be critical to the potential for and outcome of a move towards
increased electrification of industrial processes.
INDUSTRIAL ELECTRIFICATION – GENERAL FINDINGS
Industry accounts for approximately one quarter of final energy
use and greenhouse gas emissions (direct and indirect) in the
EU and is a major user of coal, oil, natural gas, biomass and
electricity. It is worth to note on the onset that electric pro-
cesses (electromotive, electro-thermal, and electrolytic) are
already in wide use in a broad range of industrial facilities and
processes. Further electrification of industrial processes may
have several justifications (CEATI, 2007; EPRI, 2009; Lechten-
böhmer et al., 2016):
• Reducing greenhouse-gas emissions: This can be achieved
directly, by replacing existing fossil-fuelled technologies
(e.g. furnaces and boilers) with electric technologies (pro-
vided that the electricity is generated by low-carbon sourc-
es); or indirectly by utilising electricity for production of
hydrogen and hydrocarbons for feedstock and energy pur-
poses.
• Improving energy efficiency: modern electro-thermal pro-
cess technology (e.g. induction, dielectric heating or micro-
wave) for heating and melting has the potential to reduce
energy use by allowing for more precise control of the en-
ergy flows than possible in existing furnaces and ovens that
must be fired continuously during production.
• Improving product quality: Electrical processes can enhance
product quality by allowing precise control and the possibil-
ity to instantly adjust energy input to varying process condi-
tions in, for example, drying and melting processes.
• Increasing the speed of production: There are several elec-
tro-technologies that offer improved rates of heat transfer
and higher efficiency, which can speed up the rate of mate-
rial heating in comparison to conventional ovens, heating
tunnels and radiant heaters.
Electrification of industrial processes in the low- and medium-
grade heat segments would technically be relatively uncompli-
cated. However, furnaces, boilers and electric heaters become
less efficient as higher temperatures are required, and their
use may necessitate significant refurbishment and major ad-
aptations in current energy supply and production processes.
In addition, some of the high-temperature technologies are
not (commercially) available yet. For industrial processes in
the high-grade heat segment, hydrogen combustion (or co-
combustion) may therefore offer benefits regarding its ability
to generate high temperatures without major alterations of ex-
isting process designs. For the steel, cement and chemical in-
dustries which account for a significant share of the high-grade
heat demand (see Rehfeldt et al., 2018) and which have process
specific requirements several technologies for direct/indirect
electrification are being investigated, including: hydrogen di-
rect reduction and iron ore electrolysis (electrowinning) in the
iron and steel industry (Fischedick et al., 2016; Otto et al., 2017;
Vogl et al., 2018); replacing fuel burners with plasma torches,
induction and microwave energy in the cement industry (Bro-
418  INDUSTRIAL EFFICIENCY 2020
6. DEEP DECARBONISATION OF INDUSTRY …
lin et al., 2017; Burman and Engvall, 2019) and the use of re-
newable hydrogen in the production of ammonia and other
basic chemicals. With respect to iron and steelmaking it will
also be important to prioritize innovation and technological
development related to delivering the highest quality of steel
from recycling (EAF) (see e.g. Allwood et al. (2019)).
We have identified a number of findings from the recent lit-
erature on industry decarbonisation in the EU with particular
importance for the role for industry electrification.
• First, it is clear that the decarbonisation of the steel, cement
and (petro-)chemical production will be important if to
achieve the EU wide emission reduction goals and that the
path taken in these industries will significantly impact over-
all industrial energy demand (Rehfeldt et al., 2018; Gerres
et al., 2019).
• Secondly, differences in assumptions on overall industrial
activity levels, choices of energy carriers, process designs,
limits on CO2 emissions and the availability of CCS, results
in very different estimates of electrification rates and overall
industrial electricity demand in 2050. Estimates of industry
electricity use in 2050 available in the literature range from
1,300 to 4,430 TWh (Lechtenböhmer et al., 2016; European
Commission, 2018; Wyns et al., 2018; Fleiter et al. 2018).
The upper estimate which is based on an aggregation of a se-
lection of low-CO2 pathways and technology studies by EU
industry associations and other sources carried out by Wyns
et al.(2018) would suggest that energy-intensive industries
(including steel, cement, chemicals and petrochemical, fuel
refining) would by far become the largest final electricity
consumer in the EU by 2050. The assessments by both Wyns
et al. (2018) and Fleiter et al. (2018) shows how the future
trajectories of technological developments in the chemical
and petrochemical industry and fuel production, in particu-
lar, will be decisive for the development of overall industrial
electricity demand. For example would a move towards in-
creased use of renewable hydrogen and direct air capture
and use of CO2 as an enabler for the production of electric-
ity-based fuels (Power-to-Liquids (PtL)), gases (Power-to-
Gas (PtG)), and chemicals (Power-to-Chemicals (PtC) (den
Ouden et al., 2017) significantly inflate industrial electricity
demand. Since industrial electricity demand is currently at
approximately 1,000  TWh the lower estimate should not
have any major consequences for the surrounding electric-
ity system even though the composition of the electricity
system will undergo major changes in the coming decades.
A quadrupling of electricity demand would however obvi-
ously be a challenge.
• Thirdly, the fact that industrial activity and energy use tend
to be unevenly distributed and sometimes are very con-
centrated to certain regions (e.g., North Rhine-Westphalia
(Germany), Rotterdam (Netherlands) and Teesside (UK))
will mean that matching supply and demand for low-CO2
energy carriers will be particularly challenging in these
regions (Schneider et al., 2019). Fourthly, commercial in-
troduction at scale of novel low-CO2 production processes
(including hydrogen direct reduction in the steel industry
and plasma heating in the cement industry) is typically an-
ticipated to materialise first after 2030 which would mean
 6. DEEP DECARBONISATION OF INDUSTRY … 6-040-20 ROOTZÉN ET AL

that industrial electricity demand would grow fast in a rela- whole (which accounted for 60 % of the total installed capacity
tively short time period (2030–2050). of wind power in the EU27 in 2018) varied between 5 GW/year
(in 2010) and approximately 12 GW/year (in 2016) (IRENA,
While the particular setup of the production processes and the
2019). In the same period average annual additions of solar PV
potential role of innovative electric processes vary considerably
varied between 3 GW/year (in 2016) and 9 GW/year (in 2011)
across the different branches of industry and between individ-
(IRENA, 2019).
ual plants, since these industries are comprised of a relatively
The demand for hydrogen storage (H2 storage) and ther-
limited number of very large plants, changes in each single
mal energy storage (TES Tank and TES Pit) increases as new
plant may have significant impacts on energy use and poten-
electricity demands arise through increased electrification in
tially on regional and local electricity loads.
industry (electrolysation for the production of hydrogen used
in the steel making process) of passenger vehicles, and as a con-
DEVELOPMENT OF ENERGY INFRASTRUCTURE FOR INDUSTRY
sequence of replacement of fossil fuels for residential heating.
ELECTRIFICATION
When considering the potential for increased electrification
Even if the most expansive scenarios are never materialised
of industrial processes it is important also to consider, aside
growth in industrial electricity demand will in parallel with
from the industrial assets needed to implement the abatement
electrification of transports and building heating and the phas-
measures, lead times related to planning, permitting and con-
ing out of fossil fuel power plants require a massive ramp-up
struction of support infrastructure including electricity grid
of investments in new zero-carbon power capacity. The Euro-
expansion, battery storage and hydrogen production transpor-
pean Commission (2018) estimates that increased electrifica-
tation and storage capacity. Project lead times for electricity
tion across all sectors of the energy system would result in an
transmission infrastructure projects, from early planning to
increase in annual electricity demand of 35–150 % by the year
commissioning can be up to 10 years or more. Recent expe-
2050 and that most of the demand will be met by renewable
riences also show how electricity grid expansion projects fre-
(wind, solar, hydro, and biomass-based power) and nuclear
quently experience delays, with lengthy permit processes and
power. Results from a recent study by Lehtveer et al. (2020) ex-
public opposition often reported as the main reason for delay
ploring different scenarios for a low carbon transition in the
(European Commission, 2019). The precise timing, location
North European electricity system illustrates (Figure 3) how re-
and nature of the technological shifts that will be required to
newable electricity capacity (left), energy storage and variation
decarbonise the basic material industry remains uncertain. Yet,
management technologies (right) will have to grow to satisfy
given the speed of change required and long lead times for ma-
demand. In the first decade (2020–2030) on-shore wind power
jor infrastructure projects, planning needs to take place even if
dominates, with average annual installation rate amounting to
not all uncertainties will be fully resolved.
almost 25 GW/year. After 2030 solar PV installation rates in-
creases significantly to more than 20 GW/year. This is partly a
INTERLINKAGES WITH AN ELECTRICITY SYSTEM IN TRANSITION
model artefact where the model choses to invest in remaining
High levels of electrification of industrial processes (including
favourable wind locations before investing in in more costly PV
use of hydrogen as feedstock) will require competitive electric-
capacity. These results can, nevertheless, be compared with his-
ity prices and sufficient and reliable supply of low-CO2 elec-
torical installation rates. In the period 2010–2018 average an-
tricity. The very large amounts of zero-carbon electricity and
nual installation rates of wind power in the studied region as a
hydrogen required, makes a large scale shift to synthetic fuel

30 140
2020-2030
Average annual installation rate (GW(h)/year)

2020-2030
120
Average annual installation rate (GW/year)

25 2030-2040 2030-2040
2040-2050 2040-2050
100
20
80
15
60

10
40

5 20

0 0
Battery, Flow

Electrolyser

TES tank

TES pit
Heat pump
H2 storage

Electric boiler
Biogas
Wind onshore

PV
Wind offshore

Collaboration Collaboration

Figure 3. Deployment of renewable electricity capacity (left), energy storage and variation management technologies (right) in a scenario
for the future development of the North European energy system (Lehtveer et al., 2020). In this scenario the share of wind and solar power
increases significantly beyond 2020 but loads in the industry, transportation and building sector provide demand side flexibility.

ECEEE INDUSTRIAL SUMMER STUDY PROCEEDINGS  419

6-040-20 ROOTZÉN ET AL
and chemical production seem unlikely, at least in the short- to
mid-term perspective. Similarly, deployment of process tech-
nologies for direct (cement) and indirect electrification (iron
and steel), at scale, will be challenging especially in regions with
poor conditions for wind and solar electricity generation.
Efforts to phase out fossil fuelled electricity generation ca-
pacity in combination with the cost developments seen over
the past decade for wind and solar power have resulted in an
increased share of renewable generation in the broader power
system. The variability of these sources, and the related balanc-
ing challenges and price volatility that it is likely to entail, may
create a market situation where a new, more dynamic role for
industrial consumers in the electricity system is both required
by the system operators and economically attractive for indus-
try. There are essentially three kinds of flexibility envisioned:
(i)  demand reduction, (ii)  increased “behind the meter” or
own generation by industry, and (iii) increasing demand for
electricity in response to very low prices. In practice, the latter
has often proven to be the most difficult for many industrial
firms to put in place. Simply conceived, the default level of
production is, in many cases, full capacity, which makes in-
creases more problematic than decreases. In today’s world,
such ‘positive’ demand response might entail rethinking over-
all production planning, maintenance schedules, etc. In the
future, new process designs, production planning, optimisa-
tion and automation will be keys to realizing the economics
of low-cost price intervals. While integration of high shares of
variable renewable electricity is expected to lead to increased
demand for flexibility, it is important to recognize that there
are several ways to provide the required flexibility services.
Providers of industrial demand flexibility will compete with
flexibility providers in other sectors on the demand side as
well as with flexibility resources (generation, grid investments,
and storage) on the supply side of the electricity system. How
integration of electrical production process in industry is
managed and interlinkages and interactions across sectors
are handled will be key to the overall outcome. Göransson et
al. (2019) show how a further strategic collaboration between
the electricity system, an increasingly electrified industry, an
electrified transport sector in the form of passenger electric
vehicles and residential heat supply may provide flexibility
and thereby enabling a faster transition from fossil fuels in the
European electricity system and reduced thermal generation
while reducing overall system costs. A recurring subject in our
engagement with stakeholders involved in the production and
use of basic materials is the importance of overcoming silo-
thinking and improving cross-sectoral cooperation in order
to speed up the transition to low- and zero CO2 processes and
practices.
Areas for advancing understanding of the potential for de-
mand response in industry include on the micro (firm) level:
• Continued efforts to identify processes and appliances suit-
able for demand response; annual electricity demands and
installed capacities
• Better characterization of technology-specific parameters
and load profiles; including data describing characteristics
and load profiles of process units or processes equipment
currently installed.
420  INDUSTRIAL EFFICIENCY 2020
6. DEEP DECARBONISATION OF INDUSTRY …
• Evaluation of operational challenges and constraints (mini-
mum and maximum down and up time, ramp-up and
ramp-down time, base and critical loads).
• Demonstrations of demand response strategies with indus-
trial end users, in order to assess customer acceptance and
actual realizable potential.
And on the macro (branch/sector) level:
• Data describing characteristics and load profiles of new pro-
cess units or process equipment including innovative elec-
trical technologies for industrial applications.
• Development and analysis of business models and tariff
structures to reward flexibility.
• Analysis of geographical distribution of demand response
potentials.
• Development of methods and tools for assessment of indus-
trial demand flexibility services, in relation to options for
demand response in other sectors on the demand side of the
electricity system.
TRENDS IN MATERIAL DEMAND
Building and infrastructure construction and vehicle manufac-
turing account for a major share of the use of CO2-intensive
basic materials like steel and cement (IEA, 2019). Thus, the fu-
ture development and mix of material use in construction and
vehicle manufacturing will determine future demand for basic
materials and consequently have major implications for overall
industry energy use. With a time horizon of several decades,
any notions as to the future development of the complex eco-
nomic, social, and technical dynamics that govern demand for
energy and materials, and the associated greenhouse-gas emis-
sions, are speculative. Nevertheless, there are several measures
and trends that will have implications for the future demand for
basic materials. A first priority needs to be to complement ef-
forts to decarbonise the primary production of basic materials
with efforts to improve resource and material efficiency. This
would include efforts early on and among all actors, to: avoid
building (where possible) and limiting the size of the vehicle
fleet (e.g. through car sharing or modal shift), re-use old assets,
recycle materials and components, optimise material use, and
to shift to low-CO2 materials.
There is a growing body of literature stressing the impor-
tance of material efficiency measures as instruments for reduc-
ing industry output and thereby energy use and greenhouse gas
emissions from heavy industries (see Hernandez et al. (2018)
for an overview). Cooper et al. (2017), for example, suggests
that 6–11 % of the energy used to support economic activity,
both globally and in the EU, can be saved by ensuring more
circular and sustainable resource use.
Steel and cement/concrete demand from building and con-
struction investments in new buildings and infrastructure will
likely be lower in Europe than in other parts of the world. How-
ever, re-investments, maintenance and renovation of ageing
infrastructures and building stocks in combination with large
scale deployment of renewable and low carbon technologies in
the energy system can be expected to uphold (at least part) of
the demand for basic materials over the next decades. The en-
6. DEEP DECARBONISATION OF INDUSTRY …
ergy system requires investments on both the supply side (e.g.
solar panels, wind turbines, transmission) and the demand side
(e.g. electric vehicles, battery storage). In addition, there will be
a need for investments to improve resilience towards impacts of
climate variability and climate change (e.g. water storage, flood
defences, erosion control water supply and sanitation (OECD,
2018). With respect to the future material demand (e.g. iron,
steel, and aluminium) from the vehicle industry current trends
of electrification, automation and shared mobility will have ma-
jor implications for the future development of the vehicle stock
and consequently for the demand of materials.
On the global scale growing populations with higher in-
comes and a shift in production and consumption towards
emerging and developing economies is projected to drive a
strong increase in global demand for goods and services over
the coming decades. Projections by the OECD (2019) sug-
gests that use of non-metallic materials – mainly sand, gravel
and crushed rocks, but also including limestone and struc-
tural clays, will grow 44 Gt in 2017 to 86 Gt in 2060. Similarly,
while steel scrap production is projected to grow faster than
iron ore production, iron ore inputs in steel production is es-
timated to increase from less than 3 Gt in 2017 to more than
6 Gt in 2060.
Taken together this this stresses the importance of acceler-
ating efforts improve material efficiency in all end-use sectors
while, at the same time, decarbonising primary production of
basic materials.
ELECTRIFICATION DRIVING CHANGING PATTERNS IN GLOBAL
COMPETITION AND PRODUCTION
The risk of carbon leakage, i.e., European industry firms los-
ing market shares or relocating to regions with more a lax
climate policy regime, is and has continuously been a con-
cern when formulating climate policy targets in the manu-
facturing industry. In the context of industrial electrification,
where abundant access to low-CO2 electricity becomes more
important and where low and predictable electricity prices
may become an even more important competitive advantage
than it already is, it is possible that new patterns of competi-
tion and production will arise. Incumbents in the European
manufacturing industry tend to be deeply embedded in the
social, economic and political contexts of which they are a
part (Arthur, 1994; Wesseling and Van der Vooren, 2017,
Svensson et al., 2020). However, it is not unthinkable that,
as the costs of solar power capacity, electricity storage and
hydrogen electrolysers decrease, the motivation to relocate
raw material supply and/or primary material production to
regions with the most favourable conditions for renewable
power production will increase. Along these lines, Toktarova
et al. (2020) explore the effects of shifting parts of Swedish
iron ore production and exports to production and exports
of direct reduced iron (DRI) (or hot briquetted iron (HBI)).
Similarly, Gielen et al., 2020, using a production shift to DRI
in Australia with exports to steel producers in Asia as a case,
investigate the effects on costs, energy use and greenhouse-
gas emissions of relocating energy-intensive industries to re-
gions and countries with low-cost abundant renewable energy
resources. This idea is by no means new, the Swedish engineer
and inventor John Ericsson (Ericsson, 1876) already in the
late 19th century speculated that:
6-040-20 ROOTZÉN ET AL
The time will come when Europe must stop her mills for
want of coal. Upper Egypt, then, with her never-ceasing sun-
power, will invite the European manufacturer to remove his
machinery and erect his mill on the firm ground along the
sides of the alluvial plain of the Nile, where an amount of
motive power may be obtained many times greater than that
now employed by all the manufactories of Europe.
In the case of cement the benefits of relocating production to
regions with favourable conditions for renewable power pro-
duction are less apparent. Whereas some trade occur between
countries within the EU and between EU member states and
countries in for example North Africa, cement markets tends
to be geographically confined. Also, since more than half of
the CO2 emissions from cement production originates from
the calcination of limestone, replacing combustible fuels with
electric powered plasma heaters (Burman and Engvall, 2019)
or concentrated solar energy (Oliveira et al., 2019) to gener-
ate heat would not be enough to decarbonise the production of
Portland Cement.
With respect to iron and steel production (and possibly also
chemicals and petrochemicals) the competitive advantaged
associated with a move of, at least parts of the production, to
regions with the potential to supply significant amounts of re-
newable energy at competitive costs appears more tangible. On
the global scale, Australia and Brazil who together account for
more than half of the iron ore production (WSA, 2018) and
who both possesses significant renewable energy resource en-
dowments (see e.g. Lord et al., 2019 and Wood et al., 2020),
seems to be well positioned to profit if a market for market for
‘green’ steel is developed. In a European context, whereas many
challenges still remain to be resolved, the announcement in
2016 by the largest Swedish steel producer SSAB of their plans
to switch from coal to renewable hydrogen (HYBRIT, 2018b),
has attracted significant attention and support. Several other
steel producers (e.g. Voerstalpine, Salzgitter, ArcelorMittal,
Thyssenkrupp) have since followed suite and initiated their
own research and development projects to explore options to
replace coal and coke with hydrogen as reductant and energy
source (Arens and Vogl, 2019; Toktarova et al. 2020). A par-
tial shift from iron ore pellets production to increased produc-
tion and exports of hydrogen DRI in Sweden as proposed by
Toktarova et al. (2020) would result in an additional electricity
demand of approximately 20 TWh (assuming that 6 Mt hydro-
gen DRI pellets are produced for exports each year) while only
replacing a small share of the 150 Mt of iron ore imported to
the EU each year. In any case, as the operating costs of green
hydrogen-based iron and steelmaking still significantly exceeds
the current coal-based process (Arens and Vogl, 2019; Toktaro-
va et al. 2020), a switch to low-CO2 primary steel production
anywhere in would require a carbon price significantly higher
than found in any of the emission trading systems in force to-
day or that new markets niches with a higher willingness to pay
are created.
UNLOCKING INVESTMENTS IN LOW OR ZERO CO2 EMISSION PROCESSES
Successful decarbonisation of the supply chains for basic mate-
rials like steel and cement, will involve the pursuit – in parallel
– of emission abatement measures with very different charac-
teristics. Consequently, to facilitate the transition, the support
ECEEE INDUSTRIAL SUMMER STUDY PROCEEDINGS  421
6-040-20 ROOTZÉN ET AL
tools will need to encompass a variety of policies and strategies.
It will be important to, on the one hand, not letting the pursuit
of ‘low-hanging fruits’ (e.g. energy and material efficiency meas-
ures) be an excuse for not acting to lay the foundation for the
high-cost long lead-time measures (zero-CO2 basic materials)
that will be required for decarbonisation, and, vice versa, not
letting the promise of e.g. low-CO2 steel or cement be an excuse
to not act to unlock the potential for measures that already ex-
ist today. Firms in harder-to-abate sectors seeking to invest in
high-cost high-risk (but low-CO2) technology face a dilemma
(Bataille, 2019). On the one hand, it is difficult to motivate and
find a business case for investments away from established pro-
duction processes in the currently uncertain policy regime. On
the other hand, a failure to invest in a shift to less carbon-inten-
sive technology is incompatible with the Paris Agreement and
late movers risks being outcompeted. Unlocking investments in
novel low-CO2 production processes (including hydrogen direct
reduction in the steel industry and plasma heating in the cement
industry) will require not only technological innovation but also
innovations in the policy arena and efforts to develop new ways
of co-operating, coordinating and sharing information between
actors in the supply chain. Thus, it is worth pointing out, which
is also done in other work (see e.g. Bataille et al., (2018); Neuhoff
et al., (2019)), that the current policy mix targeting the basic
material industry will need to be complemented with comple-
mentary policy interventions and/or private initiatives to secure
financing and lower the financial risk in investments for decar-
bonization up to 2045. This will include:
• Governmental risk sharing and state funding in the early
phases of the development and implementation of new
technologies (see e.g. Wyns et al., 2019).
• The use of carbon requirements in procurement as a tool
to create niche markets and to guarantee an outlet for low-
carbon product. Subsidies for low-CO2 production tech-
nologies through premiums, contracts for difference or tax
reductions (Neuhoff et al., 2019).
• Private initiatives like buyers coalitions (Rissman et al.,
2020) or transformation funds (Rootzén and Johnsson,
2017) that would allow actors along the supply chains for
basic materials, like steel and cement, to collectively con-
tribute to secure financing and de-risking investments in
new technology.
Discussion and conclusions
Improved performance and rapidly decreasing costs in areas
like renewable energy production, electricity storage and elec-
tromobility make an energy system completely powered by re-
newable energy sources seem to be within reach. The interplay
between manufacturing industry and an electricity system with
a steadily increasing share of variable renewables will offer new
opportunities and pose new challenges for European indus-
tries. In analogy with old windmills and waterwheels, it is pos-
sible to imagine, in a carbon-constrained world, a manufactur-
ing industry that is more adapted to interactions with variable
sources of energy. This might include everything from adapting
electric motor systems (pumps, compressors, motors, and fans)
to respond in a more flexible manner to load patterns in the
422  INDUSTRIAL EFFICIENCY 2020
6. DEEP DECARBONISATION OF INDUSTRY …
electricity grid, to the factoring in of wind conditions and solar
radiation in the process scheduling and, in the extreme, to the
relocation of electricity-intensive plants to regions with condi-
tions favourable for renewable power production.
It seems clear that electrification (indirect or direct) of indus-
trial processes will be one important component when rapidly
decarbonising the basic material production. However, how
integration in this case of electric processes is managed and
interlinkages and interactions across sectors is handled will be
key to the overall outcome.
In this work we highlight and discuss five areas that will be
critical to the potential for and outcome of a move towards
increased electrification of industrial processes in Europe, in-
cluding:
• Strategic planning for low-CO2 electricity generation ca-
pacity and support infrastructure. The timely deployment
of somewhere between 1,000 to 4,000 TWh low-CO2 elec-
tricity generation capacity, on top of the generation capacity
required to replace existing fossil fuelled electricity capacity,
will obviously be a significant challenge. But equally impor-
tant is the planning and deployment of infrastructures to
distribute and store energy including, e.g. electricity trans-
mission and distribution, hydrogen production and storage
(and CO2 transport and storage and sustainably sourced
biomass/biofuels).
• The importance of factoring in interlinkages and interac-
tions across sectors when introducing new electric pro-
duction process in industry. Industry could by offering
demand flexibility put downward pressure on the need for
backup capacity in the electricity system and for additional
transmission and distribution capacity. The potential (or
need) for industry demand flexibility however also needs
to be evaluated in the light of the ability in other end-use
sectors (i.e. transport- and buildings) to offer cost-efficient
flexibility.
• Drivers of future demand for basic materials including the
importance of efforts to improve material efficiency as a
way to limit or potentially lower deployment needs for low-
carbon industrial process technologies. This would require
efforts to improve material efficiency in building and infra-
structure construction and measures to limiting the size of
the vehicle fleet (e.g. through car sharing or modal shift).
• Changing geography of raw material supply including new
patterns of competition and production as access to low-
CO2 electricity and low and predictable electricity prices be-
comes increasingly important. If the world acts decisively to
limit carbon emissions, ‘the rules of the game’ may change
considerably. Even though the European manufacturing in-
dustry tend to be deeply embedded in social an economic
fabric of which it is a part, in a carbon constrained world,
competition from regions with the more favourable condi-
tions for renewable power production will increase.
• Unlocking investments in low or zero CO2 emission pro-
cesses though complementary policy interventions and/
or private initiatives; including measures to de-risk invest-
ment, secure financing and the provision of niche markets
for low-CO2 basic materials.
6. DEEP DECARBONISATION OF INDUSTRY …
Finally, lessons from historical transition processes also show
the importance of, beyond the physical planning, early on en-
suring transparency, broad participation and fairness (e.g. ac-
ceptable distributional effects (Vogl et al., 2019; Wood et al.,
2020)) and agility and endurance in the face of the unforeseen
(e.g. delays, changing market conditions).
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Acknowledgements
The authors would like to thank the Swedish Foundation for
Strategic Environmental Research (Mistra) and the Swedish
Energy Agency for financing the research projects that this pa-
per is based on.