A broad range of industries that depend primarily on low-temperature heat and steam processes represent roughly 70% of global industrial energy consumption. They span diverse manufacturing activities – from food and beverages to textiles, chemicals, transport equipment, wood products and paper. In 2023, these sectors emitted nearly 3 Gt of direct energy-related CO₂, accounting for half of all direct industrial emissions, although emissions have declined by around 8% since 2013.

Industrial energy use is largely in the form of heat and is increasingly being supplied from electricity. Over the past decade, global use of electricity for industrial heat has accelerated, with the People’s Republic of China (hereafter, “China”), India and the Association of Southeast Asian Nations (ASEAN) recording the largest increases. Despite differing industrial structures, all major economies have converged toward similar electricity shares for industrial heat of around 4–5%. Increased uptake is being driven by improving cost competitiveness, expanding technology availability and stronger policy signals, alongside the benefits of reducing exposure to volatile fossil fuel prices.

Renewables are rapidly transforming power systems around the world, leading to a higher share of renewables in the industrial mix via heat electrification. This linkage between industrial electricity demand and growing renewable generation is becoming an important driver of decarbonisation across industrial sectors. It contributes to greater system flexibility, strengthens energy security by reducing dependence on fossil fuel imports, and fosters economic growth, industrialisation and employment.

Improving energy efficiency is the foundational step in preparing for the electrification of low-temperature heat and steam. Energy efficiency measures lower overall heat demand, reduce losses and thereby enable smaller, more cost-effective electrification solutions. In many industrial facilities, basic optimisation such as recovering and effectively using waste heat, improving insulation, enhancing process control and plant-level thermal optimisation can deliver immediate reductions in fuel consumption at comparatively low cost. These measures not only cut emissions but also reduce the scale of investment required for electric heating technologies. Prioritising efficiency therefore maximises the impact of subsequent electrification efforts and strengthens the business case for switching from fossil fuels.

Industrial heat pumps and electric boilers are commercially available technologies for heat electrification but face several structural barriers. Large-scale industrial heat pumps are well established to deliver heat up to 150 °C, while electric boilers can generate steam up to 350 °C and pressure of around 70 bar. However, technology deployment has remained limited due to unfavourable electricity-to-gas price ratios, long grid connection lead times and the absence of clear policy frameworks. Supportive policies are only now gaining momentum, but stronger signals are still needed.

Thermal storage is the enabling technology that can connect low-cost variable renewable electricity supply with continuous industrial heat demand. Thermal storage systems can be built from low-cost, simple materials such as sand, cement and bricks and can store heat up to 1 000 °C. At around USD 15-20 per kWh, they are significantly cheaper than chemical batteries and don’t rely on global supply chains for critical minerals. Whilst the market for thermal energy storage for industrial applications is still developing, projects are emerging across multiple regions.

Electrifying industrial heat with renewables can enhance energy security in the European Union (EU). Electrification of industrial processes through heat pumps and e-boilers has the technical potential to reduce the EU’s industrial fossil fuel use by almost 3 000 PJ. Direct use of natural gas for industrial heat could be reduced by 35 bcm/yr, diversifying energy use and improving the continent’s energy security. Substituting natural gas and other fossil fuels with electricity at this scale would however imply around 600 TWh/yr of additional electricity demand, comparable to the combined annual electricity consumption of Germany and the Netherlands.

Industrial heat pumps are economically attractive compared to existing gas boilers in several EU member states. The range is, however, wide at 41-74 EUR/MWh, reflecting differences in electricity prices, and in approaches to energy taxation and network cost allocation among the examined countries. Electric boilers remain more expensive due to their lower efficiency, although they are increasingly finding markets in Northern Europe thanks to the region’s low electricity-to-gas price ratios and taxation that is favourable towards electrification. Adding thermal storage would enhance the cost competitiveness of e-boilers by reducing exposure to peak power prices, while improving operational flexibility and overall energy efficiency. Policy momentum for industrial heat electrification in the EU is building in the form of renewable heating targets and funding instruments but remains in early stages.

China is accelerating the electrification of industrial heat use through a range of policies. Electrification of low-temperature heat and steam has technical potential to reduce China’s industrial fossil fuel use by almost 9 000 PJ. Direct natural gas use could be reduced by 48 bcm, reducing the country’s strong import dependence. In parallel, realising the technical potential would increase electricity demand by 1700 TWh, which is comparable to the forecast growth in China’s solar PV electricity generation between today and 2030.

Direct use of solar PV and wind, coupled with thermal storage, creates new opportunities for heat electrification in China. Connecting industrial consumers directly to captive renewable power generators (i.e., solar PV, wind onshore or hybrid) could almost halve heat electrification costs for steam from USD 70-100/MWh (grid-connected) to around USD 50/MWh in the examined provinces. Grid-connected industrial heat pumps are attractive today compared to natural gas boilers, but struggle while cheap domestic coal is available as a heat source.

China is accelerating industrial heat electrification through its carbon neutrality targets and through coordinating national and provincial policies. The 14th Five-Year Plan, sectoral energy efficiency plans, heat pump and electric boiler action plans, financial support programmes, and grid reforms provide strong support for deployment. However, many targeted policies still focus on energy-intensive industries, leaving an opportunity to expand their scope to all industrial sectors.

Industrial parks play a central role in the ASEAN industry landscape and could become drivers of heat electrification in the region. Regional visions and plans support renewables, energy efficiency, and green industrial hubs, yet still focus on energy-intensive sectors. Capital costs, grid constraints, and limited access to finance hinder deployment, particularly in manufacturing hubs such as Indonesia, Malaysia, Thailand and Viet Nam. Expanding policy and financial support to all industrial sectors, alongside targeted demonstration projects and electricity market reform, could accelerate deployment of heat pumps, electric boilers and thermal storage.

While several drivers exist, global policy momentum is increasing but remains in early stages. To help accelerate the electrification of industrial low-temperature heat and steam, the IEA recommends the following six priority actions:

1. Elevate heat electrification into the policy agenda and integrate it into industrial roadmaps and targets within broader energy goals, while keeping a technology-open approach aiming at fostering a wide portfolio of possible pathways.

2. Anticipate heat electrification in long-term grid planning and prioritise connection requests with demand side flexibility to prevent capacity shortages and reduce project delays.

3. Reform electricity taxes and levies to level the playing field with fossil fuels and reward flexible industrial demand, possibly through lower network tariffs.

4. Provide targeted early support for capital and operational costs and enable innovative business models to accelerate the roll-out of heat electrification technologies.

5. Enhance skills and workforce development by expanding education and training programmes and certification schemes to meet the growing demand for industrial electrification expertise.

6. Promote international collaboration on technical standard frameworks to facilitate equipment interoperability, broader adoption of standards and achieve economies of scale.