Low-Carbon Heat Solutions for Heavy Industry: Sources, Options, and Costs Today
Julio Friedmann, Zhiyuan Fan, Ke Tang, October 7, 2019 (Columbia University Center on Global Energy Policy)
Recent studies indicate there is an urgent need to dramatically reduce the greenhouse gas emissions from heavy industrial applications (including cement, steel, petrochemicals, glass and ceramics, and refining). Heavy industry produces roughly 22 percent of global CO₂ emissions. Of these, roughly 40 percent (about 10 percent of total emissions) is the direct consequence of combustion to produce high-quality heat, almost entirely from the combustion of fossil fuels. This is chiefly because these fuels are relatively cheap, are widely available in large volumes, and produce high-temperature heat in great amounts.
Many industrial processes require very large amounts of thermal energy at very high temperatures (more than 300°C and often more than 800°C). For example, conventional steel blast furnaces operate at about 1,100°C, and conventional cement kilns operate at about 1,400°C. In addition, many commercial industrial facilities require continuous operation or operation on demand. The nature of industrial markets creates challenges to the decarbonization of industrial heat. In some cases (e.g., steel, petrochemicals), global commodity markets govern product trade and price. Individual national action on the decarbonization of heavy industry can lead to trade disadvantage, which can be made acute for foundational domestic industries (in some cases, with national security implications). This can also lead to offshoring of production and assets, leading to carbon “leakage” as well as local job and revenue loss (with political consequences). In many cases, lack of options could lead to dramatic price increases for essential products (e.g., cement for concrete, an essential building material). Risk of carbon leakage, price escalation, and trade complexity limits the range of policy applications available to address this decarbonization need.
To explore the topic of industrial heat decarbonization, the authors undertook an initial review of all options to supply high temperature, high flux, and high volume heat for a subset of major industrial applications: cement manufacturing, primary iron and steel production, methanol and ammonia synthesis, and glassmaking. From the initial comprehensive set of potential heat supply options, the authors selected a subset of high relevance and common consideration:
Biomass and biofuel combustion
Hydrogen combustion (including hydrogen produced from natural gas with 89 percent carbon capture (blue hydrogen) and hydrogen produced from electrolysis of water using renewable power (green hydrogen)
Electrical heating (including electrical resistance heating and radiative heating (e.g., microwaves)
Nuclear heat production (including conventional and advanced systems)
The application of post-combustion carbon capture, use, and storage (CCUS) to industrial heat supply and to the entire facility, as a basis for comparison
The authors focus on substitutions and retrofits to existing facilities and on four primary concerns: cost, availability, viability of retrofit/substitution, and life-cycle footprint. In short, the paper finds:
All approaches have substantial limitations or challenges to commercial deployment. Some processes (e.g., steelmaking) will likely have difficulty accepting options for substitution. All options would substantially increase the production cost and wholesale price of industrial products. For many options (e.g., biomass or electrification), the life-cycle carbon footprint or efficiency of heat deposition are highly uncertain and cannot be resolved simply. This complicates crafting sound policy and assessing technical options and viability.
Most substitute supply options for low-carbon heat appear more technically challenging and expensive than retrofits for CCUS. Even given the uncertainties around costs and documented complexities in applying CO₂ capture to industrial systems, it may prove simpler and cheaper to capture and store CO₂. CCUS would have the added benefit of capturing emissions from by-product industrial chemistry, which can represent 20–50 percent of facility emissions and would not be captured through heat substitution alone. Critically, CCUS is actionable today, providing additional GHG mitigation to industrial heat and process emissions as other options mature and become economically viable.
Hydrogen combustion provided the readiest source of heat of all the options assessed, was the simplest to apply (including retrofit), and was the most tractable life-cycle basis. Today, hydrogen produced from reforming natural gas and decarbonized with CCUS (blue hydrogen) has the best cost profile for most applications and the most mature supply chain, and it would commonly add 10–50 percent to wholesale production costs. It also could provide a pathway to increase substitution with hydrogen produced by electrolysis of water from carbon-free electricity (green hydrogen), which today would increase costs 200–800 percent but would drop as low-carbon power supplies grow and electrolyzer costs drop. Hydrogen-based industrial heat provides an actionable pathway to start industrial decarbonization at once, particularly in the petrochemical, refining, and glass sectors, while over time reducing cost and contribution of fossil sources. However, substitution of hydrogen will prove more difficult or infeasible for steel and cement, which might require more comprehensive redesign and investment.
Most of the other options appear to add substantially to final production costs—commonly twice that of blue hydrogen substitution or CCUS—and are more difficult to implement. However, all options show the potential for substantial cost reductions. An innovation agenda remains a central important undertaking and likely would yield near-term benefits in cost reduction, ease of implementation, and a lower life-cycle carbon footprint. Prior lack of focus on industrial heat supplies as a topic leave open many possibilities for improvement, and dedicated research, development, and demonstration (RD&D) programs could make substantial near-term progress. To avoid commercial and technical failure, government innovation programs should work closely with industry leaders at all levels of investigation.
New policies specific to heavy industry heat and decarbonization are required to stimulate market adoption. Policies must address concerns about leakage and global commodity trade effects as well as the environmental consequences. These policies could include sets of incentives (e.g., government procurement mandates, tax credits, feed-in tariffs) large enough to overcome the trade and cost concerns. Alternatively, policies like border adjustment tariffs would help protect against leakage or trade impacts. Because all options suffer from multiple challenges or deficiencies, innovation policy (including programs that both create additional options and improve existing options) is essential to deliver rapid progress in industrial heat decarbonization and requires new programs and funding. As a complement to innovation policy and governance, more work is needed to gather and share fundamental technical and economic data around industrial heat sources, efficiency, use, and footprint…
Findings And Conclusions
Finding 1: Significant GHG emissions result from a generation of heat for heavy industry. These emissions represent roughly 10 percent of global emissions, and it is unlikely that climate stabilization can be achieved without managing heat-related industrial emissions. They represent an underexplored contributor to climate change risks and an underexplored opportunity to profoundly reduce emissions.
Finding 2: Few options exist today to reasonably substitute low-carbon heat sources. Unlike the power sector and light-duty vehicles, the operational requirements of temperature, quality, flux, and high capacity place stringent constraints on viable options. These are further narrowed by geographic limits of natural resources and infrastructure. The true viability, cost, and carbon footprint of options remain poorly understood.
Finding 3: Data on low-carbon heat alternatives is scarce. International scholarship and analysis on decarbonization have focused on other sectors, and within the industrial sector, have focused on novel pathways for material production that could serve as a substitute. As such, primary and derivative data is limited and hard to assemble, which contributes to the lack of understanding of options and risks. The overall understanding of likely carbon footprint, viability, costs, and tradeoffs is poor.
Conclusion 1: National and regional governments with substantial industrial emissions should begin programs to understand their heat-related emissions. This should include data gathering and dissemination, analytical programs to assess the nation’s potential vulnerabilities and opportunities, and potential supply chain and infrastructure limits to substitute options for low-carbon heat.
Finding 4: All options for low-carbon heat face substantial technical, operation, and economic challenges. These challenges might include lack of viable engineering pathways to substitutions, limited supplies of key options or feedstocks, lack of enabling natural resources (e.g., CO2 storage or biomass), and fully realized costs. It is possible that these options carry additional hidden risks such as leakage.
Finding 5: Today, most alternatives to generate low-carbon heat cost significantly more than current heating fuels and systems. Compared to fossil fuel costs (mostly coal and gas), all options show a significant price increase of 2–20 times. These costs are sensitive to price of feedstocks (electric power, natural gas, biomass) and almost certainly carry additional hidden costs associated with poor conversion efficiency, poor heat deposition in real facilities, and system related costs (e.g., infrastructure build-out).
Finding 6: Providing low-carbon heat would likely increase the wholesale cost of production substantially. Because high-quality heat is vital to industrial operations, increased cost of low-carbon heat would yield higher unit production costs. Increases would range from 10–200 percent, depending on heat supply, industrial sector, and specific application.
Conclusion 2: More options and better options are needed. Given the urgency for deep decarbonization globally, options for substitution are essential. Given the paucity of good industrial heat-related emissions options, the current set is hard to deploy even with substantial subsidies. Researchers, governments, industrial leaders, and investors must add greatly to existing efforts to develop new and better solutions or to improve existing ones dramatically.
Finding 7: Many options for low-carbon heat do not appear competitive with CCUS retrofits on heat production systems or full plants. Based on current data, CCUS retrofits appear to have better costs than many options (including biofuels, electrification, and green hydrogen). CCUS retrofits on the entire facility, including byproduct emissions from key processes like coking and calcining, appear to be lower in cost than many options that don’t deal with process emissions. While these estimates have large uncertainties, including estimates for CCUS retrofits, this finding may prove robust under additional assessment.
Finding 8: Today, low-carbon hydrogen appears the most versatile and lowest cost. The lowest cost, most universal option across sectors appears to be hydrogen from natural gas partially or fully decarbonized through application of CCUS on the production facility (blue hydrogen). Blue hydrogen appears to provide the easiest pathway to substitute in many facilities, especially those using natural gas today, and is straightforward to scale. Finally, blue hydrogen creates an on-ramp for green hydrogen, which may become more cost competitive as renewable power for electrolysis drops in price.
Conclusion 3: CCUS is likely to prove important. In the near term, CCUS appears to be both an important enabler of low-carbon heat options (including biofuels) and may prove to be cheaper and simpler than substitution of many heat options. Given that, governments and industrial leaders should accelerate assessment of CCUS as an option for their enterprises and consider investing in both infrastructure and deployment.
Finding 9: Special policy options may be needed to decarbonize industrial heat. The high cost and low technical maturity of most low-carbon heat options in most applications limit policy approaches substantially. The complexities of trade, labor, and security are acute in heavy industry energy policy and politics, and the risk of backlash to poorly designed policy appears substantial. Many industrial sectors are excepted today from carbon control policies.
Conclusion 4: Several policy options appear both effective and actionable. Of the policy options explored, government “buy clean” procurement policies appear to have low political risk and could stimulate private investment in low-carbon heat options by creating a new customer for low-carbon products—substantial volumes of industrial product are purchased directly by governments. An innovation policy also appears to carry low political risk while accelerating creation of new options and deployment of existing options by accelerating cost reduction and discovery.
Finding 10: Much more work is needed. This report and the analysis within it should serve as a departure point for further analysis and research. It is likely to require many researchers working over many years to provide definitive progress on viable options for low-carbon heat for industry…