We are now living three moments defining the pathways to industrial decarbonization: need, share and availability. Each of these moments deserves an analysis; however, how they converge gives us the key to tie up the dots and be able to observe the complete scenario in which industrial decarbonization is developing.
These moments respond to the motivations, the responsibility for greenhouse gas emissions and the feasibility of an energy transition in the sector. However, structuring the path to be taken is left to the context defined by public policies, regulations and access to benefits and technology. This gives us as a wide range of possibilities, where companies can make strategic, informed and practical decisions.
The following explains what these three moments are, their challenges and how to create that scenario of energy transition in the industrial sector where solar thermal energy plays a very important role in the path.
Necessity: new hopes and new rules for industry
Why decarbonize the industrial sector? In 2022, the industrial sector was responsible for a quarter of global carbon dioxide emissions. It is not without reason that, albeit slowly, more and more pressure is coming from different sides to shift industry away from fossil fuels.
However, the motivation to join targets for decarbonization can come from immediate factors that make this process a necessity:
- Investors: these often have climate or decarbonization goals set out in their ESG (environmental, social and governance criteria). To accomplish these goals, they put pressure on the entities under their investment.
- Public entities: they establish local, regional or international regulations, in some cases forcing the disclosure of emissions. For example, the NDCs of each country or the European Union regulations that contemplate in their goals the decarbonization of the industry.
- The market: the decarbonization of the industry may also generate a boost in profits or may position companies in markets where they are not, with the benefit of staying where they already are.
These three factors feedback on each other and can strongly guide the industry’s decisions in its need to decarbonize its processes.
Share: #HeatIsHalf and the case of the energy transition
“The transition is not happening fast enough, the demand for energy is growing faster than the adoption of renewables. There are continued investments and subsidies for fossil fuels that prevent renewable energy from coming” says Rana in a podcast of The smarter E.
In addition to this, Rana also mentioned that another challenge is concentration. First, of technology, which continues to focus on developing more photovoltaics; and, second, geographically, leaving aside regions such as Africa, Asia – not including China, the Middle East and Latin America.
Availability: options for decarbonizing industry
Proportionally, the industrial sector has a significant impact on final energy consumption. Of that total thermal energy use, 53% is used for industrial processes, 44% in buildings to heat water and spaces, and 3% for agriculture, according to 2023 data from the International Energy Agency (IEA). In other words, proportionally, a quarter of all energy end use is purely in the hands of the industrial sector.
Specifically, in the industrial sector, the IEA believes that improvements towards decarbonization have been “modest” and “very slow,” largely due to the low development and implementation of new technologies. In the Zero Emissions scenarios for 2050, they consider technologies that have been proven to be effective but are not yet commercially available.
Here is where visibility plays a crucial role. According to the report Solar Heat Worldwide 2024 from the IEA SHC, there are at least 1,209 plants that deliver Solar Heat for Industrial Processes (SHIP) at low, medium and high temperature levels around the world.
A survey that is carried out annually, monitors the development of this market segment. The results from the 2023 survey, show that there are qualified suppliers with a remarkable track of systems installed in three continents: Asia, Europe and America.
There are multiple types of solar thermal technologies suitable for the specific needs of the factories. The survey also indicates that most of the suppliers produce the collectors in-house or assembly them on-site to deliver tailored-made clean heat solutions to clients from several industrial sectors around the world.
The thread that connects all: public policies and the market
We have already noted the proportional weight that thermal energy has in energy consumption, does this reflect in the world’s policies?
No, in REN21’s most recent report on the global status of renewables in 2024, of the 182 countries with renewable energy targets, only 43 have targets for heating and cooling. Meeting those targets will be the result of a series of guidelines and public policies that incentivize the inclusion of renewable technologies in the industry.
- Public policies and the market are the context which shape the scenario for the industry to achieve its decarbonization. And in the need to move away from fossil fuels, transforming the origin of thermal energy, given its proportion, is a wise decision. The strategy lies in the ability to manage the availability of technology within the context that the market and policies provide.
Some examples of policies and regulations:
- The case of CBAM in the European Union: the EU approved the Carbon Border Adjustment Mechanism, a tax in which the importer will have to declare the emissions linked to the production processes and, if they exceed the European standard, will have to purchase an “emissions certificate” with the EU CO2 price. If there is a carbon market in the exporting country, it will only pay the difference.
- Nearshoring in Mexico: In recent years in Mexico, the advance of nearshoring has slowed down because the country does not provide enough energy from renewable sources. Some industries have not been able to locate in Mexico because they could not meet the percentage of clean energy established in their goals.
- U.S. tax credits: The extension of clean energy tax credits that support the development of solar and wind energy now includes an additional 10% credit for the inclusion of U.S.-made materials.
Embracing solar thermal in the path of decarbonizing the industry
Author: Laura Yaniz Estrada, Communications Consultant.