How big is the market potential for electrified thermal energy?
Prepared for Kyoto Group
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We have assessed the market size for electrified industrial heat applications in three steps
TAM = Global heat demand – heat demand outside industry
Total addressable market (TAM) Serviceable addressable segments (SAS) Method
SAS = TAM – Heat demand outside relevant temperature range – existing low-carbon heat + heat demand for pre-heating
- We estimated the heat market size based on UN data
- To determine SAS, we applied three steps:
- i. Limits by directly serviceable temperature range
- ii. Discount to consider existing alternative lowcarbon heating technologies
- iii. Upside from staged heat in high-temperature industry processes
The market size of different industrial heat segments is determined by the temperature requirements of each segment
Heat demand per temperature and industry segment in Germany TWh
Methodological notes
- A significant proportion of industrial heat is required at temperatures above 500oC
- Iron and Steel makes up a significant proportion of total industrial heat demand, largely above 1000oC
- This is the key factor leading to a lower Serviceable market than the Total market for electrified heating applications
- Staged heating leads to potential for accessing higher temperature demands – although a share of pre-heating is already provided via waste heat
- c. 5% resistance-based heating in industry process heat could be deducted from SAS
Focusing on the directly applicable temperature range and the potential for staged heating leads to a SAS of c. 11,200 TWh
Market size globally,
TWh/year
An electrified system that can deliver heat up to 500°C can serve c. 45% of all industrial heat demand
Germany is by far the highest source of industrial heat demand in Europe
European SAS break down
TWh/year
Sources: Aurora Energy Research
Heat storage systems could be used to recover c. 2,500 TWh of waste heat globally
Fraction of heat demand available for waste heat
% of heat demand
Germany is by far the highest source of waste heat in Europe
Up to 69% of global district heating demand could be electrified, reflecting a market of c. 2,460TWh
District heating can be electrified up to 31 + 38 % by 2050 The size of the current market that can be electrified is
- 31% of the district heating demand in Europe in 2050 would be either already electrified (Heat pumps and electric boilers) or electrifiable (fuel boilers)
- An additional 38% of CHP could be electrified
between 1 and 2.5 PWh
- The analysis presented here represents an upper bound of the size of the district heating market
- Overall demand growth for district heating may stagnate due to efficiency improvements, but Heat Roadmap Europe sees the potential for district heating to increase from 12% to 50% in terms of the proportion of total heat delivered
- The total market for low-carbon DH is up to 2.5 PWh, which is addressable by electric applications and CHP plants
- Key uncertainties moving forward are regarding the role of large scale heat pumps, combined heat and power (CHP) from gas and coal with carbon capture and storage (CCS) and hydrogen.
Demand for district heating comes mainly from Russia and China, with China being the main growth area
Sources: Aurora Energy Research, IEA (2019)
There is great potential for expansion of district heating networks, however it will only be realised if there is a significant policy shift
Modelled heat demand from district heating
- Baseline 2015 represents historical data from 2015
- Baseline 2050 represents the proportion of district heating demand if no change in policy is enacted
- HRE 2050 represents the proportion of district heating that could be expanded in order to remain in line with Paris targets
- The chart shown here indicates that the countries that exhibit the biggest growth potential are Italy, Spain, the Netherlands, the Czech Republic, Belgium, Germany, and the UK
- In some countries (such as Romania or Finland) the penetration of district heating is lower in the HRE scenario, due to economic reasons
Sources: Aurora Energy Research, Heat Roadmap Europe (2019)
What is the cumulative investment needed to electrify heat markets?
Cumulative investment to electrify industrial heat using Heatcube is c.€1tn, with iron and steel representing about 29% of the total
| Technology Assumptions |
|
Cumulative investment to electrify SAS
bn EUR |
|
|
|
| Unit capacity |
12 MW charge;
5 MW discharge |
|
|
|
|
| Storage capacity |
60 MWh |
|
|
1,023 |
|
| CAPEX |
2 mEUR |
|
|
12% |
|
| => Annual heat output |
21.9 GWh |
|
|
14% |
|
|
|
|
|
14% |
|
Global heat demand
TWh/year
11,201 |
|
|
|
29% |
|
|
|
|
2%
2% |
4%
8% |
|
|
|
|
|
9% |
|
|
|
|
|
7% |
|
| SAS |
|
|
|
Cumulative investment |
|
| Chemical and petrochemical |
Food and tobacco |
Machinery |
Non-metallic minerals |
Textile and leather |
|
| Construction |
Iron and steel |
Non-ferrous metals |
Paper, pulp and print |
Not elsewhere specified |
|
Comments
- We assume that Heatcube is cycled once per day – leading to a total of 21.9 GWh of heat output per 60 MWh unit
- CAPEX is assumed to be consistent over countries and industry applications
- Cumulative investment represents the market at saturation.
What is the cumulative investment needed to electrify heat markets?
Electrification with Heatcube of other heat markets could imply additional cumulative investment of €450bn globally
- Accessible waste heat supply is c. 2.5PWh, with iron and steel industry being the dominant sector
- Up to 70% of the district heating demand could be satisfied by electrical sources, which could be an additional 2.5PWh market globally for electrified heat applications
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