Data story: key signals in Industrial heat & high-temp electrification

Only 5% of U.S. industrial process heat is currently electrified, yet process heat accounts for 55% of all industrial energy consumption—representing the single largest untapped decarbonization opportunity in North American manufacturing. As thermal battery deployments crossed the 100 MWh threshold in late 2024 and the DOE committed $350 million to industrial decarbonization since January 2023, the economics of retrofit workflows are shifting faster than most procurement teams realize. The signals are clear: grid-integrated electrification paired with federal incentives is rewriting the business case for steel, cement, chemicals, and food processing facilities across the continent.

Why It Matters

Industrial process heat represents approximately 20% of global final energy demand and remains stubbornly dependent on fossil fuels—roughly 80% of industrial heat worldwide still comes from natural gas, coal, or oil combustion. In North America, this dependency creates both a climate liability and a strategic vulnerability as energy prices fluctuate and carbon pricing mechanisms expand.

The 2024-2025 period has marked a decisive inflection point. According to the IEA's Energy Efficiency 2025 report, the industrial sector contributed two-thirds of global energy demand growth since 2019, making decarbonization of this segment essential for meeting Paris Agreement targets. The U.S. industrial electrification market is projected to grow at 8.52% CAGR through 2034, reaching $130.67 billion globally, driven by policy tailwinds from the Inflation Reduction Act and state-level renewable portfolio standards.

Critically, approximately 50% of U.S. industrial heat demand falls below 400°C—a temperature threshold increasingly addressable by commercial heat pumps and thermal batteries. This creates a near-term retrofit opportunity for thousands of facilities that can electrify without waiting for breakthrough high-temperature technologies. The DOE's Industrial Demonstrations Program has allocated $5.8 billion specifically for emission-reduction technologies in iron, steel, concrete, glass, pulp, paper, ceramics, and chemicals manufacturing—signaling federal prioritization of this transition.

For procurement professionals, the implications are profound: facilities that delay electrification risk stranded asset exposure as carbon pricing tightens, while early movers can capture tax credits worth up to 50% of project costs through stacked incentives.

Key Concepts

Industrial Process Heat: Thermal energy required for manufacturing operations, spanning temperatures from <100°C (food processing, textiles) to >1,500°C (steelmaking, cement clinker production). Unlike building HVAC, industrial heat often requires continuous, high-reliability delivery with precise temperature control. Decarbonizing process heat requires matching electrification technologies to specific temperature bands and duty cycles.

Contract for Difference (CfD): A financial mechanism increasingly used in industrial energy procurement where a counterparty guarantees a fixed electricity price, hedging against wholesale market volatility. For energy-intensive industries considering electrification, CfDs reduce OPEX uncertainty by stabilizing the spread between contracted renewable electricity prices and gas-equivalent costs. European utilities have pioneered CfD structures for industrial heat customers; North American adoption is accelerating through power purchase agreements with renewable developers.

Virtual Power Plant (VPP): An aggregation of distributed energy resources—including industrial thermal storage, flexible loads, and behind-the-meter generation—that can respond to grid operator signals. Electrified industrial facilities with thermal batteries become VPP assets, earning revenue by shifting consumption away from peak periods or providing frequency regulation. This transforms what was previously a fixed cost center (fuel purchasing) into a potential revenue stream while decarbonizing.

OPEX (Operating Expenditure): Ongoing operational costs including fuel, electricity, maintenance, and labor. Industrial heat electrification typically increases CAPEX (capital expenditure for new equipment) while reducing OPEX through fuel savings, lower maintenance requirements for electric versus combustion systems, and potential grid services revenue. The OPEX reduction thesis depends heavily on local electricity rates, time-of-use pricing, and available incentives.

Life Cycle Assessment (LCA): A methodology for quantifying environmental impacts across a product or process's entire lifecycle—from raw material extraction through end-of-life. For industrial electrification, LCA reveals that emissions benefits depend critically on grid carbon intensity. A facility electrifying in a coal-heavy grid region may show minimal LCA improvement until renewable penetration increases, while facilities in hydro- or solar-rich grids capture immediate benefits.

What's Working and What Isn't

What's Working

Thermal Battery Deployments at Commercial Scale: Rondo Energy's 100 MWh heat battery commissioned at Holmes Western Oil Corporation in California in October 2024 demonstrated that thermal storage technology has crossed the pilot threshold into commercial viability. The system heats refractory bricks to 1,500°C using renewable electricity, stores heat for 18+ hours, and delivers hot air or superheated steam with 97%+ round-trip efficiency. This deployment—paired with Rondo's 2 GW offtake agreement with EDP across Europe—signals that industrial-scale thermal batteries are no longer speculative. For procurement teams, this creates a proven reference case for boardroom presentations.

Stacked Federal Incentives Reaching 50% Effective Credit Rates: The Section 48C Advanced Energy Project Credit provides a 30% investment tax credit for industrial decarbonization projects, with additional 10% bonuses for domestic content sourcing and 10% for projects in energy communities (former coal regions, brownfields). Combined with DOE Industrial Demonstrations Program grants requiring 50% cost-share, sophisticated project developers are structuring deals where federal support covers half or more of total project cost. The Ohio Middletown Works steel plant exemplifies this approach: a $500 million IDP grant plus $1.3 billion private investment will eliminate approximately 1 million tons of CO₂ annually.

Heat Pumps Capturing Low-Temperature Industrial Segments: The E3 study published in October 2024 found that policy support could increase economically viable industrial heat pump applications by 20-fold. The U.S. became the world's largest heat pump market in 2025, surpassing China, with heat pumps outselling gas furnaces by 30% for space heating—creating manufacturing scale that reduces costs for industrial applications. For processes below 200°C (representing a significant fraction of food, beverage, textile, and pharmaceutical manufacturing), commercial heat pumps are now cost-competitive with natural gas in regions with favorable electricity rates.

What Isn't Working

Grid Interconnection Bottlenecks Blocking Project Timelines: Despite federal funding availability, many industrial electrification projects face 3-5 year interconnection queues as utilities struggle to process the surge in generation and load requests. FERC is evaluating large-load interconnection policies, but near-term relief remains uncertain. Procurement teams must factor interconnection risk into project schedules—a 2024 award may not energize until 2028 or later in congested regions.

Natural Gas Price Competitiveness Undermining Simple Payback: The U.S. continues to benefit from historically low natural gas prices relative to global markets, eroding the fuel-cost savings that justify electrification CAPEX in other regions. Without carbon pricing or aggressive time-of-use electricity rates, simple payback periods for electrification can extend beyond acceptable thresholds for CFO approval—particularly for facilities with recently installed combustion equipment. This economic reality means electrification often requires stacking multiple value streams (incentives, grid services revenue, brand positioning, supply chain requirements) rather than relying on fuel savings alone.

High-Temperature Process Gaps Above 1,000°C: While technologies like Coolbrook's RotoDynamic Reactor (capable of 1,700°C via supersonic gas heating) and Electrified Thermal's Joule Hive (reaching 1,800°C) have raised funding, commercial deployments for ultra-high-temperature applications remain limited. Steel and cement producers face technology availability gaps for certain process steps, forcing hybrid strategies that partially electrify while retaining fossil backup. This creates stranded asset risk if regulations tighten before full electrification becomes feasible.

Key Players

Established Leaders

Siemens Energy: Global power systems provider with industrial electrification offerings spanning electric boilers, heat recovery systems, and grid integration solutions. Active in North American industrial markets with established service networks.

ABB: Swiss multinational delivering industrial automation, electrification, and motion solutions. ABB's process electrification division targets chemicals, metals, and mining with electric heating systems and digitalization platforms for energy optimization.

Mitsubishi Electric: Investing $143.5 million in a Kentucky heat pump compressor manufacturing facility (August 2024), signaling commitment to North American industrial heat pump supply chains. Established presence in commercial and industrial HVAC electrification.

Honeywell: Process automation and control systems provider expanding into industrial decarbonization through carbon capture integration, hydrogen-ready systems, and electric process heating for chemicals and refining.

Schneider Electric: Energy management and automation multinational offering EcoStruxure platform for industrial energy optimization, microgrids, and electrification pathway planning.

Emerging Startups

Rondo Energy: California-based thermal battery developer with $162+ million raised. Deployments span oil fields (California), cement plants (Thailand), distilleries (Kentucky), and plastic recycling facilities (Texas). €75 million European expansion funded by Breakthrough Energy Catalyst and European Investment Bank in 2024.

Electrified Thermal: Developer of the Joule Hive Thermal Battery capable of reaching 1,800°C for mining, metals, cement, and chemicals applications. Raised $19 million in December 2024 from Holcim MAQER, Vale Ventures, and GVP Climate.

Coolbrook: Finnish startup using RotoDynamic Reactor technology—essentially rocket science for industrial heating—that propels gas at supersonic speeds to generate temperatures up to 1,700°C using only electricity. Winner of the 2024 BloombergNEF Pioneers Award.

Antora Energy: Thermal battery company delivering zero-emissions industrial heat and power, backed by Breakthrough Energy Ventures. Achieved commercial-scale launch in 2024.

AtmosZero: Industrial electric boiler startup backed by Energy Impact Partners ($1.36 billion Fund III), targeting direct replacement of gas-fired boilers for steam generation.

Key Investors & Funders

Breakthrough Energy Ventures/Catalyst: Bill Gates-backed climate investor with €840 million partnership with European Investment Bank. Catalyst arm specifically funds first-of-a-kind commercial industrial decarbonization projects, including Rondo's European expansion.

DOE Industrial Energy & Decarbonization Office (IEDO): Federal program that has deployed $350+ million since January 2023 for industrial decarbonization R&D and demonstrations, with $5.8 billion allocated through the Industrial Demonstrations Program.

Energy Impact Partners: Climate-focused VC with $4 billion AUM following $1.36 billion Fund III close (October 2025). Portfolio includes Boston Metal (steel electrolysis) and AtmosZero (electric boilers).

Microsoft Climate Innovation Fund: Corporate fund backing industrial decarbonization including H2 Green Steel ($326 million) and thermal storage technologies aligned with Microsoft's Scope 3 supply chain commitments.

Aramco Ventures: $7 billion AUM corporate VC with Sustainability Fund targeting Scope 1/2 emissions reductions. Strategic investor in industrial heat and carbon management technologies with global deployment reach.

Examples

1. Holmes Western Oil Corporation, California (Rondo Energy – 2024) Rondo deployed its 100 MWh industrial heat battery—the world's largest—at Holmes Western's California oilfield operations. The system stores renewable electricity as heat in refractory bricks at temperatures up to 1,500°C, delivering continuous steam for enhanced oil recovery processes. Performance metrics include 97%+ round-trip efficiency, 18+ hours storage duration, and displacement of natural gas combustion previously serving steam generation. The project demonstrates that even fossil fuel producers can electrify process heat, reducing Scope 1 emissions while maintaining operational continuity.

2. Ohio Middletown Works Steel Plant (Cleveland-Cliffs – DOE IDP Award) Cleveland-Cliffs secured a $500 million DOE Industrial Demonstrations Program grant—combined with $1.3 billion private investment—to install direct reduction ironmaking with electric arc furnace steelmaking. The project targets approximately 1 million metric tons of CO₂ reduction annually, representing one of the largest industrial decarbonization commitments in North American steel. This hybrid approach addresses the high-temperature challenge by using hydrogen-based direct reduction paired with electric arc furnace melting, demonstrating pathways for integrated steel producers to transition without complete asset replacement.

3. Bulleit Bourbon Distillery, Kentucky (Rondo Energy) Diageo's Bulleit Bourbon facility partnered with Rondo to electrify distillery heating operations using thermal battery technology. Bourbon production requires precise temperature control for fermentation and distillation—typically achieved via natural gas-fired steam boilers. The Rondo installation allows the distillery to shift electricity consumption to periods of surplus renewable generation while maintaining continuous heat delivery. The food and beverage sector represents a replicable use case given typical temperature requirements below 200°C and growing consumer demand for low-carbon products.

Action Checklist

• Conduct thermal demand audit: map all process heat loads by temperature band (<200°C, 200-400°C, 400-1000°C, >1000°C) to identify electrification-ready processes versus those requiring technology development
• Model electricity rate scenarios: obtain utility industrial rate schedules, time-of-use pricing, and demand charge structures to calculate electrified OPEX under various consumption profiles
• Evaluate Section 48C eligibility: engage tax counsel to assess qualification for 30% ITC plus bonus credits (domestic content, energy community) for potential 50% effective rate
• Review DOE Industrial Demonstrations Program funding opportunities: check current solicitations for grants requiring 50% cost-share that could accelerate project economics
• Assess grid interconnection timeline: contact utility early to understand queue position and potential delays before committing to project schedules
• Explore VPP revenue opportunities: engage with aggregators or utility demand response programs to quantify potential ancillary services revenue from flexible electrified loads or thermal storage
• Request LCA modeling from technology vendors: require emissions calculations using regional grid carbon intensity to validate decarbonization claims before making procurement commitments
• Benchmark against supply chain requirements: survey major customers for emerging Scope 3 mandates that may require suppliers to demonstrate electrification pathways
• Engage workforce development partners: assess training needs for electrical systems maintenance and explore DOE-funded workforce programs for industrial electrification technicians
• Monitor IRA policy developments: track potential changes to clean energy incentives and accelerate applications to lock in current credit structures

FAQ

Q: What temperature threshold determines whether industrial process heat can be electrified with current technology? A: Commercial heat pumps effectively serve applications below 200°C, while thermal batteries and electric resistance systems address needs up to approximately 1,000°C. Processes requiring temperatures above 1,000°C—such as cement clinker production at 1,450°C or steelmaking at 1,500°C+—require emerging technologies like Coolbrook's RotoDynamic Reactor (1,700°C) or hydrogen combustion. Approximately 50% of U.S. industrial heat demand falls below 400°C, representing the near-term electrification opportunity with commercially proven equipment.

Q: How do federal incentives stack to reduce industrial electrification project costs? A: The Section 48C Advanced Energy Project Credit provides a base 30% investment tax credit for qualifying industrial decarbonization projects. Projects can earn an additional 10% credit for meeting domestic content requirements (U.S.-manufactured steel, iron, and components) and another 10% for location in designated energy communities (former coal regions, brownfields). When combined with DOE Industrial Demonstrations Program grants requiring 50% cost-share, total federal support can reach 50% or more of eligible project costs. However, projects must meet prevailing wage and registered apprenticeship requirements to access full credit rates.

Q: What grid infrastructure challenges affect industrial electrification timelines in North America? A: Grid interconnection queues represent the primary bottleneck, with some regions experiencing 3-5 year wait times for new large industrial loads. FERC is evaluating policies to accelerate large-load interconnection, and several states (South Dakota, North Dakota, Minnesota, Vermont) have introduced rate structures valuing controllable loads. The 2025 addition of 93% renewable capacity to U.S. grids (primarily solar, battery, and wind) improves generation availability, but transmission constraints persist. Procurement teams should engage utilities early and consider behind-the-meter generation or storage to mitigate interconnection delays.

Q: How does the business case for industrial electrification differ in North America versus Europe? A: North American natural gas prices remain significantly lower than European equivalents, weakening the fuel-cost savings component of electrification economics. This means North American projects typically require stacking multiple value streams: federal tax credits, state incentives, grid services revenue (through VPP participation), supply chain decarbonization requirements from customers, and brand value. European projects benefit from higher gas prices, carbon pricing under the EU Emissions Trading System (approximately €60-90/tonne CO₂), and €1 billion+ auctions specifically funding thermal storage and industrial electrification. North American procurement teams should prioritize incentive capture and demonstrate grid flexibility value alongside emissions reductions.

Q: What workforce capabilities are required to operate electrified industrial heat systems? A: The transition from combustion-based to electrified heating systems requires different maintenance skill sets: electrical systems expertise replaces boiler/burner maintenance, and controls integration with grid signals requires industrial automation capabilities. The 30% jump in HVACR associate degree enrollment (2024-2025) and 20%+ increase in plumbing program enrollment indicate workforce scaling is underway for building electrification—but industrial-scale systems require additional training. DOE-funded programs through national laboratories and community colleges are expanding to address this gap. Facilities should assess current workforce capabilities and establish training partnerships before equipment delivery.

Sources

• International Energy Agency (IEA), Renewables 2025 and Energy Efficiency 2025 reports, available at iea.org
• U.S. Department of Energy, Industrial Energy & Decarbonization Office (IEDO), "Decarbonizing Process Heat" and "2024 Accomplishments for Industrial Innovation," available at energy.gov/eere/iedo
• American Council for an Energy-Efficient Economy (ACEEE), "How to Decarbonize Industrial Process Heat While Building American Manufacturing Competitiveness," April 2024, available at aceee.org
• E3 (Energy + Environmental Economics), "Decarbonizing Industrial Heat: Measuring Economic Potential," October 2024, available at ethree.com
• BloombergNEF, "How 12 Climate Tech Startups Are Shaping the Energy Transition in a Turbulent World," Pioneers Award 2024 coverage, available at bloomberg.com
• Rondo Energy company announcements and deployment data, available at rondo.com
• Breakthrough Energy Catalyst, "€75 Million of Funding for Rondo Energy to Develop Industrial Decarbonization Projects Across Europe," 2024 press release, available at breakthroughenergy.org
• U.S. Treasury, "Section 48C Qualifying Advanced Energy Project Credit Guidance," available at treasury.gov