Deep dive: Industrial heat & high-temp electrification — the fastest-moving subsegments to watch

Industrial process heat accounts for roughly 23% of global CO2 emissions, and over 50% of that demand sits above 400 °C, making it one of the hardest sectors to decarbonize (International Energy Agency, 2025). Yet 2025 marked a turning point: global investment in industrial heat electrification technologies surpassed $12 billion, a 58% increase year-over-year, driven by breakthroughs in high-temperature heat pumps, electric arc furnaces, and resistive heating systems capable of reaching 1,600 °C and beyond (BloombergNEF, 2026). For investors evaluating the emerging markets landscape, understanding which subsegments are accelerating fastest is critical for allocating capital ahead of the cost curves.

Why It Matters

Industrial heat is the backbone of manufacturing. Cement kilns operate at 1,450 °C. Steelmaking requires sustained temperatures above 1,500 °C. Glass production demands 1,700 °C. Petrochemical crackers run at 800 to 900 °C. These processes have historically relied on coal, natural gas, and petroleum coke because no commercially viable electric alternative could deliver the required temperatures at scale. That calculus is shifting rapidly.

Three structural forces are converging across emerging markets. First, carbon pricing mechanisms are expanding. The EU's Carbon Border Adjustment Mechanism (CBAM) began its transitional phase in 2023, and by 2026, importers of steel, cement, aluminum, and fertilizer into the EU must purchase carbon certificates reflecting the embedded emissions of their products. For emerging market exporters, this creates a direct financial incentive to decarbonize process heat: Indian steel exported to Europe faces an effective carbon cost of $45 to $65 per tonne of product at current EU Emissions Trading System prices (World Bank, 2025).

Second, renewable electricity costs in key emerging markets have fallen below the marginal cost of industrial fuel in many geographies. Solar PPA prices in India averaged $0.028/kWh in 2025, and in parts of the Middle East and North Africa, they dropped below $0.02/kWh. When industrial heat demand can be met by electricity at these rates, the operating cost advantage shifts decisively toward electrification for processes below 500 °C, and increasingly for medium-temperature applications up to 1,000 °C.

Third, industrial policy is accelerating deployment. India's Production Linked Incentive (PLI) scheme allocates $2.8 billion for green steel manufacturing through 2028. Brazil's Plano Nacional de Hidrogênio includes $1.6 billion for industrial heat decarbonization. Indonesia's Just Energy Transition Partnership (JETP) commits $20 billion in public and private financing to decarbonize heavy industry, with cement and steel identified as priority sectors.

Key Concepts

High-temperature heat pumps (HTHPs) use vapor compression or chemical looping cycles to deliver heat at temperatures up to 200 °C, with emerging designs targeting 300 °C and above. These systems achieve coefficients of performance (COP) between 2.0 and 4.5, meaning they deliver 2 to 4.5 units of heat energy for every unit of electricity consumed. This efficiency multiplier makes HTHPs the most cost-effective electrification pathway for low-to-medium temperature processes such as drying, pasteurization, and distillation.

Electric arc furnaces (EAFs) use high-current electric arcs to melt scrap steel or direct reduced iron (DRI) at temperatures exceeding 1,800 °C. EAFs already account for approximately 30% of global steel production and produce 60 to 75% fewer emissions than blast furnace-basic oxygen furnace (BF-BOF) routes when powered by low-carbon electricity. The combination of green hydrogen-based DRI and renewable-powered EAFs is the leading pathway to near-zero-emission primary steelmaking.

Resistive and induction heating systems pass electric current through conductive materials or use alternating magnetic fields to generate heat directly within a workpiece. These technologies are commercially available for temperatures up to 1,600 °C and are being deployed in aluminum melting, glass batch heating, and ceramic sintering applications. Energy conversion efficiencies of 90 to 98% compare favorably to the 40 to 65% thermal efficiency of gas-fired equivalents.

Concentrated solar thermal (CST) for process heat uses mirrors or lenses to concentrate sunlight, delivering temperatures from 150 °C to over 1,000 °C. In high-irradiance emerging markets such as India, the Middle East, and northern Africa, CST systems offer levelized heat costs of $15 to $40/MWh, competitive with natural gas in regions without subsidized fuel pricing.

What's Working

High-Temperature Heat Pumps for Food, Beverage, and Chemical Processing

The HTHP segment is the fastest-moving subsegment globally, with installed capacity growing at 42% annually since 2023 (IEA, 2025). The technology has achieved commercial readiness for processes up to 200 °C, covering approximately 30% of total industrial heat demand. In India, Thermax Limited has deployed over 120 industrial heat pump systems across dairy processing, pharmaceutical manufacturing, and textile drying applications. A flagship installation at Mother Dairy's Patparganj facility delivers 8 MW of thermal output at 150 °C with a COP of 3.2, reducing the plant's natural gas consumption by 75% and achieving payback in 2.8 years at prevailing Indian gas prices.

In Brazil, Embraer's manufacturing facilities have integrated heat pumps from Johnson Controls for paint curing and composite processing at temperatures up to 180 °C. The systems recovered waste heat from compressed air systems and cooling loops, boosting overall plant energy efficiency by 22% while eliminating 4,200 tonnes of CO2 annually.

The next frontier is the 200 to 300 °C range, where companies such as Vattenfall's partnership with Alfa Laval and the startup Olvondo Technology are developing transcritical CO2 and steam compression systems. Pilot installations in Scandinavian pulp mills have demonstrated sustained operation at 250 °C with COPs above 2.0, and emerging market deployments are expected to begin by late 2026.

Electric Arc Furnace Steelmaking with Green DRI

The steel sector represents the highest-value subsegment for investors, given the industry's $2.5 trillion annual revenue and 7% share of global CO2 emissions. The green hydrogen DRI plus EAF pathway is moving from demonstration to commercial scale in emerging markets at remarkable speed. In India, JSW Steel commissioned Asia's first green hydrogen DRI pilot at its Vijayanagar works in 2025, producing 50,000 tonnes of direct reduced iron using electrolytic hydrogen powered by a dedicated 200 MW solar farm. The pilot demonstrated a 62% reduction in CO2 intensity per tonne of crude steel compared to the adjacent blast furnace operation, with a production cost premium of $40 to $60 per tonne.

ArcelorMittal's joint venture with the government of India is constructing a full-scale 1.5 million tonne per year green DRI-EAF facility in Hazira, Gujarat, with commissioning targeted for 2028. The project's financing structure includes $800 million in concessional debt from the Asian Development Bank and a $200 million EU CBAM compliance premium embedded in offtake agreements with European automotive manufacturers.

In Brazil, Gerdau operates the world's largest fleet of EAFs, processing 10 million tonnes of scrap steel annually. The company has secured long-term renewable energy contracts at $0.032/kWh, giving its EAF operations a 30% energy cost advantage over coal-fired competitors exporting to CBAM-regulated markets.

Concentrated Solar Thermal for Cement and Mineral Processing

CST technology has found a compelling niche in cement precalcination and mineral processing across high-irradiance emerging markets. Synhelion, in partnership with CEMEX, commissioned a 5 MW concentrated solar thermal system at a cement plant in Monterrey, Mexico, delivering process heat at 1,000 °C for clinker precalcination. The system displaces 15% of the kiln's coal consumption and reduces per-tonne CO2 emissions by approximately 120 kg. Heliogen's AI-controlled heliostat field at a pilot facility in Lancaster, California, has demonstrated temperatures exceeding 1,500 °C using concentrated sunlight alone, with plans to deploy the technology at mining operations in Chile and South Africa by 2027.

In India, the Indian Institute of Technology Jodhpur has partnered with Dalmia Cement to pilot a 3 MW CST system integrated with a rotary kiln, targeting 20% coal displacement. The project's economics are supported by India's solar resource: direct normal irradiance (DNI) values of 5.5 to 6.5 kWh/m²/day in Rajasthan make CST cost-competitive with imported coal at current prices.

What's Not Working

Ultra-High-Temperature Electrification Above 1,500 °C

Direct electrification of processes above 1,500 °C remains technically challenging and commercially immature for most applications. Cement clinker production at 1,450 °C, glass melting at 1,700 °C, and certain ceramic processes require sustained high temperatures that current electric systems struggle to deliver at the throughput rates required for commercial-scale operations. Electric kilns for cement production have been demonstrated only at pilot scale (under 50 tonnes per day), compared to the 3,000 to 10,000 tonnes per day capacity of conventional rotary kilns. The capex premium for fully electric cement kilns is estimated at 2 to 3 times that of conventional systems, with limited operational data on refractory wear and maintenance cycles under continuous electric operation.

Grid Infrastructure Constraints in Emerging Markets

Many emerging market industrial clusters lack the grid infrastructure to support large-scale electrification. A single EAF steel plant producing 1 million tonnes per year requires 400 to 600 MW of reliable electricity supply. In India, industrial zones in states such as Jharkhand and Odisha, where steel production is concentrated, experience grid reliability below 99% and voltage fluctuations that can damage sensitive electric heating equipment. Grid connection timelines for new high-voltage industrial loads in India average 18 to 36 months, and in parts of Sub-Saharan Africa, grid connection for loads above 10 MW can take 3 to 5 years. Behind-the-meter renewable generation partially addresses this, but intermittency requires either grid backup, battery storage (adding $20 to $40/MWh to delivered electricity costs), or overcapacity in generation assets.

Hydrogen Cost and Availability

Green hydrogen, essential for DRI-based steelmaking and certain chemical processes, remains expensive in most emerging markets. Production costs average $4.50 to $6.50/kg in India and $5.00 to $7.50/kg in Brazil and Southeast Asia as of 2025, well above the $2.00/kg threshold needed for cost parity with coal-based steelmaking without carbon pricing. Electrolyzer supply chains are concentrated in China and Europe, creating lead time and currency risk for emerging market projects. The gap between announced green hydrogen capacity (over 40 GW globally by 2030) and projects that have reached final investment decision (under 5 GW) highlights persistent execution risk.

Key Players

Established Companies

• Siemens Energy: a global leader in industrial electrification, offering electric heating systems, high-temperature heat pumps, and electrolyzer technology across 90 countries, with dedicated emerging market partnerships in India and the Middle East
• Thermax Limited: India's largest industrial heating and cooling solutions provider, with over 120 deployed industrial heat pump systems and a growing portfolio of hybrid solar-electric heating solutions for food processing and chemical manufacturing
• JSW Steel: India's leading private-sector steelmaker, operating Asia's first green hydrogen DRI pilot and committed to reducing carbon intensity by 42% by 2030 through EAF expansion and renewable energy integration
• ABB: a global provider of electric heating and process automation systems, with induction and resistive heating solutions deployed in aluminum, glass, and automotive manufacturing across emerging markets
• Gerdau: Latin America's largest steelmaker and the world's largest recycler of scrap steel, operating 30 EAF facilities powered increasingly by renewable electricity

Startups

• Electra: a US-based startup developing low-temperature iron ore electrolysis that eliminates the need for both blast furnaces and hydrogen, operating at 60 °C with a claimed 80% reduction in energy consumption compared to conventional steelmaking
• Synhelion: a Swiss startup commercializing concentrated solar thermal technology for cement and fuels, with pilot systems delivering process heat above 1,000 °C
• Olvondo Technology: a Norwegian startup developing ultra-high-temperature heat pumps using thermal energy storage, targeting industrial processes up to 600 °C
• Rondo Energy: a US-based company commercializing industrial heat batteries that store renewable electricity as high-temperature heat (up to 1,500 °C) and deliver it continuously to industrial processes

Investors

• Breakthrough Energy Ventures: invested over $700 million in industrial heat decarbonization startups, including Electra, Rondo Energy, and Heliogen
• Asian Development Bank: providing $3.5 billion in concessional financing for industrial decarbonization projects across South and Southeast Asia, with steel and cement as priority sectors
• Temasek Holdings: deployed $1.8 billion in clean industrial technology investments across emerging Asia, including green hydrogen and industrial heat electrification companies

KPI Benchmarks by Use Case

Metric	HTHPs (<200 °C)	EAF Steelmaking	CST Process Heat	Resistive/Induction Heating
CO2 reduction vs. fossil	60-80%	60-95%	30-50%	70-95%
Energy cost per MWh (thermal)	$15-35	$25-50	$15-40	$20-45
Capex premium vs. conventional	1.2-1.8x	0.8-1.2x	1.5-2.5x	1.0-1.5x
Payback period (years)	2-5	3-7	4-8	2-5
Energy conversion efficiency	200-450% (COP)	55-70%	40-60%	90-98%
Technology readiness level	TRL 8-9	TRL 9	TRL 7-8	TRL 8-9
Maximum temperature	200-300 °C	>1,800 °C	>1,000 °C	<1,600 °C

Action Checklist

• Map industrial heat demand across target portfolio companies by temperature range, volume, and current fuel source to identify highest-impact electrification opportunities
• Assess CBAM exposure for emerging market exporters of steel, cement, aluminum, and fertilizer, quantifying the carbon cost premium under 2026-2030 pricing scenarios
• Evaluate grid infrastructure capacity at target industrial sites, including available power, voltage stability, and connection upgrade timelines
• Screen HTHP vendors for processes below 200 °C, prioritizing food, beverage, pharmaceutical, and chemical applications with the shortest payback periods
• Model green hydrogen cost trajectories in target geographies, incorporating electrolyzer capex forecasts, renewable electricity PPAs, and water availability constraints
• Investigate concessional financing availability through multilateral development banks and national green industry programs for industrial heat projects in emerging markets
• Monitor pilot-to-commercial scaling timelines for Electra, Rondo Energy, and Synhelion as indicators of next-generation technology readiness
• Establish partnerships with local utilities and grid operators to negotiate industrial electricity tariffs and demand response arrangements for large electrification loads

FAQ

Q: Which industrial heat applications offer the fastest payback for electrification in emerging markets? A: Processes below 200 °C in the food, beverage, dairy, and pharmaceutical sectors offer the fastest payback, typically 2 to 4 years, when using high-temperature heat pumps. These applications benefit from the COP multiplier (delivering 2 to 4.5 units of heat per unit of electricity), low technical risk, and compatibility with existing process equipment. In India and Brazil, where industrial gas prices are relatively high and renewable electricity is cheap, payback periods can fall below 2 years for large-scale installations above 5 MW thermal.

Q: How does CBAM change the investment calculus for emerging market steel and cement producers? A: CBAM creates a direct financial penalty for carbon-intensive exports to the EU, effectively equalizing the carbon cost between EU producers (who pay ETS carbon prices of $55 to $75 per tonne of CO2) and importers. For Indian steel, this adds $90 to $140 per tonne of product cost. For cement, the premium is $60 to $95 per tonne. These penalties shift the cost-benefit analysis: investing $40 to $60 per tonne in electrification or hydrogen-based decarbonization becomes economically rational when the alternative is paying CBAM certificates at EU carbon prices. Producers who decarbonize early will capture a competitive advantage as CBAM free allocations phase out completely by 2034.

Q: What is the realistic timeline for green hydrogen to reach cost parity with coal for steelmaking in emerging markets? A: At current trajectories, green hydrogen production costs in India are expected to reach $2.00 to $2.50/kg by 2029 to 2030, driven by electrolyzer cost reductions (currently $600 to $900/kW, projected to reach $250 to $400/kW by 2030) and continued declines in renewable electricity costs. At $2.00/kg, green hydrogen-based DRI becomes cost-competitive with coal-based blast furnace steelmaking when CBAM or domestic carbon pricing above $40/tonne CO2 is factored in. Without carbon pricing, cost parity requires hydrogen below $1.50/kg, which is not expected before 2032 to 2035 in most emerging markets.

Q: How do industrial heat batteries compare to direct electrification for high-temperature applications? A: Industrial heat batteries, such as those developed by Rondo Energy and Antora Energy, store renewable electricity as thermal energy in materials like iron oxide or carbon blocks and discharge heat at temperatures up to 1,500 °C over extended periods. Their advantage over direct electrification is the ability to decouple electricity consumption from heat delivery, enabling facilities to charge during low-cost renewable generation windows and discharge continuously during production. Capital costs range from $50 to $100/kWh of thermal storage capacity, and round-trip efficiency is 80 to 95% depending on discharge temperature. For applications requiring continuous high-temperature heat in regions with variable renewable generation, heat batteries can reduce delivered energy costs by 20 to 35% compared to grid-plus-battery-storage configurations.

Sources

• International Energy Agency. (2025). World Energy Outlook 2025: Industrial Heat Decarbonization Pathways. Paris: IEA.
• BloombergNEF. (2026). Industrial Decarbonization Market Outlook 2026: Electrification, Hydrogen, and Carbon Capture. London: BNEF.
• World Bank. (2025). State and Trends of Carbon Pricing 2025. Washington, DC: World Bank Group.
• McKinsey & Company. (2025). The Green Steel Opportunity: Emerging Market Pathways to Near-Zero-Emission Steelmaking. Mumbai: McKinsey.
• Asian Development Bank. (2025). Financing Industrial Decarbonization in South and Southeast Asia. Manila: ADB.
• International Renewable Energy Agency. (2025). Innovation Outlook: High-Temperature Heat Pumps for Industrial Applications. Abu Dhabi: IRENA.
• Rocky Mountain Institute. (2025). Reinventing Industrial Heat: The Business Case for Electrification in Emerging Markets. Boulder, CO: RMI.