Market map: Industrial heat & high-temp electrification — the categories that will matter next

Industrial heat accounts for roughly 23% of global CO2 emissions and approximately 50% of total industrial energy demand, according to the International Energy Agency. Yet fewer than 5% of industrial heat processes above 400 degrees Celsius currently use electrified solutions. As carbon pricing regimes tighten across Europe and new technology pathways reach commercial readiness, the categories within industrial heat electrification are shifting. This market map identifies the solution segments gaining traction, the players defining each category, and the whitespace opportunities that will shape investment and procurement decisions over the next two to three years.

Why It Matters

Industrial heat is the backbone of manufacturing, covering everything from low-temperature drying and pasteurization (below 150 degrees Celsius) to ultra-high-temperature processes in steelmaking, cement production, and glass manufacturing (above 1,500 degrees Celsius). Historically, these processes have relied on natural gas, coal, and fuel oil because fossil fuels offered reliable, cost-effective high-temperature output.

Three forces are accelerating the shift toward electrified alternatives. First, EU Emissions Trading System (ETS) carbon prices have stabilized above 80 euros per tonne of CO2 since mid-2024, fundamentally changing the economics of fossil-fired furnaces and kilns. For energy-intensive industries, carbon costs now represent 15 to 25% of total energy expenditure, making clean alternatives competitive at price points that were uneconomic five years ago. Second, the EU Carbon Border Adjustment Mechanism (CBAM) entered its transitional phase in 2023 and will apply full financial adjustments from 2026, creating a level playing field that penalizes carbon-intensive imports. Third, corporate net-zero commitments are translating into capital allocation decisions: more than 60% of European steel and cement producers have announced electrification or hydrogen switching plans for at least one production line by 2030.

For sustainability professionals, understanding this market map is essential because procurement decisions made in the next 24 months will lock in technology choices for 15 to 30 years of asset life.

Key Concepts

Temperature tiers define the market segmentation. Low-temperature heat (below 200 degrees Celsius) serves food processing, textiles, and chemicals. Medium-temperature heat (200 to 1,000 degrees Celsius) covers ceramics, glass annealing, and chemical reactions. High-temperature heat (above 1,000 degrees Celsius) includes steelmaking, cement clinker production, and aluminum smelting. Each tier has different electrification readiness and incumbent technology profiles.

Electric arc furnaces (EAFs) use electricity to melt scrap steel or direct reduced iron. EAFs already account for approximately 30% of global steel production and are the primary pathway for electrified steelmaking. When paired with renewable electricity and green hydrogen-based direct reduced iron, EAFs can reduce steelmaking emissions by 90% or more compared to blast furnace-basic oxygen furnace routes.

Industrial heat pumps use electricity to upgrade waste heat or ambient heat to usable process temperatures. Current commercial units reach up to 160 degrees Celsius, with demonstration units targeting 200 degrees Celsius. They offer coefficients of performance (COP) of 2.5 to 5.0, meaning each unit of electricity delivers 2.5 to 5 units of thermal energy.

Resistance and induction heating use direct electrical energy conversion to heat materials. Resistance furnaces pass current through heating elements to generate temperatures up to 1,800 degrees Celsius. Induction heating uses electromagnetic fields to heat conductive materials, commonly used in metal forging and heat treatment.

Concentrated solar thermal (CST) focuses sunlight to generate high-temperature heat for industrial processes. Pilot installations in Spain, Morocco, and Australia have demonstrated temperatures above 1,000 degrees Celsius, though commercial deployment for industrial heat remains limited to specific geographies and processes.

Plasma and microwave heating represent emerging electrification pathways for ultra-high-temperature applications. Plasma torches can reach temperatures above 5,000 degrees Celsius and are being piloted for cement and waste processing. Microwave heating offers volumetric and selective heating capabilities for chemical processes and mineral processing.

What's Working

Electric arc furnace steelmaking is scaling rapidly in Europe. ArcelorMittal commissioned its first hydrogen-ready EAF at its Sestao plant in Spain in 2025, with capacity to produce 1.6 million tonnes of low-carbon steel annually. The project received 460 million euros in EU Innovation Fund support. Across Europe, EAF capacity additions announced between 2023 and 2025 total approximately 25 million tonnes, representing a 40% increase over existing European EAF capacity. The economics are increasingly favorable: at carbon prices above 80 euros per tonne, EAF production costs are at parity with blast furnace routes for flat steel products when scrap steel is available.

Industrial heat pumps are displacing gas boilers in food and chemical processing. Vattenfall partnered with dairy producer Arla Foods in 2024 to install a 25 MW heat pump system at a Swedish processing facility, replacing natural gas boilers and reducing site emissions by 80%. The payback period was 4.5 years at current energy prices. Across Europe, industrial heat pump installations grew 35% year-over-year in 2025, driven by natural gas price volatility and carbon cost exposure. Companies like SPH Sustainable Process Heat (now part of Johnson Controls) and Olvondo Technology are reporting order backlogs extending 12 to 18 months.

Resistance heating for cement and ceramics is moving beyond pilot stage. LEILAC (Low Emissions Intensity Lime and Cement) technology, developed by Calix and backed by the EU Horizon program, uses indirect electric heating to capture process CO2 from limestone calcination. The LEILAC-2 demonstration at HeidelbergCement's plant in Hanover, Germany, is processing 100,000 tonnes of limestone per year, with plans to scale to full commercial capacity by 2028. The approach captures over 95% of process emissions without requiring post-combustion carbon capture equipment.

Green hydrogen direct reduction is reaching industrial scale. SSAB's HYBRIT project in Sweden produced the world's first fossil-free sponge iron in 2021 and delivered the first commercial quantities of fossil-free steel in 2022. H2 Green Steel's facility in Boden, Sweden, is under construction with a target capacity of 2.5 million tonnes per year by 2026. The project has secured 6.5 billion euros in financing, including loans from the European Investment Bank.

What's Not Working

Ultra-high-temperature electrification above 1,500 degrees Celsius remains technically challenging. While plasma and microwave technologies show promise in laboratory settings, no commercial-scale deployment exists for cement clinker production or glass melting at the temperatures required. Electrode materials degrade rapidly at sustained temperatures above 1,500 degrees Celsius, and energy conversion efficiencies drop below 60% for many plasma applications. The technology readiness level for these applications is estimated at TRL 4 to 6, meaning three to seven years to commercial deployment.

Grid capacity is a binding constraint in key industrial regions. The Ruhr Valley in Germany, the industrial corridor of northern France, and the Benelux chemicals cluster all face transmission bottlenecks that limit electrification of existing industrial sites. Connecting a single large EAF to the grid requires 200 to 500 MW of firm capacity, equivalent to the electricity demand of a small city. Grid reinforcement timelines in the EU average seven to twelve years from application to commissioning, far longer than the industrial transition timelines set by policy.

Concentrated solar thermal has limited geographic applicability. While CST can deliver temperatures above 1,000 degrees Celsius, the technology requires direct normal irradiance above 2,000 kWh per square meter per year for economic viability. This limits deployment to southern Europe, the Middle East, and parts of Australia. For the majority of European heavy industry located in northern latitudes, CST is not a viable primary heat source.

Capital costs for electrification remain higher than fossil alternatives in many sectors. An electric resistance kiln for ceramics production costs 2.5 to 4 times more than a conventional gas-fired kiln of equivalent capacity. While operating cost savings from avoided carbon costs and lower electricity prices per unit of useful heat can offset this premium, the upfront capital barrier deters investment, particularly for SMEs with limited access to green financing.

Hydrogen supply and cost remain uncertain for large-scale adoption. Green hydrogen prices in Europe ranged from 5 to 8 euros per kilogram in 2025, compared to a target of 2 euros per kilogram needed for cost parity with natural gas in most industrial heating applications. Electrolyzer capacity in Europe reached approximately 2 GW by end of 2025, well below the 40 GW target for 2030 outlined in the REPowerEU plan.

Key Players

Established Leaders

• ArcelorMittal: The world's largest steelmaker outside China, investing over 10 billion euros in decarbonization including EAF conversions across six European sites by 2030.
• Siemens Energy: Supplier of electric heating systems, grid connection infrastructure, and electrolyzer technology for industrial applications. Active across all temperature tiers.
• Linde: Major industrial gas company providing hydrogen supply infrastructure and engineering services for hydrogen-based direct reduction and process heating.
• ABB: Provider of electric furnace technology, power electronics, and industrial automation systems for electrified heating processes.
• HeidelbergCement (Heidelberg Materials): Largest European cement producer, leading deployment of electric calcination through the LEILAC partnership and investing in carbon capture integration.

Emerging Startups and Platforms

• H2 Green Steel: Building Europe's first large-scale green hydrogen-based steel plant in Boden, Sweden. Has secured customer agreements with Volkswagen, BMW, and Scania.
• Calix: Developer of the LEILAC indirect electric calcination technology for cement and lime production. Listed on the ASX with European pilot operations.
• Electra: US-based startup developing low-temperature iron electrorefining that produces pure iron at under 100 degrees Celsius using electricity, eliminating the need for blast furnaces or traditional direct reduction.
• Olvondo Technology: Norwegian company developing high-temperature thermal energy storage (up to 1,200 degrees Celsius) integrated with electric heating for continuous industrial processes.
• Antora Energy: Developer of solid-state thermal batteries that store renewable electricity as heat at over 1,500 degrees Celsius and deliver it as industrial process heat or electricity on demand.

Key Investors and Funders

• EU Innovation Fund: The primary European funding mechanism for industrial decarbonization, allocating over 10 billion euros through 2030. Has funded ArcelorMittal, LEILAC, and multiple hydrogen projects.
• Breakthrough Energy Ventures: Investor in Antora Energy, Electra, and other early-stage industrial heat electrification companies. Fund size exceeds $3.5 billion across multiple vehicles.
• European Investment Bank (EIB): Provided over 4 billion euros in loans for industrial decarbonization projects between 2023 and 2025, including H2 Green Steel and ArcelorMittal.

Action Checklist

1. Map your heat demand by temperature tier. Categorize all thermal processes by temperature range, energy intensity, and current fuel source. Identify which processes fall below 200 degrees Celsius (immediately electrifiable with heat pumps), between 200 and 1,000 degrees Celsius (resistance or induction heating), and above 1,000 degrees Celsius (EAF, hydrogen, or emerging technologies).
2. Assess grid connection capacity. Request a grid capacity assessment from your transmission system operator for current and projected electricity demand under electrification scenarios. Begin grid connection applications early, as lead times of seven or more years are common in the EU.
3. Evaluate carbon cost exposure. Calculate the annual ETS cost of current fossil-fired heating and model the cost trajectory at carbon prices of 100, 120, and 150 euros per tonne. Use this to build the business case for electrification capital expenditure.
4. Engage technology providers for feasibility studies. For processes below 200 degrees Celsius, request proposals from industrial heat pump manufacturers. For steel and metals, evaluate EAF conversion pathways. For cement and lime, explore LEILAC and similar electric calcination technologies.
5. Secure funding and financing early. Apply to the EU Innovation Fund, national recovery and resilience plans, and green bond programs. Capital-intensive transitions benefit from layered financing structures combining grants, concessional loans, and commercial debt.
6. Pilot before committing to full-scale conversion. For technologies at TRL 7 or below, invest in pilot-scale demonstrations at a single production line before committing to site-wide conversion. Build internal expertise and generate performance data for investment decisions.
7. Monitor hydrogen cost trajectories and supply commitments. For processes that require hydrogen as a reductant or fuel, secure supply agreements or co-invest in dedicated electrolyzer capacity rather than relying on spot market availability.

FAQ

Which industrial heat processes can be electrified today? Processes below 200 degrees Celsius (drying, pasteurization, sterilization) can be electrified using commercial heat pumps with payback periods of three to six years. Steelmaking via EAF is commercially proven. Resistance and induction heating cover most metal heat treatment applications up to 1,800 degrees Celsius. Cement calcination and glass melting above 1,500 degrees Celsius remain in pilot or demonstration stages.

How does the EU ETS affect the economics of industrial heat electrification? At carbon prices above 80 euros per tonne, electrification of low- and medium-temperature processes is at or near cost parity with natural gas in most European jurisdictions when avoided carbon costs are included. For high-temperature processes, the crossover point depends on local electricity prices and grid connection costs, but is generally in the range of 100 to 120 euros per tonne of CO2.

What is the role of hydrogen versus direct electrification? Direct electrification (heat pumps, resistance, induction, EAF with scrap) is more energy-efficient than hydrogen-based heating for most applications because it avoids the conversion losses of electrolysis and hydrogen combustion. Hydrogen is primarily needed where it serves as a chemical reductant (replacing carbon in iron ore reduction) or where ultra-high temperatures and specific flame characteristics are required.

What are the biggest barriers to scaling industrial heat electrification in Europe? Grid capacity and connection timelines are the most frequently cited barriers by industrial operators, followed by upfront capital costs and technology maturity for ultra-high-temperature applications. Policy uncertainty around ETS free allocation phase-out and CBAM implementation details also affects investment timing.

Sources

1. International Energy Agency. "Industry: Tracking Clean Energy Progress." IEA, 2025.
2. European Commission. "EU Emissions Trading System: Market Stability Reserve and Allowance Prices." EC, 2025.
3. ArcelorMittal. "Climate Action Report 2025." ArcelorMittal, 2025.
4. HYBRIT Development AB. "Summary of Findings from HYBRIT Pilot Operations 2021-2025." SSAB/LKAB/Vattenfall, 2025.
5. Calix Ltd. "LEILAC-2 Progress Report: Electric Calcination at Scale." Calix, 2025.
6. European Investment Bank. "Climate and Energy Lending Review 2025." EIB, 2025.
7. Agora Energiewende. "Industrial Heat Decarbonisation Pathways for Europe." Agora, 2025.