Trend watch: Industrial heat & high-temp electrification in 2026 — signals, winners, and red flags

Industrial process heat accounts for approximately 75% of manufacturing emissions across the European Union, yet only 7 TWh of this demand is currently served by electric heat pumps—a fraction of the 722 TWh technically addressable with today's technology (European Heat Pump Association, 2024). This represents a hundredfold scaling opportunity that is now accelerating rapidly. The EU industrial electric heating equipment market reached USD 1.9 billion in 2024 and is projected to grow at 8.6% CAGR through 2034, while the industrial heat pump segment specifically hit USD 426.3 million with 6.5% annual growth (Global Market Insights, 2025). As high-temperature systems now reach 200°C commercially—with R&D targeting 300°C by 2035—the technical barriers that once protected fossil fuel incumbents are eroding faster than most energy transition models anticipated.

Why It Matters

The electrification of industrial heat sits at the intersection of three converging pressures: regulatory mandates, grid economics, and corporate decarbonization commitments. The EU Clean Industrial Deal, announced in February 2025, explicitly targets increasing economy-wide electrification from 23% to 32% by 2030—an unprecedented nine-percentage-point shift that will require massive industrial adoption (European Commission, 2025).

For energy-intensive industries—steel, chemicals, cement, glass, food processing—process heat typically represents 50-80% of site energy consumption. Traditional approaches using natural gas, coal, or fuel oil face mounting carbon costs under the EU Emissions Trading System, where allowance prices exceeded €80 per tonne in 2024. For a typical chemical plant consuming 100 GWh of thermal energy annually, this translates to €15-20 million in annual carbon costs at current emission intensities—a figure large enough to shift procurement decisions toward electrified alternatives.

The opportunity is sector-specific but substantial. According to Agora Industry's 2024 analysis, direct electrification can feasibly replace "the vast majority of fossil fuels" for industrial process heat across all major sectors by 2035. This assessment represents a significant upgrade from earlier studies that positioned hydrogen and carbon capture as the primary decarbonization pathways for industrial heat.

Key Concepts

Temperature Tiers and Technology Readiness

Industrial heat applications span a wide temperature range, each requiring different electrification technologies:

Low temperature (<100°C): Primarily addressed by commercial heat pumps achieving COP of 3-5. Applications include preheating, space heating, and low-grade process heating in food and beverage, pharmaceuticals, and pulp and paper. Technology is mature and cost-competitive with natural gas in many EU markets.

Medium temperature (100-400°C): Served by high-temperature heat pumps (up to 200°C), electric boilers, and resistance heating. Recent breakthroughs include GEA's pentane-based systems reaching 135-160°C deployed commercially in 2025. This tier represents the largest immediate opportunity, covering pasteurization, drying, distillation, and steam generation.

High temperature (>400°C): Requires electric arc furnaces, induction heating, plasma torches, or emerging technologies. Applications include steel reheating, glass melting, and cement calcination. While technically demonstrated, commercial deployment remains limited to sectors like steel mini-mills where electric arc furnaces have operated for decades.

Retrofit Workflows

Industrial electrification rarely involves greenfield construction. Most projects require retrofitting existing facilities, creating specific workflow challenges:

1. Site assessment: Comprehensive energy audit identifying heat demand profiles, temperature requirements, and integration points with existing systems
2. Grid capacity evaluation: Assessment of available electrical supply, substation capacity, and upgrade requirements—often the binding constraint
3. Technology selection: Matching heat pump, electric boiler, or hybrid configurations to process requirements
4. Business case development: Modeling capital expenditure, operational savings, carbon cost avoidance, and available incentives
5. Permitting and grid connection: Navigating electrical connection applications, environmental permits, and construction approvals
6. Installation and commissioning: Typically 12-24 months for large-scale industrial installations

Grid Infrastructure Constraints

The grid has emerged as the decisive bottleneck for industrial electrification. Over 40% of European distribution grids are now more than 40 years old and approaching end-of-life (European Investment Bank, 2025). In Spain, 83.4% of network nodes are already saturated—and this is one of Europe's most advanced grid systems.

The scale of the queue is staggering: 1,700 GW of renewable and clean energy projects are currently stuck in connection queues across 16 European countries, representing six times Germany's total installed generation capacity (Clean Air Task Force, 2025). In 2024 alone, grid bottlenecks caused 72 TWh of renewable electricity curtailment—equivalent to Austria's annual consumption—at a cost of €8.9 billion in compensation payments.

Sector-Specific KPI Benchmarks

Sector	Typical Process Temp	Electrification Potential	Current Adoption Rate	Payback Period (years)	Primary Technology
Food & Beverage	60-150°C	High (80%+)	15-25%	3-5	Heat pumps, electric boilers
Pulp & Paper	100-200°C	High (70%+)	8-12%	4-6	Steam heat pumps, MVR
Chemicals	100-400°C	Medium-High (50-70%)	5-10%	5-8	High-temp heat pumps, e-boilers
Primary Metals	200-1,500°C	Medium (40-60%)	3-8%	6-10	Electric arc, induction
Cement & Glass	1,000-1,500°C	Low-Medium (20-40%)	<3%	8-15+	Plasma, electric melters
Refineries	200-600°C	Medium (35-50%)	2-5%	6-12	Hybrid systems, e-crackers

What's Working

Incentive Alignment Through Auctions

The EU Innovation Fund's first-ever Industrial Heat Auction, launched in December 2025, represents a paradigm shift in policy design. With €1 billion allocated specifically for industrial heat decarbonization, the auction mechanism awards funding based on cost per tonne of CO₂ avoided—directly linking support to climate outcomes rather than technology preferences (CINEA, 2025).

The program is structured across three temperature windows: €150 million for medium-temperature installations (100-400°C) at 3-5 MW thermal capacity, €350 million for larger medium-temperature systems above 5 MW, and €500 million for high-temperature applications above 400°C. Spain has added €30 million in national co-funding, demonstrating the model for member state amplification.

Technology Performance Improvements

High-temperature heat pump capabilities have advanced faster than industry anticipated. GEA's February 2025 deployment at Tiense Suiker in Belgium achieved 135-160°C using pentane refrigerant (R601)—temperatures previously thought to require alternative technologies (GEA, 2025). Mayekawa's CO₂ cascade systems now reliably deliver 120°C for industrial applications, while Heaten's HeatBooster technology, developed in partnership with INNIO, targets up to 200°C with modular 1-50 MW configurations.

These advances mean that approximately 37% of EU industrial heat demand—everything below 200°C—is now technically addressable with proven, commercially available heat pump technology.

Demonstrated Project Economics

Leading projects are proving the financial case. BASF's 50 MW heat pump installation at Ludwigshafen, developed with GIG Karasek and scheduled for commissioning in mid-2027, will generate 60 metric tonnes of steam per hour while eliminating 100,000 tonnes of CO₂ annually (BASF, 2024). The project reduces greenhouse gas emissions from formic acid production by 98%, demonstrating that electrification can achieve near-complete decarbonization for specific process lines.

What's Not Working

Grid Connection Delays

Despite technical readiness and favorable economics, grid constraints are stranding projects. Spain alone has €60 billion in clean energy investments at risk due to connection bottlenecks, with only 10% of connection requests authorized, 40% pending, and 50% rejected outright (ECFR, 2025). The country built only "a few hundred kilometers of new lines" while adding several gigawatts of solar capacity in recent years—a mismatch that exemplifies the continent-wide infrastructure gap.

The EU's European Grids Package, announced in December 2025, acknowledges this crisis but implementation will take years. For industrial projects, grid capacity has become "the decisive limitation"—more constraining than labor, capital, or facility permitting.

Electricity Price Competitiveness

EU electricity prices for energy-intensive industries remain approximately 2x higher than the United States and 50% above China (Eurelectric, 2025). After declining from 2022 peaks, wholesale prices in many markets began rising again in late 2024, compressing the operating cost advantage of electrification relative to natural gas.

France's relatively stable nuclear-based electricity pricing has enabled that country to capture 14% of the EU industrial electric heating equipment market (USD 271.8 million in 2024). But for manufacturers in Germany or Italy facing higher and more volatile electricity costs, the business case remains challenging without substantial incentive support.

Skills and Supply Chain Gaps

The European heat pump market saw a 22% decline in overall sales in 2024, with Germany, Denmark, and the Netherlands each experiencing 30% drops (EHPA, 2025). While industrial and commercial systems—particularly in Italy—showed resilience with double-digit growth, the residential downturn has created workforce instability that affects the broader ecosystem.

Installer shortages, component lead times, and engineering capacity constraints continue to delay projects. The Danfoss scroll compressor launched in February 2025 addresses one supply chain bottleneck, but similar capacity investments are needed across transformers, switchgear, and specialized heat exchanger components.

Key Players

Established Leaders

GEA (Germany): Global leader in industrial refrigeration and heat pump systems. Deployed landmark pentane-based high-temperature heat pump at Tiense Suiker (Belgium) reaching 135-160°C. Systems range from 150 kW to 10+ MW thermal output with ammonia and hydrocarbon refrigerants.

Siemens Energy (Germany): Major provider of large-scale industrial electrification solutions with €6.5 billion+ annual R&D investment across energy technologies. Partnership with Air Liquide for gigawatt-scale electrolyzer production supports hydrogen-electric hybrid approaches.

BASF (Germany): Leading industrial customer and technology developer. Operating demonstration e-cracker at Ludwigshafen; constructing 50 MW industrial heat pump; transitioning European Performance Materials and Intermediates divisions to 100% renewable electricity as of 2025.

Danfoss (Denmark): Component supplier enabling industrial heat pump adoption. Launched new scroll compressor for industrial heating electrification in February 2025. Technology roadmap targets broader temperature ranges and capacity scales.

Emerging Startups

Heaten (Norway): Developer of HeatBooster technology reaching 200°C in modular 1-50 MW configurations. Founded 2020 with €30 million+ R&D investment and 60,000+ hours of testing. Strategic partnership with INNIO provides global service network and 600+ engineers for deployment.

Exergy (Italy): Specialist in ORC and large-scale heat pump systems above 1 MW thermal, focusing on industrial waste heat recovery and process integration applications.

JOA Air Solutions (Netherlands): Industrial retrofit engineering firm providing pre-engineering studies, system integration, and heat exchanger design for complex high-temperature applications.

Key Investors & Funders

EU Innovation Fund: €40 billion committed 2020-2030 from ETS revenues. 2025 cycle includes €1 billion dedicated Industrial Heat Auction—first mechanism specifically targeting process heat decarbonization.

European Investment Bank: Providing €581.8 million to Eni for Livorno biorefinery transformation (July 2025); actively financing grid infrastructure upgrades essential for industrial electrification.

German Federal Ministry for Economic Affairs (BMWK): Funding BASF's Ludwigshafen heat pump project; BEG program offers 30-70% upfront cost subsidies with 76% of 2024 applicants claiming natural refrigerant bonus.

Examples

BASF Ludwigshafen Heat Pump

BASF's flagship industrial heat pump project at Ludwigshafen represents the largest installation of its kind in the European chemical sector. The 50 MW thermal system, developed in partnership with GIG Karasek, will generate 60 metric tonnes of steam per hour—equivalent to 500,000 metric tonnes annually. Groundbreaking occurred in September 2024 with commissioning scheduled for mid-2027. The installation will reduce CO₂ emissions from formic acid production by 98% (100,000 tonnes annually), demonstrating that electrification can achieve near-complete decarbonization for specific chemical processes. The project received funding support from Germany's Federal Ministry for Economic Affairs and Energy.

GEA at Tiense Suiker

GEA's February 2025 deployment at Tiense Suiker in Belgium marked a commercial breakthrough for high-temperature heat pump technology. Using pentane refrigerant (R601), the system achieves outlet temperatures of 135-160°C—a range previously considered out of reach for heat pump technology and typically served by natural gas boilers. The installation supports sugar production processes requiring medium-high temperature steam. This deployment validates that industrial heat pumps can now address applications across the entire food and beverage sector, expanding the addressable market significantly beyond previous 80-95°C limitations.

ThyssenKrupp Bochum Electrical Steel

ThyssenKrupp's €300 million modernization of its Bochum electrical steel facility demonstrates the interplay between industrial electrification and the energy transition supply chain. The new annealing and isolating line (€150 million), operational as of January 2025, produces 200,000+ metric tonnes annually of ultra-thin electrical steel sheets (0.2 mm) essential for EV motors and generators. While not directly an electrification-of-heat project, the investment illustrates how industrial decarbonization creates demand for materials that themselves enable electrification—a virtuous cycle that policy frameworks are beginning to recognize and support.

Action Checklist

• Commission comprehensive energy audit identifying heat demand profiles, temperature requirements, and electrification opportunities at each production stage
• Engage with grid operators early to assess connection capacity and understand queue timelines—this is increasingly the binding constraint
• Evaluate eligibility for EU Innovation Fund Industrial Heat Auction (deadline February 19, 2026) and national incentive programs like Germany's BEG scheme
• Request proposals from established heat pump suppliers (GEA, Mayekawa, Heaten) for systems matching your temperature and capacity requirements
• Develop detailed business case modeling CapEx, OpEx savings, carbon cost avoidance, and available subsidies across realistic 10-year horizon
• Assess supply chain lead times for critical components including transformers, switchgear, and specialized heat exchangers
• Plan phased implementation starting with lowest-temperature applications where technology is most mature and payback periods shortest
• Establish monitoring systems to document emissions reductions for regulatory compliance and potential carbon credit generation

FAQ

Q: What temperature ranges can industrial heat pumps now reliably serve? A: Commercial systems now reach 200°C, with R&D targeting 300°C by 2035. Standard ammonia systems deliver 85-95°C; CO₂ cascade systems reach 90-120°C; and new pentane-based technology achieves 135-160°C as demonstrated by GEA's 2025 deployment at Tiense Suiker. For most food processing, pulp and paper, and many chemical applications, current technology is sufficient. High-temperature applications above 400°C (steel, cement, glass) require electric arc furnaces, induction heating, or plasma technologies that are proven but capital-intensive.

Q: How long does industrial heat electrification typically take from decision to operation? A: Expect 24-48 months for large-scale installations (5+ MW thermal). Site assessment and technology selection typically require 3-6 months; business case development and board approval another 3-6 months; grid connection applications and permitting 6-18 months (increasingly the critical path); procurement and installation 12-18 months; commissioning and optimization 3-6 months. Smaller installations (under 2 MW) can complete in 12-18 months when grid capacity is available.

Q: What payback periods are realistic for industrial heat pump installations? A: Payback varies significantly by sector, temperature requirement, electricity pricing, and available incentives. Food and beverage applications at low-medium temperatures typically achieve 3-5 year paybacks. Chemical sector projects requiring higher temperatures see 5-8 year returns. Heavy industry applications in steel or cement may require 8-15+ years without substantial carbon pricing or incentive support. With EU Innovation Fund support covering up to 60% of relevant costs, paybacks can compress by 40-50%.

Q: How should companies prioritize given grid connection constraints? A: Grid capacity has become the decisive limitation for many projects. Companies should: (1) engage grid operators early—before finalizing project scope—to understand connection timelines; (2) prioritize sites with existing high-capacity electrical connections; (3) consider on-site renewable generation (rooftop solar, behind-the-meter storage) to reduce grid dependency; (4) evaluate locations in regions with active grid modernization programs. In some cases, choosing a different facility with better grid access may be more practical than waiting years for connection at a constrained site.

Q: What distinguishes successful retrofit projects from those that stall or fail? A: Analysis of 2024-2025 deployments identifies three critical success factors. First, early grid engagement—projects that began connection discussions in feasibility stage rather than after technology selection experienced 40-60% shorter timelines. Second, phased implementation—starting with lowest-temperature applications builds organizational capability and demonstrates returns before tackling more challenging high-temperature processes. Third, securing locked-in incentives—projects with confirmed Innovation Fund or national subsidy commitments proceeded even through commodity price volatility, while those dependent on future incentive rounds often stalled.

Sources

• European Heat Pump Association (EHPA). "Industrial Heat Pumps Position Paper." March 2025. https://www.ehpa.org
• Global Market Insights. "Europe Industrial Electric Heating Equipment Market Size Report 2034." January 2025. https://www.gminsights.com
• European Commission. "EU Clean Industrial Deal." February 2025. https://commission.europa.eu
• Agora Industry. "Direct Electrification of Industrial Process Heat." 2024. https://www.agora-industry.org
• European Climate, Infrastructure and Environment Executive Agency (CINEA). "Innovation Fund 2025 Industrial Heat Auction." December 2025. https://cinea.ec.europa.eu
• GEA Group. "Heat Pumps: Key Technology for the Energy Transition." February 2025. https://www.gea.com
• BASF SE. "Groundbreaking Ceremony for Industrial Heat Pump at Ludwigshafen." September 2024. https://www.basf.com
• Clean Air Task Force. "EU Grid Package: Three Areas Demanding Immediate Action." November 2025. https://www.catf.us
• European Council on Foreign Relations (ECFR). "A Brighter Future: Why Upgrading the Grid Is Vital for Europe's Competitiveness." 2025. https://ecfr.eu
• International Energy Agency (IEA). "Electricity Mid-Year Update 2025." June 2025. https://www.iea.org
• European Investment Bank. "Investment Needed to Upgrade Europe's Electricity Grids." 2025. https://www.eib.org
• Eurelectric. "Power Barometer 2025: In Shape for the Future." 2025. https://powerbarometer.eurelectric.org