How to decarbonise your steam grid while technology, infrastructure, and policy remain uncertain

Multiple forces are currently powering industry’s transition towards a decarbonised future, particularly in relation to steam production processes. The relentless financial imperative for enhanced efficiency and sustainable production is shaping the survival prospects of industrial players.

Organisations are under pressure from strict climate goals such as the Net-Zero Industry Act and the Green Deal Industrial Plan, governmental regulations, and market commitments. These are particularly impactful for publicly traded industrial companies.

What are the key challenges shaping the decarbonisation efforts of the industrial sector? And what best practices can organisations follow to future-proof their steam grids?

Key challenges facing industry players

Demanding and unstable regulatory environment

While climate objectives are becoming stricter, industrial players in Europe still face regulatory uncertainty. The Renewable Energy Directive (REDIII), Energy Efficiency Directive (EED) and Gas Package are two examples of regulations that are still not fully defined but will be very impactful.

Next to this, changes in political directions across European countries fail to provide the stable investment climate required for decarbonisation decision-making.

Infrastructure needs

Another example of uncertainty is the infrastructure needed to transition and decarbonise, such as additional electricity grids, H2 pipelines, and carbon capture and storage (CCS).

Delays seen in those types of projects are adding further uncertainty to investment decisions. For instance, the German energy company Uniper warned that the Dutch government’s four-year delay to the Delta Rhine Corridor (DRC), a network of hydrogen, CO2 pipelines, and new electricity cables, would sabotage its own climate policy.

Europe’s competition with other regions

Boardrooms across industrial companies need to consider the matter of competitiveness from a global standpoint and craft their strategies with global markets in mind, which may add to the uncertainty.

“We are in the middle of a deep, long valley, and it is still unclear how long we will have to pass through it," said Markus Steilemann, President of the Association of the Chemical Industry.

The Future of European Competitiveness, a 2024 report by Mario Draghi at the request of the European Commission, emphasised the need for Europe to prioritise reducing the innovation gap with the US and China. It also suggested that without coordinated strategies, decarbonisation may undermine competitiveness and growth.

Cost of power (left) and gas (right) for industries in the EU, China and the US (€/megawatt hour). Source: The Future of European Competitiveness.

How can industrial players move forward with their steam decarbonisation initiatives despite these hurdles? Here are three best practices that help organisations navigate this challenging landscape.

Best practice 1: Use external pressure such as Carbon Pricing and emission targets as momentum to implement initiatives

Steam process optimisation has become a critical priority as the cost of heat has surged dramatically. While historically heat and electricity costs were roughly equal, some sites had a doubling or even tripling of gas costs. This seismic shift is forcing organisations to rethink their energy strategies.

The sharp rise in heat prices has created a "burning platform" for industries, which can be managed by both addressing immediate risks and seizing opportunities for long-term change. This motivates industrial players to optimise their steam systems, reducing energy consumption, improving efficiency, and exploring alternative heat sources or technologies like heat recovery and cogeneration.

Cost reduction has always served as a key driver for initiatives launched in the industrial sector. The leaders we interviewed for our report Full steam ahead: The opportunity for industry in decarbonizing its steam grids (available for download here) agreed that while posing a challenge, the current market circumstances are a beneficial backdrop to projects that focus on optimising operation costs.

European refineries and chemical sites have always focused on efficiency, partly due to high personnel costs, making them some of the most efficient organisations on the global scale. Carbon accounting approaches such as calculating the internal carbon cost or fixed ceilings may strengthen this cost imperative even further as decarbonisation and cost optimisation go hand in hand. Such measures are now essential for industrial players to mitigate the financial strain and remain competitive.

“If the economic viability of Germany as a location is questionable, then the investments in the industry are taken elsewhere.”

Energy Business Developer, Petrochemical Company

Best practice 2: Create a long-term “charcoal sketch” per site to support decision-making, driving an end-to-end view supported by modern modeling techniques

Building a long-term roadmap

The leaders we interviewed pointed to the common practice among top players of first creating a long-term, high-level roadmap for a site and then checking each short-term action against it to stay on the right track.

The high-level plan sets the direction for the next decade or more, while decarbonisation-related plans can be crystalised to match set target dates, such as 2030. Even when uncertainties cloud a strategic plan, there is always a preferred path. Iterations are possible as some uncertainties become clearer.

Since technologies are constantly evolving, companies can benefit from outlooks of installed volume and their cost. For example, an organisation can first focus on reducing demand to reduce the level of electrification required later. A different motivation is to avoid technical issues down the road.

A broader perspective

Another strategy our respondents pointed out was running a transition that doesn’t focus on solutions to specific problems but approaches steam optimisation holistically.

A full-steam system approach is needed for both no-capex optimisation and capex optimisation. A change of setpoint or equipment on one side of the system might impact the other side of the system.

Engineers often look for point solutions while forgetting the bigger picture or long-term future implications of the change, with some investment decisions having a lifespan of up to 20 years.

One of the interviewees mentioned an example of a site condensing 20 MW of 90°C heat at the top of a stack while the business unit next to it was heating water to 80°C for use. Looking across sites can help reduce energy needs.

Cascading effects of partial solutions

Considering the current level of integration in modern plants and industrial parks, organisations can expect the mean effects of partial solutions to cascade.

Leaders we surveyed suggested that partial or point solutions may generate effects down the line.

For example, electrifying a cracker may lead to a reduction in steam demand and, in turn, cause suboptimal outcomes related to the operational bandwidth. Another example is electrifying a spray dryer, which involves less residual heat upgrade and integration, which impacts the overall heat distribution.

Instead of looking for a single solution that will solve all future problems, organisations need to do the grunt work and understand how a set of small solutions implemented across the system can help unlock new opportunities.

Resourcing for both long and short term

Another related best practice is to allocate financial and human resources across both long- and short-term projects. This helps industrial players avoid the risk of losing the entire team to projects strictly related to decarbonisation efforts.

It's important to remember that since short-term measures focus on efficiency, their implementation frees up budget that industrial players can invest in other future initiatives. This way, short-term measures buy time towards planning over the long-term time horizon.

“Companies are now looking for silver bullets instead of digging into the details of advanced heat integration like pinch analyses boosted by heat pumps, MVR and similar heat recovery technologies.”

Industry Advisor, Strategy Consulting Firm

Best practice 3: Start by optimising the efficiency of your current system and act on what’s possible within its constraints

Improving your current system

Many of our interviewees indicated that they know that there is potential to improve their current system, even without significant hardware changes or shutdowns. Improving efficiency is also often the cheapest measure companies can take. In essence, it follows the essential rules of the Trias Energetica, especially the first one.

Driving efficiency in steam systems requires an end-to-end approach, however, considering the full steam system. Analysing all sources and sinks of heat and identifying potential solutions like Mechanical Vapor Recompression or Heat Transformers require looking at the system in its entirety.

Seeing the bigger picture

Additionally, organisations cannot decommission or change an element with confidence that everything will run smoothly.

Every alteration needs to be considered from a bird’s eye perspective at the level of the broader plant complex and the individual plant or system. Forgetting about the bigger picture may lead to one solution causing issues in other parts of the system.

Decision-making despite uncertainty

Recognising uncertainty as a contributing factor is important. However, decisions still need to be made to continue the project flow, and – as the leaders we interviewed pointed out – many projects are still viable even with constraints present. This is especially true for heat integration initiatives.

The leaders we interviewed emphasised this point, suggesting that organisations should consider projects that are feasible with limitations in place. If they don’t act and postpone initiatives, they will inevitably deal with a massive volume of requirements forced by carbon pricing and regulations. Engineering firms and contractors may not be able to help companies meet these requirements on time

“Companies that can take a long-term view often have the transition plans, allowing them to make short-term decision on the basis of this.”

Technology Manager, Basic Chemicals Player

Wrap up

The transition towards decarbonising industrial steam production is driven by financial pressures for efficiency and strict climate regulations like the Net-Zero Industry Act. However, industries face challenges such as regulatory uncertainty, infrastructure delays, and global competition.

To navigate these hurdles, organisations should leverage external pressures like carbon pricing to optimise steam systems, create long-term roadmaps for decision-making, and focus on improving current system efficiency within existing constraints.

These best practices help organisations balance short-term efficiencies with long-term sustainability, ensuring competitiveness and regulatory compliance in a decarbonising world.

To learn more about other best practices for decarbonising steam grids, check out our report Full steam ahead: The opportunity for industry in decarbonizing its steam grids based on interviews with 35 leaders from European industrial companies.