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Cost of Heat

By Jakob Jensen — — Posted in heat series

The cost of heat ends up in the cost of the products we buy.

Because the cost of heat ends up in the products we buy, manufacturers are always looking for the cheapest source of energy. So far, the only available methods for large-scale sustainable production of heat at sufficiently high temperatures come at costs 2-3 times the fossil-fired alternatives. For this reason, manufacturers never choose sustainable methods for heat production.

The price of fossil fuels varies from fuel to fuel and from region to region, but often natural gas is the cheapest fuel option. The lowest prices for natural gas are typically obtained by large companies with access to piped natural gas. Companies that do not have access to a pipeline will have natural gas delivered as liquified natural gas (LNG) in pressurized containers. As LNG can be easily transported over long distances, it holds more uniform prices in most places.
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Globally, industrial processes below 400ºC/750ºF consume almost as much energy as does electricity production (see previous article re. electricity's share). Such processes include food production, pulp and paper, many chemical processes, processing of primary metals, and many other manufacturing processes requiring steam or heat including district heating and turning seawater into potable water (aka desalination).

Existing methods for sustainable heat production can deliver heat in this temperature range, but so far they haven't been able to compete with fossil fuels. However, this situation may change as carbon emission taxes increase.
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In Europe, carbon emission taxes target all major industries and utilities, and in the US carbon emission taxes are also increasingly imposed. Presently, carbon pricing increases the cost of heat €5-7 per MWh. OECD estimates that to keep global temperature increase below 1.5ºC by end of the century, carbon taxes must increase three-fold by 2030. With costs of carbon emissions at that level existing solar-based solutions are likely to become competitive in the sunnier regions of the world. For Heliac, the increased carbon emission taxes may even allow for subsidy-free energy at costs close to zero for large-scale customers around the world - also in the less sunny regions.

The US market for industrial process heat below 260ºC/500ºF consumes 2,000 TWh annually at a fuel cost in the neighborhood of €40-50 billion while emitting 500MT CO2 (1.3% of total global emissions). To the extent efficient, low-cost sustainable solutions can function together with fossil fuels in hybrid setups, this is an area that may hold great climate- and business potential. Upcoming articles "Integration" and "Plenty of Room" take a closer look at how easy it is to integrate solar heating into fossil-fired systems, and how far heat can be transported while remaining competitive to fossil fuels.
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Processes above 400ºC/750ºF can also benefit from solutions delivering lower temperatures. National Renewable Energy Laboratory (NREL) in the US has analyzed how much solar thermal could be augmented as pre-heating for fossil-fired power plants in the US and found it possible to install up to 60GW solar thermal for this purpose alone. If NREL's 2011-analysis still holds true, then this homogeneous segment may represent a €20 billion opportunity for solar thermal solutions.

In total, trillions of euros are spent each year on fossil fuels for heat production for all sorts of industrial purposes. The different methods for heat generation will be described in next week's article, Generation.

Total heat production accounts for half the global CO2 emissions. Renewable solutions that can provide heat at lower costs – by simply being cheaper, by leveraging the expected increases in carbon taxes, and/or by increasing efficiencies – are looking into market opportunities possibly capable of dwarfing any and all inventions in traditional solar and wind.

Interested in reading more? Please see the links to my other articles below. Additionally, a 'Like’ from you will also be much appreciated as this should help direct more attention at the many business and climate opportunities the market for heat production offers.

Thank you for reading,

Jakob Jensen

HEAT is a series of non-technical, easy-read 3-minutes articles looking at heat’s role in energy production, its environmental impact, technologies for sustainable large-scale heat production, and some of the business opportunities these solutions generate.

References

Solar Industrial Process Heat, NREL 2016

Renewable Energy for Industry, IEA 2017

Solar-Augment Potential of U.S. Fossil-Fired Power Plants, NREL 2011

European CO2 Emission Allowance Prices, Business Insider 2019

California Cap & Trade Program, ICAP 2018

Effective Carbon Rates, OECD 2018

Industrial Natural Gas Prices, Statista 2017

Natural Gas Prices (US), EIA 2017

Natural Gas Intel (Mexico), NGI 2018

Global LNG Prices, Bluegold Research 2018

Statistical Review of World Energy, BP 2018

The Social Cost of Carbon, The Carbon Brief 2017

Photo credits

Akiko Ishibashi - Heliac solar field during construction 2018

About me

I have spent the better part of 20 years investing in cleantech startups. During my career I have probably seen at least 3,000 business proposals, including Heliac's which I was introduced to in 2016 when I headed Climate-KIC Nordic's accelerator program. I found -and still find - Heliac's solution to be by far the best new solution I've ever come around, which is why I joined the company in early 2017.

Disclaimer: I have not double-checked all my sources and I am not an expert in all areas mentioned in the articles. I may therefore have reached conclusions that wiser men and women may know to be inaccurate. If so, I trust they will let me know, so I can become a bit wiser too.

This insight was originally posted in LinkedIn