LDES, Industrial Heat and Decarbonisation Policy
In ‘Why Long Duration Energy Storage is the Solution to Industrial Decarbonisation’ MGA Thermal covered the impact of industrial emissions – which contribute to over 25% of the world's greenhouse gas emissions, generating over 12.5 billion tons of CO2 emissions in 2021 (LDES Council 2023). Decarbonising industry has massive potential to reduce our global emissions; The LDES Council report ‘Driving to Net Zero Industry Through Long Duration Energy Storage’ suggests the emissions reduction opportunity is approximately 8 billion tons of CO2 emissions, which is nearly 2/3 of global industrial emissions.
Why Long Duration Energy Storage (LDES)?
LDES can provide both heat and electricity supply from stored renewable energy. This is particularly true for thermal energy storage technologies which store energy as heat and generate electricity by driving a steam turbine. When both heat and electricity are provided from the same thermal energy storage system at the same time, it is called cogeneration.
Many industries' current processes use electricity and/or heat from fossil fuels and boilers which can operate without disruption regardless of the weather. LDES stores renewable energy from excess supply from renewable sources, and firms it so it is available 24/7. This ability to firm the dispatch of energy, results in LDES being an economically attractive solution for industrial firms seeking to decarbonise heat and/or improve the reliability of their electricity supply.
Is the technology ready?
The LDES Council (2023) suggests that existing LDES technologies can already address 65% of industrial emissions. There are LDES and thermal energy storage technologies already on the market, and many scaling or commercialising for the increase in demand that will occur as more industries decarbonise. An example of a rapidly scaling LDES technology is MGA Thermal an Australian thermal energy storage technology, founded in 2019. MGA addresses industrial heat applications between 150°C and 650°C, providing both heat and electricity cogeneration 24/7, read more about the technology here.
Some industries (E.g. steel and cement) are harder to decarbonise due to very high-temperature requirements (1000C), integration or radiative heat requirements. For more discussion on hard-to electrify heat, read the LDES Council’s ‘Driving to Net Zero Industry Through Long Duration Energy Storage’ report.
There is also a strong economic case for LDES in low-to-medium temperature processes. It improves further for grid systems that have volatile electricity prices from natural gas prices (Germany), intermittent renewable supply such as solar production (Australia) or low reliability of supply from unplanned outages or labour strikes (South Africa). The economics are set to improve further towards 2040 due to falling capital costs of LDES solutions, diminishing grid reliability and increased price volatility.
Despite the strong economic case, LDES for decarbonising industrial heat has only recently entered the discussion.
So, how can we enable LDES for industrial decarbonisation (and reduce approximately 8 billion tons of CO2 emissions)?
The right policy solution or enabler for LDES technologies varies by industry sector. Broadly, there are three categories of solutions: long-term market signals; revenue mechanisms; and technology support or other enabling measures.
Particularly for off-grid industries, subsidies are a relevant policy tool to consider. However, subsidies can either help or hinder the adoption of LDES; just as supply and demand affect price, increasing the price of any element (through subsidies) will alter the economic case of LDES adoption. If a country has subsidies or support for fossil-fuel-driven equipment, it weakens the case for LDES. Equally, if a country has a carbon tax, or decarbonisation subsidies, it boosts the economic case for LDES, ideally creating an environment where it’s an economic ‘no-brainer’ for businesses to decarbonise.
For the segment of ‘easy-to-electrify’ heat, there are two key enablers recommended by LDES Council (2023); long-term contracts for amortisation (15-30 years) and market/regulatory encouragement. In some regions, the cost of electricity might be high compared to conventional fuels, which would mean electrification would increase overhead costs. This additional cost and hence the reluctance to electrify could be counterbalanced with an equivalent carbon tax, so again, decarbonisation becomes more economical than the alternative. A policy that allows dynamic price signals (variation of price with supply/demand) strengthens LDES savings, allowing users to buy and charge their energy storage when the price is low (high renewable energy supply on the grid).
The ‘hard-to-electrify’ segment contains commoditised products, such as cement and steel. For this reason, the key enablers are policy-based, including carbon pricing and greenhouse gas targets to strongly incentivise or require these industries to decarbonise. In this instance, decarbonisation will likely take multiple technologies, one of which is LDES, to achieve the challenge of electrifying very high temperatures.
What’s the solution?
It's important to note that decarbonising industry is a complex change to how many systems and processes have always run. The dramatic increase in electrification will require major planning, policy and investment into the electricity network itself.
The appropriate policy or enabler for industry to decarbonise with LDES technologies will also vary by industrial sector. It’s already economic in many sectors to electrify off-grid applications, and the electrification of on-grid applications would be accelerated with the help of policy and technology advancement. In addition to policy, the value of LDES must be demonstrated and communicated to industry; the LDES Council is a fantastic example of how shared learnings within LDES are helping advance the role of LDES and ultimately accelerate decarbonisation.
If you’d like to learn more about how MGA Thermal is helping to decarbonise industry through 24/7 thermal energy storage, check out our technology here.