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Breaking the gas trap: The new rules of 'security of supply' for industrial heat

Thaddäus Kreisig, Aurora Energy Research, in office

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For decades, natural gas was the reliable backbone of industrial heat. Today, it is the biggest vulnerability on the P&L. As European heavy industry races to electrify, the definition of ‘security of supply’ is fundamentally changing. We sat down with Thaddäus Kreisig, Advisory Principal at Aurora Energy Research, to explore why thermal energy storage is rapidly becoming the ultimate operational insurance policy.

Thaddäus Kreisig 234x350

If you were a fly on the wall in a European heavy industry boardroom five years ago, the primary concern regarding energy was simple: Will the physical gas keep flowing? Today, the conversation has fundamentally shifted.

According to Thaddäus Kreisig, Advisory Principal at Aurora Energy Research, who monitors the intricate dynamics of the European power market, the panic over physical shortages has largely subsided – replaced by a much more existential threat to continuous manufacturing.

– When we talk about security of supply in the energy sector, it’s always tied to the physical delivery. Even immediately after Russia’s invasion of Ukraine, we didn’t see a physical shortage, says Kreisig. – But if we talk about the boardrooms of industrial players today, it’s no longer necessarily about the security of the physical supply. It’s about the security of predictable costs.

For energy-heavy industries exposed to fierce international competition, Kreisig points out that predictable OPEX is not just a financial metric.

– That is essentially their life insurance, Kreisig elaborates:

– Because that determines if you will be there in the next five years, or if you’ll be gone.

He points to the current headwinds facing the European car manufacturing industry as a cautionary tale. While careful to note that the sector’s struggles are complex, the underlying mechanism is clear to him:

– When you don’t, at the moment, have the means to match international prices, you see the effects of that. People are being let go.

The e-boiler equation

Despite this harsh reality, there is still a lingering hesitancy in certain corners of European industry. Kreisig acknowledges that some players still cling to a ‘wait it out’ mentality, hoping for a return to the good old days of stable gas prices. But for those looking realistically at the future, electrification is the clear path forward.

However, electrifying baseload heat is not as simple as plugging into the grid.

– Many in the industry view the e-boiler as the quickest and cheapest fix. But, if a plant manager tries to electrify their baseload heat by connecting a massive e-boiler to the live grid, what does that OPEX model actually look like when you run it through your simulations?

– An e-boiler is very effective regarding CAPEX, which means less commitment for decision-makers, says Kreisig. – However, the OPEX of an e-boiler without any form of heat buffer is – and will always be – connected to the volatility of power prices. And the volatility of power prices itself is very much linked to the level of gas prices. If gas prices are high, power prices in the morning and evening hours are high, since gas-fired generation is needed to generate electricity. At the same time, hours where prices usually set by renewables (i.e., midday) remain close to zero.

To emphasise the risk, Kreisig points out the physical limitation for processes that demand uninterrupted steam:

– With an e-boiler, you always need to take what you get from the live grid.

In other words: Because a factory cannot simply pause production when electricity prices spike, an industrial site attempting to decarbonize its 24/7 heat without a physical buffer simply swaps one volatile market for another.

The solution extreme price fluctuations

lies not in avoiding the power market,

but in strategically exploiting it.

The 1,000-hour opportunity

The solution to these extreme price fluctuations lies not in avoiding the power market, but in strategically exploiting it. Across Europe, Kreisig notes, the massive build-out of renewable energy is physically changing how the grid behaves.

– We hear a lot about negative power prices when the sun is up. What is actually stopping heavy industry from just scooping up this massive surplus of cheap power today?

– I think one thing that might be stopping them is that they might be uncertain about how to predict negative price hours, says Kreisig.

The solution, he suggests, is to slightly shift the perspective.

– The key is that industry shouldn’t only target negative price hours. Low-price hours, meaning prices close to zero, are more than enough. And these close-to-zero hours are actually much easier to predict, since they are driven by regular solar and wind patterns.

To illustrate the sheer scale of this opportunity, Kreisig points to the data:

– Even in Germany, which lies somewhere in the middle in this metric when comparing EU countries, we had 600 hours of negative prices last year. That corresponds to about a thousand hours of prices around zero. And this number will continuously grow over time with more wind and solar deployment.

Capturing this abundance of surplus power requires physical flexibility, a point Kreisig strongly advocates for.

– With thermal heat storage, you target exactly these price hours and exclusively get access to low-priced energy, says Kreisig. – It takes away the volatility and gives you the predictability on cheap energy that a lot of people are looking for.

Thermal heat storage

takes away the volatility

and gives you the predictability

Beyond paper hedges

For many industrial players, signing a Power Purchase Agreement (PPA) to secure a fixed price for renewable energy is a popular strategy. But while a PPA acts as a financial hedge, it does not solve the physical challenge of variable weather.

– A financial hedge like a PPA looks great on a spreadsheet, but it doesn’t help much if the wind just isn’t blowing on a freezing Tuesday in February. When a plant needs continuous 24/7 steam, how do you view the balance between these financial paper hedges and the need for actual physical flexibility?

– PPAs are financial hedges, but ultimately, you don’t know exactly when this production will happen, says Kreisig. – For the rest of the year, you are still exposed to power prices and unpredictable spikes. Using storage lets you specifically make use of the hours where volume from the PPA is available, locking in a predictable price. It’s much bigger, more scalable, and has longer durations where you can store energy compared to a traditional battery.

As the necessity of behind-the-meter Thermal Energy Storage (TES) becomes apparent, the next hurdle for industrial projects is often ‘bankability’ – getting lenders to trust the business case.

– The technology used in thermal batteries is much simpler than a traditional battery. I don’t see a technical reason to discard these projects, says Kreisig. – It’s more a matter of running the right scenarios and model the precise dispatch logic for a given setup so lenders feel comfortable with the merchant revenues. It should not be any harder than financing a battery in the market. It’s a case for maturing the conversation.

For me, it’s no longer a question

of whether deploying storage solutions

makes sense

It’s simply a matter of

organizing it effectively

The reality check

When looking past the immediate hurdles, Kreisig and Aurora’s data points clearly toward an electrified, storage-backed future for European industry.

– If you had 30 seconds with a European plant manager who is still sitting on the fence and hesitating to change their energy setup, what is the one harsh reality check your data tells you they need to hear today?

– The number of low-pricing hours is increasing. This is a fact in all European countries, and it will continue, says Kreisig. – This potential can be tapped by thermal storage, allowing you to get access to cheap electricity, then cheap heat, and actually making your business more resilient. I think that is already one of the strongest arguments.

– And if we flip it: What specific trend or data point gives you genuine optimism that European industry will actually manage to break the gas trap?

– Even against political will, renewable projects are being deployed; they are getting cheaper, and they are bringing prices down. This trajectory is unbroken, says Kreisig.
– The build-out is coming, and there is no doubt that low-price electricity is coming true.

For European plant managers, the takeaway is clear: The market mechanics are already shifting, and the tools to capture the 1,000-hour opportunity exist today. The biggest risk is no longer the energy transition itself – it is the financial cost of waiting it out.

– For me, it’s no longer a question of whether deploying storage solutions makes sense, Kreisig says and adds:

– It’s simply a matter of organizing it effectively for the individual use case to tap into the potential.

Breaking the gas trap: The new rules of 'security of supply' for industrial heat

The e-boiler equation

The 1,000-hour opportunity

Beyond paper hedges

The reality check

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