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.
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.
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.