Reliable gas boilers, uncertain bills: what industrial steam users should assess before 2027

 Higher gas prices and a smaller winter storage buffer put industrial steam costs back in focus. Kyoto Group Business Analyst Salvatore Guccione explains what this means for plants that depend on gas,  and why assessing alternatives takes time. 

EU gas storage was 72% full on 1 October 2026, compared with 83% on the same date a year earlier, according to ENTSOG’s winter outlook, the European association of gas transmission system operators. That leaves a smaller buffer heading into winter. Storage supplied about a quarter of EU gas demand last winter, alongside continued pipeline imports, LNG deliveries and domestic production.

Prices have also risen. Dutch TTF futures, a widely used benchmark for European wholesale gas, traded above €100/MWh on 30 October, compared with approximately €49/MWh in early June. A plant’s actual fuel bill depends on its supply contract and hedge cover, but higher market prices put pressure on uncovered purchases and contracts coming up for renewal.

“Gas boilers are proven and reliable, but reliance on gas has become a business risk,” says Salvatore Guccione, PhD, Business Analyst at Kyoto Group. “The question is how much gas-price exposure the business is prepared to carry.”

Three forces behind the price 

Drawing on Baringa's and ENTSOG's October outlooks, Guccione identifies three connected pressures: LNG availability, storage and weather.

LNG availability is the main supply pressure. Baringa estimates that global LNG supply in January–September was 38 million tonnes below a year earlier, despite increased production elsewhere. Disrupted Gulf exports have tightened the market, increasing the risk of competition between Europe and Asia for available cargoes.

“Europe can pay more for gas even when its own suppliers keep delivering,” Guccione says. “Disrupted LNG exports from Qatar and the UAE leave less gas available globally, increasing competition between European and Asian buyers for other cargoes. The IEA also documented higher Asian prices drawing flexible LNG cargoes away from Europe earlier this year. Europe may therefore need to pay more to attract those deliveries. A recovery in Gulf exports, additional supply from other producers or lower demand would ease that competition and the pressure on prices.”

Storage determines how much disruption Europe can absorb. A smaller starting buffer increases the importance of continued deliveries throughout winter. Strong imports and moderate consumption would help preserve stocks; prolonged withdrawals would leave less flexibility later in the season.

Weather can turn a tight market into a more expensive one. Cold raises heating demand, while weak wind or hydro generation can increase gas use for electricity. Baringa’s October outlook expects lower overall winter demand than last year, but higher gas use for power generation.

“These pressures reinforce each other,” Guccione says. “The concern is a prolonged period of cold weather increasing gas demand while storage is lower and additional LNG deliveries are difficult to secure.”

Europe has diversified its gas supply routes and expanded LNG import capacity since 2022. That makes a simple repeat-of-2022 comparison misleading. Equally, low storage alone does not establish an imminent shortage.

“Europe is better prepared to manage disruption, but import capacity is not a guarantee of affordable gas,” Guccione says. “For industrial buyers, security of supply and certainty of cost are two different questions.”

What it does to a steam bill 

Consider a plant meeting its steam demand with a gas boiler. Guccione compares the cost of producing that steam at gas prices of €49/MWh and €100/MWh, then considers how hedging half the gas volume at €49/MWh changes the result.

Including delivery charges, taxes and carbon, the calculated cost rises from approximately €87 to €150/MWh of useful heat, an increase of around 72%. Hedging half the gas volume at €49/MWh limits the increase to approximately 36%, bringing the cost to around €118/MWh.

Calculated examples account for boiler efficiency of 90% and include an illustrative €5/MWh of gas for delivery charges and taxes, plus carbon pricing at €89.2/tCO₂, based on the quotation for 30 October 2026. 

The €150/MWh gas-price scenario is a stress-case example showing how a further gas-price increase would affect steam production costs, with the other assumptions held constant. It uses a price level observed during a previous winter: the European Commission’s review of Q4 2022, reports TTF spot prices peaking close to €150/MWh in early December 2022. The purpose is to test the plant’s financial exposure; it is not a forecast for this winter.

Carbon is already included in these figures, contributing approximately €20/MWh of useful heat at the assumed €89.2/tCO₂. Longer-term carbon costs remain sensitive to policy. DNV’s Energy Transition Outlook 2026 projects an average regional carbon price for Europe of €112/tCO₂ in 2030. Applying that price to the same boiler assumptions would give a carbon contribution of around €26/MWh of useful heat. DNV also expects proposed EU ETS reforms to moderate the price path from the early 2030s, highlighting the importance of policy in shaping future carbon costs.

Those longer-term carbon projections sit alongside a more immediate question for plants preparing their 2027 budgets: how much of the cost of producing steam is actually secured, and for how long? A boiler’s operational reliability cannot answer that commercial question.

ENTSOG’s winter outlook highlights the importance of sustained LNG deliveries to support demand and preserve storage. The financial impact on an individual plant will depend on its purchasing arrangements, the volume left unhedged and how long higher prices last.

For Q4 2026 and Q1 2027, Guccione suggests testing whether a budget built around €70–100/MWh gas would remain viable at €120–150/MWh for several weeks. These are planning scenarios, and should be revisited as weather, LNG deliveries and storage withdrawals develop.

“Industrial plants need reliable steam and costs they can plan around,” Guccione says. “A reliable boiler does not remove the financial risk of gas or carbon price spikes.”

Imagine a plant that has fixed its selling prices for next year. Its gas contract then renews at a higher price.

“If final customers cannot absorb the increase, your margins will,” Guccione says. “Gas deserves the same scrutiny as any other major production cost. Before calling gas the safe option, ask whether the business can afford another price spike.”

The cost of waiting

“Waiting becomes costly when it leaves too little time to act,” Guccione says.

A plant that started assessing alternatives a year ago could now know which solutions would work, what they would cost and how long installation would take. A plant that waited for cheaper gas has less time to prepare for 2027 and plan installation around production. Assessments, grid connections where needed, equipment orders and installation around production all take time.

“Starting earlier would not have guaranteed savings, but could have given the business more choices,” he says.

Plants with gas prices hedged through 2027 have less immediate commodity-price exposure, although other costs and physical supply risks remain.

One decision before year-end

Before year-end, Guccione recommends setting a budget and timetable for assessing alternatives to gas-based steam production. The comparison should cover total heat costs and price risk, including electricity contracts, grid charges, connection capacity, steam demand, storage sizing and financing.

“The same scrutiny should apply to gas and its alternatives,” he says.

Power-to-heat with thermal storage offers one route: use electricity during lower-price hours, store the energy as heat and produce steam when the plant needs it. This can make use of surplus renewable generation and reduce gas dependence. Whether it also lowers steam costs depends on the plant’s electricity supply, system design and operating conditions.

Kyoto Group’s Heatcube is one option to assess, either as an equipment purchase or through Heat-as-a-Service, where Kyoto manages the system, and the customer pays for the steam supplied.

“Continued exposure to gas prices means continued risk for production costs and margins,” Guccione says. “Before another year passes, decide how much of that risk the business can afford.”