Emissions are to fall to 140 million metric tons per year by 2030, according to the federal Climate Protection Act. The challenges for decarbonizing the industrial sector are even more significant than in other sectors. Compared to power generation, building energy, or the transport sector, industrial processes are very heterogeneous. In some cases, climate-neutral technologies are still at the beginning of their development or are associated with high costs, such as the electrification of high-temperature processes. Moreover, process emissions cannot be reduced by switching to renewable energies.
Moreover, production in the German industry has been increasing for years, displacing, for example, advances in energy efficiency in the energy balance. Added to this is the fact that industry in Germany and Europe is in international competition. Costs for reducing emissions can therefore only be passed on to end customers to a limited extent.
There are concerns that production facilities could be relocated abroad. Thus investments would not be made in Germany if decarbonization costs in Germany were significantly higher than in other countries. Simultaneously, the climate benefits could be limited because emissions would only be relocated (“carbon leakage”), i.e., they would no longer be generated in Germany but in another country. Clever approaches are needed here to ensure that the German industry remains competitive while reducing CO2-emissions at the same time.
The EWI investigates how state-induced electricity price components and other regulatory interventions affect various industrial sectors’ competitive conditions. For example, the impact of the German coal phase-out on the electricity price was calculated for the Ministry for Economic Affairs, Innovation, Digitalization and Energy of the State of North Rhine-Westphalia, and an assessment was made of the additional consequences it would have for various industrial sectors. The EWI also addresses questions around carbon leakage and possible countermeasures, for example, electricity price compensation within the framework of the European Emissions Trading Scheme (EU ETS).
The use of emission-reducing technologies in the industry depends mainly on their short- and long-term economic feasibility. For example, the industry’s current hydrogen demand can be switched from fossil (e.g., methane steam reforming) to climate-neutral generation technology (e.g., water electrolysis).
For this purpose, a model was developed at the EWI that compares the use of the two technologies in a closed system and optimizes them under given framework parameters (for example, electricity, CO2 prices, and raw material prices) to evaluate the economic feasibility of the competing technologies. For example, the model can optimize the use of green hydrogen over conventional hydrogen to supply refineries or chemical companies using hydrogen storage.
The increasingly volatile supply of electricity requires that the electricity demand becomes more flexible. This requirement presents the industry with the challenge of offering flexibility while keeping the quality of its products unchanged.
The EWI researches these issues within the context of various projects. For example, the institute is investigating how to market flexibility in sequential markets. Furthermore, the EWI looks at the influence of different market designs on investments in flexibility options and their spatial allocation. Coordination problems between grid investments, generation investments, and investments in further flexibility options are taken into account.