- Global Research
- General Research Insights
The third frontier
- The focus of decarbonisation is moving to heat, which needs to be tackled if net zero targets are to be achieved
- Heat solutions are diverse and spread across industry and buildings…
- …and we note that policy for the ‘heat transition’ is starting to move
Over the past decade the focus of decarbonisation has centred firstly on the power sector and more recently on the transport sector. We believe a change is now due, and both policy and investments should increasingly turn their focus to heat – the ‘third frontier.’
Addressing the heat problem
Heat is essential for homes, offices and industries alike, providing warmth and ensuring the production of goods in key industries. It is also carbon intensive. Heat is a huge end-use for energy, accounting for nearly 50% of global energy consumption, spread evenly across buildings and industry. With around 70% of heating powered by fossil fuels, staying warm is essentially helping to heat the planet.
Of global energy is consumed as heat
Of heat is powered by fossil fuels
Despite this, the decarbonisation of heat has largely been ignored in the public debate, we believe. In our view a more concerted shift is required in order to reduce heat emissions and continue to aim for 2050 net zero targets.
The solutions to decarbonising heat solutions are complex and varied. Many homes and offices have scope for electrification via technologies such as heat pumps. Efficiency solutions, from insulation to district heating systems, are also applicable in the majority of use cases.
Industrial heat encompasses a wide variety of temperature levels for diverse processes and end-uses. The biggest challenge in industry lies in a number of ‘hard to abate’ sectors including steelmaking, chemicals, and cement. These rely on high-grade heat processes that cannot easily be made more efficient or electrified, so may require more pragmatic solutions including carbon capture. Hydrogen also has promising potential to decarbonise the steelmaking process.
Emissions reduction policy for heat has historically been lacking. The focus has been mainly on adding insulation in buildings and replacing old oil systems, which have only a marginal effect on the carbon intensity of the heat sector. However, we see momentum shifting as governments step up spending commitments on clean technologies over the next decade.
The EU Net-Zero Industry Act recognises heat pumps as a strategic low carbon technology. The Inflation Reduction Act is bringing heat decarbonisation up the agenda in the US, with large subsidies available for household purchases of heat pumps. And China’s Clean Winter Heating Plan calls for large-scale renewable energy deployment in clean heating, better building energy efficiency, and more renewable energy resources contributing to clean heating.
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