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Maguire: EU policymakers to make or break decision on industrial heat

European legislators are expected to announce new policies soon on the types of heat used in industry. This could determine whether the region is able to maintain viable and competitive business or if it will suffer a further thinning out of its industrial base.

Industrial heat is a vital input for all types of production, including chemical plants, steel mills. food processors, electronics, and car assembly lines.

The International Energy Agency (IEA), according to its data, shows that industry accounts for approximately a quarter of Europe's total consumption. Heat applications make up around half the total?industry -power requirements.

Gas-fired boilers have been used by most European industries to heat their facilities for decades. However, the price of gas has risen dramatically since the Russian invasion of Ukraine 2022, causing costs to spiral and pushing many facilities into debt.

In fact, the output of plastics, chemicals and fertilizers has fallen to historical lows in Germany, Europe's largest manufacturer and economy. High energy costs, as well as an unclear policy plan, have stifled industry and hindered economic growth.

In an effort to reduce energy costs and provide more regulatory certainty, European policymakers will release new measures in the spring that aim to rapidly scale up electric industrial heating technologies to meet the needs of businesses who do not use fossil fuels.

ARE YOU UP FOR THE CHALLENGE?

These steps would reduce Europe's annual fossil fuel import bill, which is several hundred billion dollars. They would also help to cut industrial emissions.

It will be a difficult task to create a set that is both workable and meets the needs of all industries, from Lisbon to Warsaw. This is especially true during a time of increasing tensions between EU member states.

This?said', key policymakers will find it totally unacceptable to continue with the current muddle of half-measures while the industry is still reliant upon expensive and volatile fossil energy imports.

In addition to the mounting losses of jobs, governments in Europe also have to deal with declining tax revenues from crippled businesses. This drains both treasury funds and political clout required to set up a new, workable course for industries.

This means that EU legislators and industry advisors are under a lot of pressure to create a roadmap that is both bold and effective, and can quickly steer European industry on a new path underpinned by cleaner and cheaper electricity.

Final Push

Several major European think tanks have weighed in on the best way to electrify industrial heating and assist businesses to return to growth.

Fraunhofer Institute, a specialist in applied research for the industry, contributed to a set of proposals that focused on the possibility of electrifying industrial process heat at low and medium temperatures.

The report found that electric heat pumps are able to reduce operating costs by 20% in the food and beverages sector compared to traditional gas-fired heating systems, even when electricity costs remain three times higher.

Electric pumps are more efficient than gas units, so companies can use electricity to cook, pasteurise and sterilize large quantities of food.

The paper and chemical industries are also able to?accomplish many key tasks currently powered by gas using high-end heat pumps.

It is important to note that significant changes will be required in the current taxation system to encourage businesses to make the necessary changes.

Think tanks propose reducing taxes and levies for electricity while increasing taxes on gas consumption through a consistent increase in carbon prices.

The recommendations also include a more favorable depreciation schedule for new electric equipment so that companies can benefit from?tax incentives on new capital expenditures related to electrification.

If industries are to electrify quickly, it will be important that new clean electricity generators and new electricity demand sources can be integrated into electric grids faster.

Moreover, more public-private funding options are needed to enable businesses to afford the required investments quickly.

European policymakers and business leaders will face a challenge of the greatest magnitude if they are to achieve all these goals in a short time span across many countries.

Failure to provide the remaining industry in Europe with the tools necessary to regain its competitive edge may result in the failure of entire companies and a lasting economic shock across the region.

These are the opinions of the columnist, an author for.

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(source: Reuters)