Why industrial heat is the sleeping giant of emissions

High temperature heat is everywhere, even where we don’t feel/notice it—from the production of steel and cement to food processing and pharmaceuticals. It’s responsible for 44% of the industry’s total energy consumption, yet it remains one of the hardest sectors to decarbonize. The reason is simple: fossil fuels like natural gas and coal are still the cheapest way to generate high temperatures, and changing that equation requires significant investment and system-level transformation.

But the pressure to decarbonize is mounting. With the EU’s Fit for 55, Net-Zero Industry Act and the Clean Industrial Deal and similar efforts emerging globally, the industrial sector is under growing scrutiny. The EU’s ambition? To produce at least 40% of its net-zero tech domestically by 2030—and industrial heat plays a central role in that plan.

Three main temperature bands define the challenge:

• Low (<100°C): can be addressed with mature technologies like heat pumps
• Medium (100–400°C): served by resistive heaters and industrial boilers
• High (>400°C): demands advanced solutions such as plasma, induction, and arc-based heating

Electrification is possible across all these segments—especially when combined with thermal energy storage (TES) to balance grid loads and process demands—but each comes with distinct technical and financial barriers.

From technology gaps to investment gaps

The technological solutions for industrial heat decarbonization already exist. Heat pumps are up to 3 times more efficient than traditional gas boilers. High-temperature resistive heaters and induction systems can reach temperatures beyond 1,000°C. And TES systems enable smart integration with intermittent renewable sources.

Still, adoption lags. Why?

1. Financial barriers: upfront CapEx can range from $1M to $50M per plant, a massive burden for companies with thin profit margins.
2. Infrastructure bottlenecks: full electrification requires robust grid upgrades that are far from ready in most industrial zones.
3. Technological risks: solutions for high-temp applications are still scaling, with long development timelines and talent scarcity slowing progress.
4. Operational risk aversion: manufacturers are reluctant to disrupt existing processes that work—especially when the returns on greener alternatives are not always immediate.

And yet, the momentum is shifting. The total addressable market is enormous: $500 billion+ in global CapEx, with heat pumps alone accounting for $300 billion of that. Governments are stepping in—through grants, tax incentives, and coalitions like the First Movers Coalition—to de-risk early adoption.

Industrial heat is heating up: the VC perspective

Venture capital is catching on. In the last five years alone, the sector has seen:

• €800M+ raised by European startups
• €2.9B+ invested globally
• 53 investments in Europe, with rounds steadily increasing in size

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Startups are innovating in areas such as molten salt storage, ceramic resistors, and iron powder-based systems. These solutions are tackling different temperature ranges and process needs—from AI-optimized geostorage for district heating to plasma systems for metal processing.

The industrial heat ecosystem is no longer theoretical, it’s forming.
Corporate players, public funds, and private investors are all converging on this space. With decarbonization timelines accelerating and the regulatory noose tightening, the winners will be those who act early, take smart risks, and deploy capital where it matters most.