In the late 19th century, manufacturing facilities began adopting electrification as a way to generate cost savings. Now, more than two centuries later, there’s a renaissance in the electrification of industry: from shipping terminals (link resides outside ibm.com) in New Jersey to steel production (link resides outside ibm.com) in New Zealand, industrial operations are turning to electrification more than ever before.
However, today’s electrification push isn’t just about saving money—it’s about saving the planet.
Electrification is the conversion of a device, system or process that depends on nonelectric energy sources into one powered by electricity. In the context of sustainability initiatives, electrification technologies use renewable electricity, which is electric power stemming from solar energy, wind energy and other clean, renewable sources.
As such, electrification has become key to supporting the global transition to renewable energy, a central facet of the movement to decarbonize the economy, achieve net-zero emissions and mitigate climate change. As IBM’s Institute for Business Value noted, “aggressive action to decarbonize is needed,” with electrification across industries, in particular, emerging as a “critical imperative.”
The industrial sector is energy intensive, accounting for 37% of global energy use. Its energy consumption comes with a sizable and growing carbon footprint: industrial emissions surged 70% (link resides outside ibm.com) over the past two decades, with industrial companies contributing about a quarter of the world’s carbon emissions.
Industrial emissions are driven by both energy consumption and the type of energy used. According to the International Energy Agency (IEA), industrial energy consumption is still “dominated” by fossil fuels. Coal has long been the most common fuel in industrial operations, and in 2022, the total share of fossil fuels (link resides outside ibm.com) (including natural gas and oil) in the industrial sector’s energy mix was 67%. Reducing emissions will require shifting to more clean, renewable energy for industrial processes.
Enter electrification.
Successful, sustainable electrification requires replacing fossil fuel-powered means of production with electric technologies and electrical equipment. Examples include:
Process heating electrification: Industrial process heating is a key step in manufacturing everything from materials such as steel and cement to consumer products such as appliances and cosmetics. The heating accounts for a significant proportion of onsite energy use because much of it happens at high temperatures—400°C (752°F) (link resides outside ibm.com) or more. Since those energy demands are usually met through the combustion of fossil fuels, process heating contributes 30% (link resides outside ibm.com) of the greenhouse gas (GHG) emissions stemming from manufacturing facilities. Electrification offers an environmentally friendly alternative. Using electromagnetic heating technologies, electric boilers, electric furnaces and industrial heat pumps can help industries drive major declines in GHG emissions. In New Zealand, for example, a steelmaking plant’s (link resides outside ibm.com) switch to an electric arc furnace is projected to reduce emissions by at least 45%.
Electric motors: Gas turbines and steam turbines (powered by fossil fuels) drive different types of rotating machinery, such as fans and compressors. Replacing such turbines with clean energy-powered electric motors can reduce emissions at various industrial sites, including natural gas pipeline compression stations. (Natural gas is often considered a “bridge fuel” to compliment renewable energy sources.) Compression stations traditionally have used industrial gas turbines, but that is changing. For example, as of 2023, more than 300 compression stations (link resides outside ibm.com) in Europe now rely on electric motors.
Electric vehicles: GHG emissions also come from heavy use of fossil fuel-powered on- and off-road vehicles, from the trucks that move materials and goods along supply chains to the forklifts at manufacturing facilities and ports. Switching to electric vehicles is another way to significantly reduce emissions in these spaces. For example, at a shipping terminal in Elizabeth, New Jersey, port operators estimate that a new initiative to deploy electric terminal tractors (link resides outside ibm.com) will prevent 1,100 tonnes of GHG emissions annually per tractor.
The installation of electric heating and cooling systems, such as heat pumps, is also an avenue for decarbonization at industrial facilities. However, there is less research (link resides outside ibm.com) on these initiatives compared to research on electrifying residential heating and cooling systems.
While the potential reduction in greenhouse gas emissions is a key driver of electrification globally, business leaders tend to keep another motivation in mind: their bottom lines.
Indeed, electrification can yield long-term cost savings for industrial businesses. Electric equipment tends to have lower costs for maintenance while providing greater energy efficiency. In recent years, electricity prices and renewable electricity prices have also compared favorably to fossil fuel energy costs, including fossil fuel-based electricity generation.
In addition, electrification may benefit the health of employees. That’s because electric vehicles and equipment don’t emit harmful air pollutants. Replacing fossil fuel-powered machines and vehicles with electric ones could improve indoor and outdoor air quality, reducing the likelihood of employees suffering adverse health effects.
Electrification may also help businesses meet their ESG goals and win the approval of stakeholders, such as investors and customers, so electrification initiatives regularly feature in companies’ sustainability reports.
Electrification’s benefits notwithstanding, there are obstacles to its adoption. Among them are high upfront costs. While electrification saves money over time, replacing fossil fuel-based systems with electric systems can be expensive and even cost-prohibitive. Government incentives are helping make industrial electrification more affordable. From California (link resides outside ibm.com) to Finland (link resides outside ibm.com) to New Zealand (link resides outside ibm.com), policymakers have subsidized electrification investments for energy-intensive industries. The largest initiatives include the European REPowerEU plan (link resides outside ibm.com) and the US Department of Energy’s industrial decarbonization (link resides outside ibm.com) investment.
The resilience and capacity of present-day energy systems present another major challenge. As industries electrify more equipment and vehicles, the resulting increases in electricity demand can potentially overburden electrical grids. Various government programs around the world aim to help grid operators upgrade infrastructure and expand capacity, but according to IEA (link resides outside ibm.com) analysis, more policy development is necessary.
While physical infrastructure improvements are key to reinforcing power systems amid growing electrification, software solutions can also play a pivotal role. The IBM® Environmental Intelligence Suite, for example, empowers industries and energy providers to anticipate and prepare for disruptive environmental conditions, with outage prediction capabilities, renewable power generation forecasting and more.
Explore the IBM Environmental Intelligence Suite and learn more about sustainability trends below.