Issue #09
16 APRIL 2025
Issue #09
16 APRIL 2025
— Editorial by ECCO
— HEAT PUMPS FOR INDUSTRIAL PROCESSES? THREE GOOD REASONS FOR A WIN-WIN-WIN SCENARIO by Marco Flavio Calanca, Marketing Director, Daikin Applied Europe>y ECCO
— Carbon Capture and Storage (CCS): a cornerstone for Net Zero transition by Politecnico di Milano
— The role of utilities and their networks in achieving a net-zero economy by AGICI
The transition towards the electrification of low temperature industrial processes represents one of the most effective and efficient solutions for accelerating the decarbonisation of industry, both in Italy and across Europe. This involves replacing fossil fuel-based processes with electric alternatives, such as heat pumps, to generate process heat. In Italy, 68% of the demand for such heat still depends on fossil fuels. Therefore, electrification offers an opportunity to reduce CO2 emissions while simultaneously ensuring energy security, shifting consumption from fossil fuels to electricity. This is a necessary first step towards reducing our reliance on imported fossil fuels and their related price volatility, as well as moving towards renewable energy sources.
In 2022, industry was responsible for 20% of greenhouse gas emissions across Europe. To help reduce emissions in this sector, in addition to the existing carbon pricing scheme for the thermoelectric sector and energy-intensive industries, the pricing system will also be extended to small and medium-sized enterprises (SMEs) from 2027. This price signal is expected to guide consumption towards electricity, supporting decarbonisation, energy security and, ultimately, competitiveness.
ECCO has developed a specific feasibility study on the electrification of process heat in two key sectors of Italian industry: the food and textile sectors, both of which use low and medium temperature process heat (up to 200°C). These processes already present an opportunity to be efficiently electrified using existing technologies. The study thus provides a starting point for solutions that can be effectively applied to all industries or processes using similar temperatures.
The two sectors analysed in the study are primarily composed of SMEs and represent a significant portion of Italy’s revenue and exports.
In the food sector, final energy consumption in 2021 was 39 TWh, with 73% of this energy used for heat processes. In the textile sector, final energy consumption was 12 TWh, with 73% used for heat processes.
The study was conducted using a sectoral energy model and presents several economic scenarios for the adoption of electrification solutions to replace current uses of natural gas. Drawing on the most recent sectoral energy balances and modelling the energy transformations of carriers (gas, electricity) from their entry into the two sectors to final services (for example, low or high-temperature drying, with or without steam), the model optimises long-term cumulative costs, considering the evolution of CapEx and OpEx for technologies and in relation to projected trajectories of wholesale gas and electricity prices, including contributions from the ETS and transport costs.
The results of the scenario analysis indicate that:
Furthermore, by simulating targeted financial policies, such as reducing the Weighted Average Cost of Capital (WACC) to 4% compared to the 10% used in baseline simulations, and introducing a capital grant covering 50% of the investment costs for high-efficiency electric technologies, the model shows that heat pumps and higher-efficiency technologies for steam production are adopted five years earlier. This results in an electrification rate of 86% by 2035, leading to additional long-term cost savings.
According to the analysis, the cost of these public support policies would amount to 2.3 billion euros for the state between 2025 and 2040.
However, when including the impact of fiscal and parafiscal components in the tariffs, the efficiency benefits of heat pumps compared to gas use are absorbed. By verifying the results of the simulations with the case study analyses that look at the final energy price for 2023—where the fiscal and parafiscal charges applied to electricity and gas tariffs, such as system charges and excise duties, are also considered—the economic advantage of electrification is nullified even for processes below 80°C.
The analysis thus makes it possible to identify the main barriers to electrification of final consumption in industry and, consequently, the policy proposals necessary for effectively promoting this solution.
To promote electrification as a key solution for decarbonisation, energy security and industrial competitiveness, an integrated and coherent policy framework is needed at both the European and national levels. This framework should maximise the adoption of high-efficiency electrification, fostering mutual reinforcement between governance levels.
The main proposals include:
Two fundamental elements to consider in developing this framework are:
The transition to the electrification of low temperature industrial processes presents a significant opportunity for both Italian and European industry. Reducing CO2 emissions, improving energy efficiency and increasing competitiveness are just some of the benefits that can be achieved. However, to fully realise these benefits, it is essential to adopt targeted political strategies and develop a regulatory framework that supports the adoption of electric technologies. With a joint commitment at both national and European levels, electrification can become a turning point in the industry’s transition, supporting energy independence while fostering the development of strategic technological sectors that remain strongly present in Italy and Europe.
With just one month to go until NetZero Milan, the conference placing the energy transition of Italian industry centre stage, we, as an HVAC (Heating, Ventilation, and Air Conditioning) manufacturer and member of Assoclima, feel a responsibility to highlight a technology that is well-positioned to play a leading role in decarbonisation: industrial heat pumps.
In a context of increasingly ambitious European targets – from a 55% reduction in emissions by 2030 to climate neutrality by 2050 – it is crucial to accelerate the adoption of mature, efficient and scalable technological solutions. Heat pumps offer exactly that: a reliable, well-established and strategic technology for the electrification of thermal consumption, in both the residential and, above all, industrial sectors.
Reason #1 – For the health of our environment
Electrification of process heat is one of the most effective ways to reduce emissions in the manufacturing sector. According to a recent ECCO study, around 31% of Italy’s industrial heat demand is below 200°C – a temperature range compatible with the use of heat pumps. Replacing existing gas-based systems with high-efficiency electric alternatives could save up to 16 MtCO₂eq. These are concrete, achievable reductions in key sectors such as textiles and food.
Reason #2 – For energy cost savings
The case studies analysed in ECCO’s report “Electrification of industrial heat” show that using heat pumps in low-temperature industrial processes (<80°C) is already economically advantageous. The energy savings are substantial, especially when residual heat from production processes can be recovered. However, current energy pricing structures favour gas over electricity: in Italy, the price of electricity can be up to 3.5 times higher than that of gas for industrial use. This severely undermines the competitiveness of the more efficient technologies.
For electrification to take off, it is essential to revise the tariff system, reducing excise duties and unfair charges on electricity. Assoclima’s proposal – already presented to institutional stakeholders – is clear: a cost structure that brings the electricity-to-gas price ratio below the 2:1 threshold would be enough to unlock numerous industrial investments.
Reason #3 – For creating industrial development in Italy
Italy’s heat pump sector is not just a promise – it is a well-established industrial reality. Italy ranks second in Europe for both the value of heat pump component production and employment in the sector. With an industrial value of around 5 billion euros and over 100,000 people employed across the value chain, this sector represents a concrete lever for national growth and industrial resilience.
Investing in heat pumps means supporting a high value manufacturing sector that is deeply integrated within Europe but firmly rooted in Italy. Our own company, for instance, has invested over 25 million euros in new production facilities and R&D centres in recent years, creating significant employment opportunities – a tangible sign of the economic potential behind this transition.
A Win-Win-Win scenario
Heat pumps for industrial decarbonisation? Yes, but not only. We are talking about a solution that brings environmental benefits, economic savings and industrial returns. It is a win-win-win scenario that we can set in motion today, provided we can establish the right political, regulatory and financial framework.
Carbon capture, utilization, and storage (CCUS) are critical technologies in the global effort to achieve net zero emissions. According to the International Energy Agency’s Net Zero scenario, reaching Net Zero will require the deployment of 5 gigatonnes per year of CO₂ capture capacity between 2030 and 2050. This translates into the construction of approximately 250 new capture plants annually—about five per week—with each plant designed to capture 1 million tonnes (Mt) of CO₂ per year. Such an ambitious scale-up underscores the importance of CCUS as both a technical and strategic solution in the transition from a fossil-fuel-based economy to a low-carbon future.
Historically, the period from 2011 to 2020 was seen as a “lost decade” for Carbon Capture and Storage (CCS) development. However, recent years have witnessed a dramatic resurgence in large-scale CCS projects, especially in Europe. This renewed momentum is largely driven by higher carbon prices under the European Union Emissions Trading System (ETS) and significant public funding initiatives such as the Innovation Fund. A prominent example is Italy’s Ravenna CCS hub, which is projected to achieve a CO₂ storage capacity of 16 Mt/y—enough to offset roughly 25% of emissions from Italy’s hard-to-abate industrial sectors.
CCS is indispensable for decarbonizing industries that generate process emissions that result directly from the chemical reactions inherent in production processes. Hard to abate sectors, such as cement, lime, and waste-to-energy facilities are unable to significantly reduce these emissions through fuel switching or efficiency improvements alone. CCS will also be highly competitive relative to hydrogen and electrification, particularly in sectors like chemical production (e.g. ammonia and methanol), as well as in the iron and steel industry. In these sectors, CCS offers cost advantages over alternative decarbonization strategies, which are essentials for goods that cannot benefit of a premium market for renewable products.
Beyond simply reducing emissions, CCS presents the unique opportunity for achieving negative emissions. Techniques such as Bioenergy with Carbon Capture and Storage (BECCS) and Direct Air Capture (DAC) can remove CO₂ from the atmosphere, thereby enabling net negative emissions. BECCS, which captures CO₂ from biomass energy processes, and DAC, which extracts CO₂ directly from ambient air, are pivotal in scenarios where offsetting residual emissions is required to meet climate targets. These technologies provide a pathway not only to stabilize atmospheric CO₂ levels but also to actively reverse the accumulation of greenhouse gases over time.
In addition to storage, Carbon Capture and Utilization (CCU) opens new avenues for transforming captured CO₂ into value-added products such as e-chemicals and e-fuels. This approach is particularly promising for de-fossilizing the chemical sector by producing carbon-neutral chemicals and fuels. E-fuels, synthesized from CO₂ and green hydrogen, offer a long-term solution for decarbonizing sectors that are difficult to electrify, such as shipping and aviation.
The coming years are pivotal for establishing the infrastructure necessary to drive the energy transition. Investments in energy efficiency, low-carbon renewables and nuclear power plants, modern electric grids for efficient transmission and distribution, and a robust hydrogen infrastructure for long-term energy storage will lay the foundation for a sustainable energy ecosystem. Equally critical is the development of CO₂ transport and storage networks, which will allow hard-to-abate sectors to achieve their net-zero targets. Access to these new infrastructures will be decisive in enhancing the competitiveness of industrial plants, enabling them to thrive in a net zero Europe and a net zero world while supporting a resilient and low-carbon global economy.
Achieving climate neutrality by 2050 is not just an environmental issue: it is an unprecedented industrial, economic and infrastructural challenge. Europe and Italy have decisively taken the path towards the so-called “net-zero economy”, but the road ahead is still long and full of obstacles. We need a profound and systemic transformation of the entire energy system and, above all, we need a strategic vision that can guide investments worth hundreds of billions.
The first step to understand the scope of the transition is to look at the three large blocks of energy consumption: electricity production, heat generation and mobility. They are three very different worlds in terms of necessary investments, industrial presence and technological maturity. There are many options available and in some cases alternatives to each other; more realistically, in most cases it will be necessary to combine multiple technologies, balancing costs, environmental benefits and returns for the country system.
In this context, AGICI conducted a detailed analysis on the necessary investments in renewables and energy efficiency to achieve the European objectives. The result is a complex but extremely clear picture: over 1,000 billion euros between now and 2050, divided between the residential, services and transport sectors.
The most significant need concerns the residential sector, with over 700 billion euros needed for efficiency measures and the installation of low carbon technologies. Among these, the installation of 43 GW of heat pumps, 26 GW of efficient and decarbonized boilers, 38 GW of distributed photovoltaics and 7 GW of solar thermal.
In the transport sector, the estimated investment exceeds 100 billion euros. Over 17,000 new electric charging stations will be needed, but also 4.5 GW of electrolysers for the production of green hydrogen, intended for the most difficult to electrify segments.
The remaining amount will be allocated to the service sector. Utility-scale renewables – photovoltaic, wind and hydroelectric – will absorb over 150 billion, while the expansion of district heating (new power plants and new networks) will require almost 30.
And nuclear power? It could play a role, but only in the long term and under industrial and political conditions yet to be defined.
We often think of the energy transition as a question of generation: more renewable plants, more storage, more clean technologies. But there is an enabling factor that too often goes unnoticed: networks.
Energy transport and distribution infrastructures – electricity, gas and heat – are the connective tissue of the transition. Without modern, widespread, digital and resilient networks, none of the solutions mentioned above will really work. It is through networks that decarbonisation passes.
We need to strengthen electricity networks to manage increasingly distributed and variable generation as well as make gas networks flexible to accommodate new green gases. Investments and modernizations also concern district heating networks to bring decarbonised heat to cities.
We need to proceed with all this in the most rapid, coordinated and sustainable way possible.
AGICI has started a strategic analysis on the investments of the main Italian and European utilities in the network sector. The preliminary data relating to Italy reveal a clear trend: investments are growing.
In the networks sector alone, we have gone from around 9 billion euros in 2023 to a forecast of 11 billion for 2024 and 14 billion for 2025. It is estimated the 15 billion € of investment can remain stable at least until 2027. A dynamic that reflects operators’ awareness of the central role that infrastructures will have in achieving the 2050 objectives.
But in addition to quantity, the quality of investments also counts: digitalisation, climate resilience, interoperability, integration of electricity and gas networks. In other words: it’s not enough to spend, you need to spend well.
To take stock of these dynamics and compare investment strategies and models at a European level, AGICI, as part of the NetZero Milan 2025 Fair, organizes the international vertical:
“THE ROLE OF UTILITIES AND THEIR NETWORKS IN ACHIEVING A NET-ZERO ECONOMY. COMPARING GROWTH STRATEGIES AND POLICIES”.
Milan, May 15, 2025, from 2:30 pm to 5:00 pm (networking coffee to follow)
Allianz MiCo
A high-level international panel representing some of the main operators in the supply chain will discuss the study.
The topics of the discussion include:
– Smart grids and distributed generation;
– Electrification of domestic and industrial consumption;
– Electric transmission for the development of renewables;
– DSO and development of electric mobility;
– Comparison of hydrogen production and transport models;
– Gas networks and green gas injection
– Role of gas transport for a resilient and secure energy system;
– District heating networks for the decarbonization of large urban centers;
– How to exploit waste heat from industries and water.
The energy transition to reach a totally decarbonised economic model is not a theoretical exercise, but a real industrial revolution. Utilities and their networks are called to lead this change, with strategic vision and investment capacity. The next few years will be decisive: the choices made today will determine not only the success of the transition, but also the economic competitiveness and social sustainability of tomorrow’s Italy.
Monday, April 28 and Tuesday, April 29
Informal meeting of environment ministers – link
Thursday, April 24 and Friday, April 25
International Summit on the Future of Energy Security (London) – organized by the International Energy Agency – link
From Monday, April 21 to Saturday, April 26
Word Bank Group and International Monetary Fund Spring meetings (Washington) – link
From Monday, April 21 to Friday, April 25
US Climate Action Summit (Washington) – link
Wednesday, April 23 and Thursday, April 24
Second G20 Finance and Central Bank Ministerial Meeting (Washington) – li
