The pulp and paper industry (PPI) is one of the most energy-intensive industries in Europe and globally. With paper demand and production projected to increase, there is an urgent need to reduce the use of fossil fuel-generated energy and the carbon emissions that result from it. Increasing efficiency, switching to green energy sources, and integrating alternative technologies are key to this transition. However, the industry’s need for medium and high-temperature heat poses unique challenges to decarbonization.
The Challenge of High-Temperature Heat
Up to 70% of industrial energy demand consists of medium (150 °C – 400 °C) and high temperature (above 400 °C) process heat, most of which cannot be electrified due to technical constraints. Similarly, heat is responsible for approximately 70% of the energy needs of a paper mill and is still generated by fossil fuels like natural gas. Low-carbon alternatives such as heat pumps and solar thermal struggle to meet the high-temperature requirements, while biomass – currently the main alternative – faces hurdles such as sustainable sourcing and high costs. Successfully decarbonizing the sector hinges on developing and integrating low-carbon solutions for medium- and high-temperature heat, also known as green thermal energy.
Accomplishing this goal requires the right combination of technologies to fit the specific needs of each manufacturing site, a well-designed fuel sourcing strategy, and awareness of local regulations. With those in place, green thermal solutions can help companies transition away from fossil fuels and reduce industry emissions.
The Complexities of Industrial Heat
According to an ENGIE Impact analysis of companies with science-based targets, while 65% have made significant strides in procuring renewable sources of power, only 27% have done the same for heat. Why have the efforts to decarbonize industrial heat been so disproportionately slow?
Emerging technologies and market development: Green thermal solutions such as hydrogen are still in the early stages of commercialization, with supply chains and market adoption dependent on location.
Varied heat requirements: Industrial processes require different temperatures and adaptation to make new solutions compatible with existing equipment and suitable for specific needs.
High costs: Transitioning to green thermal energy can involve costly changes to production processes and equipment. Operating costs (OPEX) may increase depending on the bioenergy source.
Operational and commercial risks: Switching to new heat sources, such as biomass, requires adjustments to fuel sourcing, storage, and operations.
Regulatory challenges: Decarbonization solutions must comply with evolving regulations, including stringent safety, environmental, and certification compliance standards, adding complexity to their deployment.
Carbon leakage risk: Higher production costs due to decarbonization could shift production to regions with less stringent climate regulations, contributing to carbon leakage.
These complexities create a scenario for difficult investment decisions, making it challenging to decide when and how to switch to green thermal energy.
Available Solutions for Decarbonizing Heat
Despite the complexities, solutions are available and ready to be deployed. The P&P sector can use various technologies and fuel sources, assessed on a site-by-site basis, for low, medium, and high-temperature needs:
Low-Grade Heat
Several mature, low-carbon solutions are available, such as geothermal, heat pumps, electric boilers, and solar thermal.
Medium and High-Temperature Heat
Several technologies exist, some already mature and proven, such as biomass and waste boilers, combined heat and power (CHP), and steam turbines, while other innovative solutions are still emerging, like high-temperature heat pumps, and carbon capture, utilization and storage (CCUS). Likewise, accessible, low-carbon fuels like biomass, biogas, biomethane and black liquor are an option, while green hydrogen supply is still several years away.
The key consideration is how to identify the best options, as there is no one-size-fits-all solution. Production sites often require a mix of solutions appropriate to its activities, energy demand, and geographical location. The optimal energy mix must be assessed on a case-by-case basis. Finding the right mix, however, is not the end of the story.
P&P companies face several long-term uncertainties – and opportunities – when it comes to decarbonization, such as evolving regulatory frameworks and policies on emissions standards, renewable energy, and carbon pricing in different regional markets, the pace of technological innovation, energy market volatility, and resource availability. Partnering with experienced energy services providers to assess current and future energy demand, recognize opportunities and risks, and model various scenarios can help identify the right combination of solutions.
Practical Steps to Decarbonize Heat
Prioritize energy efficiency: Before transitioning to green thermal solutions, identify and implement energy efficiency measures, including heat recovery
Assess present and future thermal needs: Categorize the site’s heat requirements (low, medium, high) and create energy usage profiles based on historical data and growth projections.
Match needs with technologies: Align thermal needs with available green solutions, considering factors like asset compatibility, space availability, feedstock supply and plant operational requirements. Prioritize equipment upgrades or replacements based on their age, total cost of ownership (TCO), and emissions reduction potential.
Evaluate costs and risks: Assess current and future energy commodity prices, including the impact of regulations, subsidies, and carbon pricing. Also consider the maturity timeline and cost evolution of innovative decarbonization technologies like green hydrogen and carbon capture. Thorough strategic planning is needed for a successful transition.
Develop a sourcing strategy and implementation plan: Choose from short-term contracts, long-term purchase agreements, and on-site solutions to secure sustainable fuel sources.
Navigating Economic and Regulatory Complexities
With the phase-out of free allowances in the EU Emissions Trading System (ETS) in certain sectors and the introduction of the EU’s Carbon Border Adjustment Mechanism (CBAM), carbon costs are expected to rise. The latter mechanism ensures that imported goods face carbon costs equivalent to domestic production. As carbon and natural gas prices increase, decarbonization scenarios may offer significant savings compared to continuing business-as-usual.
Case Study: A Pathway to Net Zero
ENGIE Impact conducted an in-depth analysis for a multinational P&P company aiming to decarbonize three of its largest sites and achieve carbon neutrality by 2050. By comparing combinations of different green alternatives such as electrification, biomass, hydrogen, and CCUS against the cost of using natural gas as the main commodity to generate heat, it was found that the total cost of ownership (TCO) could be 20% less expensive than continuing business-as-usual. The strategy, which combines decarbonization measures including green thermal, could also lower the carbon intensity by up to 35% by 2030, creating a clear pathway to Net Zero by 2050.
It is undeniable that opportunities exist for further decarbonization of heat. While retrofitting plants with low-carbon technologies requires upfront CAPEX, these upgrades can unlock long-term savings and operational efficiencies, and as-a-service agreements may be an option to reduce capital investments. With the right approach, companies can position themselves ahead of the curve as demand for greener products grows and carbon markets mature. Government incentives and carbon pricing mechanisms also offer significant potential to improve the economic viability of these efforts, making decarbonization not just a challenge, but a competitive advantage.
Additionally, addressing regulatory and logistical hurdles can open new pathways for innovation. The fragmented regulatory landscape across regions might create uncertainty for companies looking to invest in innovative technologies, but also offers an opportunity for forward-thinking companies to engage in policy development and help shape standards for the industry. Meanwhile, the complexity of sourcing and transporting alternative fuels, such as biomass, presents a chance to build resilient supply chains and establish new partnerships, particularly in regions with untapped potential. Overcoming these barriers will not only support the transition to low-carbon heat but also drive growth and create market opportunities.
Sourcing Options and Risk Mitigation
With green thermal being so critical to the potential for robust decarbonization in the P&P sector, corporates and their procurement departments need to be aware of sourcing options that technically fit their assets and can have the greatest impact on a sustainable future while meeting competitive financial criteria. Whether sourcing biomass (wood chips, pellets, waste), biomethane, green hydrogen, or using byproducts such as black liquor and paper rejects, they need to consider the following sourcing mechanisms:
Short-term supply contracts, bundled with energy certificates
Long-term purchase agreements for biomass and either biogas or biomethane. Biomass or biomethane purchase agreements (BPAs) will become more common as markets mature
Onsite solutions, either through direct investment or third-party arrangements
As biomass is already a primary source of thermal energy in the sector, it illustrates the potential benefits and risks associated with making green fuels a key part of a long-term decarbonization strategy. When sourced sustainably, biomass can provide a reliable and carbon-neutral energy source, but several factors must be considered, such as:
Sustainability requirements regarding biomass quality, especially if imposed by subsidy schemes regulation
Increasing competition for sustainable biomass, which puts pressure on sourcing and prices
Low-quality biomass may require enhanced exhaust air treatment, bringing additional costs and deteriorating the business case
Large-scale cultivation of biomass crops can lead to deforestation, habitat destruction and loss of biodiversity. Regulations imposed by countries with targets for preserving woodlands, forests, and biodiversity may impact biomass sourcing
To navigate these challenges and risks, it is important to set up a risk mitigation strategy, which includes
Securing biomass supply or marginal land for growing dedicated energy (non-food) crops early to avoid the impact of scarcity
Paying attention to market developments
Implementing a sustainable forest management strategy
Companies with several sites can leverage their buying power to source biomass at scale for different sites in the same region, although logistical costs and availability must be assessed.
Risk mitigation for long-term decarbonization also involves staying abreast of technological advancements and diversifying the low-carbon solutions used to generate heat. For instance, recent developments include the emergence of high-temperature heat pumps (HTHPs) that are pushing the envelope from 70-80 °C up to 150-200 °C. This means they can be integrated into paper mills for drying, boiling, and bleaching processes while remaining highly efficient by recuperating waste heat and raising its temperature.
The Confederation of the European Paper Industries (CEPI), and the European Heat-Pump Association (EHPA) conclude that this will not only potentially reduce emissions through fuel substitution but can also lead to a 50% reduction in energy demand for drying pulp and paper (drying accounts for 70% of the energy use in the sector).
Start Early to Gain a Competitive Advantage
Industries like the PPI require high heat reaching up to 1,000 °C. While the most common decarbonization solutions, such as industrial heat pumps and geothermal, work well for low to mid-temperature needs, they are not feasible for high temperatures. Industry leaders must therefore look to a different set of low-emission technologies such as electrification, CHPs, boilers, or CCUS, as well as different primary energy sources, like biomethane and hydrogen.
Though many of these technologies are still nascent and costly, companies should not wait to start planning. Being unprepared to adopt solutions when they become cost-competitive could result in missed opportunities to invest in green fuels, jeopardizing their competitive position.
Decarbonizing heat in the PPI is complex but achievable with a clear understanding of technological maturity, market readiness, and cost dynamics. By starting early and finding the right energy partner to accompany them along their journey, companies can gain a competitive edge, upgrade assets for long-term resilience, and significantly reduce emissions.
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