Several forces drive the industrial sector’s transition toward decarbonisation. The push for higher efficiency and sustainable production challenges the long-term viability of large chemical and refining operations.  

Another driver is climate policies like the Net Zero Industry Act and the Inflation Reduction Act and carbon pricing mechanisms such as ETS. Industrial enterprises are also forced to manage the rising heat generation costs as natural gas prices rise, aggravated by Russia's invasion of Ukraine, which has exacerbated economic limitations in the European Union.  

At the same time, heat production is transitioning away from classic steady-state processes and toward novel modalities. Traditional settings were intended to maximise efficiency, but they are now being challenged by the variability caused by the introduction of renewable energy sources.  

Although steam has long been an important energy carrier for industry, it has until recently been viewed as a utility that is less crucial than core activities on the path to decarbonisation.  

This article explores 5 key challenges industry players face today on their path to decarbonising and optimising their steam grids. These challenges were identified through our 2024 market research, during which we conducted in-depth interviews with 35 industrial leaders, primarily in the Benelux and DACH regions, across the (petro)chemicals, refining, pulp & paper, and food & beverages sectors. 

To gain deeper insights into these challenges and learn how leaders are overcoming them, fill out the form to download the report. 

Challenge 1. The pressure to decarbonise is mounting while technology, infrastructure, and policy remain uncertain 

While climate objectives are becoming stricter, industrial players in Europe still face regulatory uncertainty. The Renewable Energy Directive (REDIII), Energy Efficiency Directive and Gas Package are examples, along with governmental changes that prevent establishing a stable regulatory regime.  

Another related challenge Europe-based industrial players face on their path towards decarbonisation is the soaring cost of natural gas, exacerbated by Russia’s invasion of Ukraine. Traditional systems were designed to run on fossil fuels and maximise efficiency, but geopolitical issues such as trade restrictions or sanctions have caused supply and demand volatility. Geopolitical conflicts have increased the need to innovate and adapt steam-based processes to avoid the risk of rising fossil fuel costs.  

Boardrooms across industrial companies need to consider the matter of competitiveness from a global standpoint and craft their strategies with global markets in mind, which may add to the uncertainty. “We are in the middle of a deep, long valley. And it is still unclear how long we will have to pass through it," said Markus Steilemann, President of the Association of the Chemical Industry in Germany. 

The future of European competitiveness, a 2024 report by Mario Draghi at the request of the European Commission, emphasised the need for Europe to prioritise reducing the innovation gap with the US and China. It also suggested that without coordinated strategies, decarbonisation may undermine competitiveness and growth.  

Cost of power (left) and gas (right) for industries in the EU, China and the US (€/megawatt hour). Source: The future of European competitiveness report. 

At the same time, industrial processes can no longer focus on steady state production as organisations depart from fossil fuels and embrace renewables. The latter calls for more flexibility and a mindset change from concentrating on efficiency to considering the bigger picture. 

Challenge 2. Steam is increasingly in focus as part of decarbonisation and competitiveness efforts 

Until recently, steam was considered as a low-margin utility, often sold off to other companies or organised as a side business. However, steam has become a key part of the industry’s decarbonisation journey – both a source of emissions and a linking pin for many chemical plants. Multiple reports designate steam as the next big issue to tackle, one example being Decarbonizing the chemical industry by McKinsey & Company. 

Optimising steam processes comes with several challenges. Changes applied to individual units have a deep impact on the steam system to which they’re connected. Steam also plays a versatile role in industrial processes including mechanical, heating and feedstock, which makes it difficult to replace like for like. 

Challenge 3. Steam is complex and critical, and decarbonisation will only add complexity 

Steam is a complex medium to analyse and optimise due to its two-phase nature. Hardware tooling for steam grid improvement such as sensors or steam traps may require a partial or total site shutdown, which generates significant costs and risk.  

Operators in industrial sites tend to focus on the output and safety of the system, for example, having two boilers on standby to deliver heat when required. The approach has traditionally been to err on the side of caution when managing steam systems and establishing setpoints. This has, however, left an opportunity for improvement initiatives at the level of steam processes on the table.

Challenge 4. Steam systems are often managed by teams across companies, departments and control rooms 

Industrial players have been facing staff shortages for the past few years, but the issue is becoming more critical considering the upcoming transformation of the sector. According to Accenture, chemical companies will soon face waves of retirement since c. 30% of employees in the industry are 50 years of age or more and due to retire within the next decade. 

And when it comes to dealing with change, industry companies encounter even more challenges. Large industrial plants have ample experience in implementing small changes regularly, updating their setups and adjusting to the latest technologies incrementally. Today, they face a large-scale transformation happening in the near future due to both decarbonisation and flexibilisation efforts. Such a level of change calls for mindset changes as well.  

Another complication comes from the organisational complexity of steam networks, with steam producers often not being part of the same division or even company. This may lead to a conflict of interest that hampers or blocks initiatives, as cost and benefits don’t accrue to the same party or department. 

Challenge 5. Electrification opens the door to flexibilisation opportunities, but it requires new capabilities

Electrification and the subsequent flexibilisation for handling the constantly changing power prices are very likely to become an important part of the future industrial landscape. Many industrial players are creating hybrid setups – for example, keeping a gas and electric boiler that can be switched on and off depending on the electricity prices. 

These two powerful advancements will entail significant changes such as lower reliance on base load and more variable sources. Naturally, they will also come with new challenges such as grid connections providing enough capacity, technology uncertainties related to the transition to electric sources, and the resulting inability to implement them like-for-like. Organisations will soon be facing choices such as whether to continue with steam and electrify its production or skip this medium and electrify the process altogether. 

Electrification and flexibilisation will require new capabilities such as trading on power markets or designing and running processes in a flexible setup. All of this will be happening in a world where industrial players can no longer count on the certainty provided by base load powered by fossil fuels. 

Wrap up 

Steam users face growing pressure to reduce carbon emissions while navigating a challenging shift in heat generation. As steam transitions from a low-margin utility to an essential component of decarbonisation, organisations should give steam the attention it deserves. 

The complexities and speed of the energy transition create uncertainty and competing priorities in the preparation of future steam networks. But one thing is certain: to minimise carbon emissions and improve operational efficiency, industrial organisations need to extend their decarbonisation initiatives to cover steam grids.  

Modernising control and design approaches, as well as integrating digital tooling into basic operations are the steps in this process. Only end-to-end digital tools that span the entire system can handle the intricacies of steam grids, putting industrial players on the right track to future-proofing their operations. 

Watch our webinar Full Steam Ahead: The Opportunity for Industry in Decarbonising its Steam Grids to learn more about how industrial players address these challenges today. 

If you’d like to explore these best practices in depth, our report based on interviews with 35 industrial leaders across Europe is a great start.