Pathways to a GHG-neutral German industry: Assessing the role of direct and indirect electrification and demand reduction

The German Climate Protection Act aims to reduce greenhouse gas (GHG) emissions by 65% in 2030 and by 100% in 2045. Normative scenarios from energy system models (ESMs) quantify transformation pathways in line with these targets. Scenarios for the industry often have a sectoral perspective, neglecting dependencies with the energy sector and other demand sectors. Moreover, scenarios often analyze consistency strategies, i.e. the replacement of fossil technologies by renewable ones, without focusing on demand reduction. Here, we answer two questions: What are the scenarios for industrial transformation that consider consistency and demand reduction? What structural changes occur in individual industrial sectors and how are they linked to other sectors? Four scenarios are developed in an adapted Cross Impact Balance analysis. These scenarios are described by 12 different descriptors that contain both qualitative storylines and quantitative model assumptions for key areas that impact industrial decarbonization, such as the availability and prices of GHG-neutral energy imports. Two scenarios focus on consistency, either through direct or indirect electrification, and two focus on sufficiency, combining energy demand reduction with either less or more optimistic assumptions on technological change. The ESM REMod is used to calculate cost-optimal transformation pathways for the energy sector and the demand sectors industry, buildings, and transport. For the industry, REMod explicitly models production routes for the energy-intensive basic materials crude steel, ammonia, methanol, high-value chemicals, and cement. Each production route is implemented using specific energy consumptions and techno-economic parameters such as CAPEX and OPEX. The model takes production volumes of the basic materials as input. In contrast to other ESMs, REMod optimizes the transformation in all sectors at the same time and endogenously accounts for sector coupling. Despite the German focus, general conclusions can be drawn for industrial sectors and process heat supply. Preliminary results indicate that final energy demand for industry including feedstocks reduces in 2045 to 90% of current levels in both consistency scenarios and to 66% in scenarios including demand reduction. This reduction of final energy demand is attributed to more energy efficient production routes and technologies. In addition, the sufficiency scenarios assume a reduction in consumption. Across all scenarios, direct electrification of process heat supply is important. By 2045, industrial electricity demand increases by 37-46% compared to current levels in the consistency scenarios. In the sufficiency scenarios, reduction of energy demand outweighs the increase of electricity demand by direct electrification of process heat supply resulting in a constant electricity demand in the industry. The availability of green hydrogen and hydrogen-derivatives is crucial as feedstock for the chemical industry, the production of crude steel and the supply of high-temperature process heat. In the consistency scenarios, over 90% of the demand for green hydrogen is for feedstock or energetic use in the industry. To supply this green energy, domestic variable renewable energy (VRE) capacities must be expanded. Additionally, GHG-neutral imports of green hydrogen or derivatives are required. The imports are limited by scenario design. In the consistency scenario with focus on direct electrification, VRE capacities reach 790 GW, accompanied by 300 TWh of imports of synthetic energy carriers in 2045. In the consistency scenario focusing on indirect electrification, only 760 GW of VRE are needed, but 450 TWh of imports are used. In the sufficiency scenarios, demand reduction lowers those capacities to below 630 GW of VRE with only 200 TWh of imports. Demand reduction can play a significant role in the transformation of the energy system by slowing down the need for drastic technological changes.