The costs of fossil fuels versus electric power vary, and there is a good deal of uncertainty as to when electric power will become decisively and irreversibly cheaper. Hybrid equipment that can switch between conventional fuel and electricity may, on a case-by-case basis, be a cost-effective first step, particularly for processes such as drying and melting, whose heat requirements collectively accountįor about 35 percent of fuel consumption for energy in industry today. Please email us at: practical considerations may slow full-scale electrification for many companies, regions, and applications. If you would like information about this content we will be happy to work with you. We strive to provide individuals with disabilities equal access to our website. Meeting the 1.5-degree Celsius pathway advocated by the Intergovernmental Panel on Climate Change (IPCC) would require multiple industrial subsectors to electrify at more than twice their current levels by 2050, which are beyond their current economics (for more, see “ Climate math: What a 1.5-degree pathway would take.”) All told, about half of the fuel consumed for energy in industry could be electrified with available technology (exhibit). Regulators, for their part, will continue to bear down on companies’ greenhouse-gas emissions. The falling costs of both electrical equipment and renewable electricity generation itself are expected to boost electrification of industrial processes. While a sweeping change won’t happen overnight, electrification is on the rise, and our recent Global Energy Perspective shows that by 2035 renewables could produce more than half of the world’s electricity-in most regions at a lower cost than through fossil-fuel generation.
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Shifting from fossil fuels to full electrification is a big leap for many factories for some, hybrid equipment offers a practical step to meet long-term financial and environmental goals.įor more than a century, fossil fuels have been essential to powering the world’s largest factories. These quick-hit overviews should serve as useful thought starters, and sources of inspiration, for leaders in any industry seeking to chart their own sustainability journey. Also on the table: business-model innovation aimed at satisfying demand for lower-carbon technologies and more sustainable products (opportunities for miners and cement makers) as well as reorienting supply chains toward more “circular” practices (which is described by apparel executives, the linear descendants of the textile innovators who started the Industrial Revolution). These range from introducing hybrid-electric equipment (a first step for some) and fully electrifying operations (a key emissions-abatement lever for oil and gas companies), to boosting efficiency through digitization, advanced analytics, and artificial intelligence (practices profiled in a case study of the chemical and consumer-goods company Henkel). In this compilation, McKinsey experts and corporate leaders describe emerging opportunities for industrial operators to help lead the way to a lower-carbon future. Yet even as industries grapple with structural changes, and as societies and economies pivot to the “next normal,” companies themselves have a window of opportunity to adapt their operations to help reduce the disruption that climate change will ultimately bring. The COVID-19 pandemic presents an unforeseen challenge to industrial operators as they face the immediate impact of plummeting demand for many products, as well as pressing needs to ensure the safety of employees. Ever since the steam engine helped launch the Industrial Revolution, large-scale operations have boosted living standards, provided richer choices than our ancestors dreamed of-and generated unintended consequences, including pollution.