One promising approach is the utilization of industrial waste heat, which can be efficiently processed and reintegrated into the production cycle using modern heat pump systems. There is particularly significant untapped potential in the low-temperature range that can be unlocked through innovative technologies.
Chapters
Climate goals and the role of industry
Decarbonizing industry starts with process heat
Recovering process heat: ways to utilize industrial waste heat
Industrial waste heat as a strategic resource in decarbonizing heat
300 TWh of economically usable waste heat in Europe
Industrial heat pumps: A key technology for climate-neutral industry
The potential of advanced heat pumps
Savings potential for process heat in energy-intensive sectors
Policy framework for promoting industrial waste heat utilization
Funding programs for waste heat utilization in industry
The dilemma of sustainable investments under short-term planning horizons
Conclusion: Waste heat utilization in transition – from nice-to-have to strategic imperative
Climate goals and the role of industry
The use of fossil fuels and the resulting greenhouse gas (GHG) emissions are considered the main drivers of global warming. In order to meet the agreed-upon climate protection targets, fossil energy sources must gradually be replaced with renewable energy. A prerequisite for achieving climate neutrality by 2050 is therefore a comprehensive transformation toward sustainable energy systems. Industry plays a particularly crucial role in this transition: it accounts for 20% of GHG emissions1 and 25% of final energy consumption2 across the EU-28 countries.
Figure 1: Greenhouse gas emissions by country and sector. Source: European Environment Agency
Decarbonizing industry starts with process heat
The majority of industrial final energy consumption is attributed to process heat, which is still predominantly generated using fossil fuels. Therefore, the efficient use and sustainable provision of heat should be at the core of industrial decarbonization strategies. One key tool for this transformation is the utilization of industrial waste heat, which can significantly reduce the need for fossil fuels in the generation of process heat.
Waste heat is produced in nearly all thermal processes: When a paper mill releases steam into the air or a chemical plant discharges heated cooling water, valuable heat is lost that could otherwise be reused. In the EU, an estimated 20–50% of the energy used in industry is lost to the environment each year in the form of waste heat3. And it’s not just the heat itself that’s lost – additional energy is consumed by ventilation systems, cooling equipment, pumps, and other units to remove waste heat from production facilities. This represents a massive waste of valuable energy.
Figure 2: Breakdown of total energy demand in European industry by general uses (left), and process heat demand by temperature level (center) and energy source (right) (re = renewable energy sources). Adapted from 4 5
Recovering process heat: ways to utilize industrial waste heat
The use of industrial waste heat is often an underestimated component of successful decarbonization of heat. Particularly in the low-temperature range (<100°C), but also at temperatures up to 200°C, there lies enormous untapped potential for the decarbonization of process heat – potential that has so far been scarcely utilized.
The cascade principle of waste heat utilization
Today, industrial waste heat utilization largely follows the cascade principle: High-temperature waste heat is gradually reused in processes with lower temperature requirements. However, at the end of this utilization chain, large amounts of waste heat often remain at a temperature level for which there is no direct use within the facility.
Heat pumps offer an effective solution for recovering these waste heat streams: They raise the temperature of available waste heat to a higher level, making it possible to reintegrate it into industrial processes – for example, as process steam. Alternatively, if internal reuse is not feasible, the waste heat can be fed into local heating networks.
Figure 3: The waste heat from one process is used to supply downstream processes with lower temperature requirements. The remaining low-temperature waste heat can be recovered using heat pumps instead of being lost. © GIG Karasek
Three approaches to optimal waste heat utilization
Depending on the structure and requirements of the production process, various approaches can be taken to utilize waste heat effectively:
- In-process use: Recirculation of waste heat within the same production step (e.g. using flue gas heat to preheat combustion air).
- In-house use: Reuse in other processes or for space heating and domestic hot water generation (possibly with the help of heat pumps).
- External use: Feeding waste heat into local or district heating networks if internal use is not feasible.
For in-process and in-house use, heat exchangers or steam generators – for waste heat temperatures above 150°C – are commonly employed. Heat pumps are ideal for upgrading waste heat that cannot be used directly.
Industrial waste heat as a strategic resource in decarbonizing heat
In the past, low energy and CO₂ prices meant there was little incentive to fully tap into the potential of waste heat utilization. Investments were expected to pay off within one to two years, and political pressure for decarbonization was limited. As a result, energy efficiency projects were often overlooked in favor of measures with more immediate economic returns. For example, it was considered more profitable to operate an additional production line using fossil energy than to optimize energy consumption on an existing line.
But times have changed – politically, economically, and technologically.
1. Climate policy developments
- CO₂ pricing: Starting in 2027, the EU Emissions Trading System (EU ETS) price will be fully market-based. Forecasts predict prices of €150–200 per ton by 2030.6 7
- Emissions trading: The gradual phase-out of free allowances by 2034 will raise operating costs and intensify international competitive pressure – making new business models and decarbonization strategies increasingly essential.8
2. Energy market risks
- Import dependency: Geopolitical tensions have exposed the vulnerability of fossil fuel supply chains.
- Price volatility: Extremely volatile energy prices (e.g. +1,000% for gas in 2022) threaten planning security.
3. Technological advances
- Heat pumps: New developments now achieve temperatures of around 200°C, making low-temperature waste heat usable.
- System integration: Modular plant concepts allow for flexible integration into production processes.
At the same time, government support programs are improving the economic viability of efficiency measures. As a result, waste heat utilization is increasingly becoming a strategic advantage:
- CO₂ reduction: Companies reduce their environmental footprint and minimize financial risks due to rising emissions prices.
- Increased energy efficiency: Primary energy demand decreases, and fossil fuel consumption is reduced.
- Cost savings: Lower energy consumption leads to significantly reduced operating costs.
- Competitive advantage: Savings can be factored into pricing strategies, helping secure market share.
- Eligibility for funding: Energy-efficient companies benefit from public funding programs, partnerships, and tenders – enhancing their sustainability profile.
For energy-intensive industries in particular, the use of industrial waste heat is now more than ever a key to decarbonization, cost reduction, and strengthening industrial competitiveness.
300 TWh of economically usable waste heat in Europe
European industry possesses substantial untapped thermal resources. Recent studies confirm significant waste heat potential, the utilization of which could make an important contribution to the energy transition.
- Across the EU, the technical waste heat potential is estimated at 920 TWh9 per year, of which approximately 300 TWh10 are economically usable. This corresponds to 40% of the industrial process heat demand at temperatures below 200°C (see Figure 2) or 10% of the heating demand of European residential buildings.
- In Germany, the Fraunhofer Institute estimates the technically available waste heat potential at 67 TWh per year, equivalent to about 15% of industrial heat consumption.11
- Austria has similarly significant potential: the Industrial Excess Heat project identified 34 TWh, which represents roughly one-third of the national heat demand.12
Modern heat pump and heat recovery systems now offer mature technological solutions to harness these energy potentials in both ecologically and economically meaningful ways.
Industrial heat pumps: A key technology for climate-neutral industry
Industrial heat pumps enable the energy-efficient provision of process heat by recirculating waste heat from production processes. Powered by electricity, they offer a forward-looking alternative to fossil fuels and pave the way for the electrification of industrial heat supply. As the share of renewable energy in the electricity mix increases, the climate footprint of heat pumps continues to improve. Even today, modern systems enable significant CO₂ reductions – and in a fully decarbonized energy system, industrial heat pumps will become a zero-emissions technology.
Cost-effectiveness through energy circularity and cost reduction
The use of industrial heat pumps promotes high levels of energy circularity and increases overall process efficiency:13
- Energy efficiency: Up to 80% better utilization of primary energy
- Cost reduction: Up to 20% lower production costs
- CO₂ reduction: Up to 75% fewer emissions by replacing fossil fuels
Thanks to these savings, investments typically pay off within 2 to 5 years. When cooling is required simultaneously, the overall system efficiency increases significantly – eliminating the need for additional investment in separate cooling systems.
Efficiency metric COP as a key decision-making factor
A key indicator of a heat pump's economic viability is the Coefficient of Performance (COP). It reflects the ratio of heat output to the electrical energy input. The higher the COP, the more efficiently the heat pump operates – and the lower the operating costs.
- COP ≥ 4: particularly attractive economically
- COP < 2.5: often no longer economically viable, as payback periods increase significantly
COP values exceeding 10 or even 30 are technically achievable in industrial applications under favorable conditions – especially in processes with low boiling point elevation or where simultaneous cooling demand exists. Even with COP values below 2.5, heat pump investments can still be economically appealing if savings from reduced cooling costs, CO₂ certificate expenses, and government incentives improve overall profitability. In addition, more stable energy prices have a positive long-term effect.
The potential of advanced heat pumps
Industrial heat pumps today can reach temperatures of up to 200°C, opening up new areas of application in industrial process heat supply. Despite significant technological advancements, their use in industry remains limited. Yet they have the potential to cover up to 37% of industrial process heat demand in Europe, leading to substantial CO₂ reductions: 14 15
- Up to 100°C: 222 TWh/year and 51 million tons/year of CO₂ reduction
- 100–200°C: An additional 508 TWh/year and 95 million tons/year of CO₂ savings
Figure 4: Potential of industrial heat pumps to meet process heat demand through waste heat utilization. © GIG Karasek
Savings potential for process heat in energy-intensive sectors
Industries with high and continuous waste heat generation offer particularly favorable conditions for the cost-effective use of industrial heat pumps. These include the building materials, steel, paper, food, and chemical industries. The use of high-temperature heat pumps in these sectors could cover a substantial share of process heat demand in a climate-friendly way and creating significant competitive advantages.
Studies show significant savings potential from heat pumps: 15 16
- Pulp and paper industry: approx. 230 TWh per year
- Food and beverage industry: approx. 123 TWh per year
- Chemical industry: approx. 119 TWh per year
- Nonmetallic minerals: approx. 43 TWh per year
- Mechanical engineering: approx. 41 TWh per year
There is particularly high potential in the food, paper, and chemical industries, as illustrated in figure 5. The positive values in the diagram represent the available waste heat, while the negative values indicate the respective process heat demand. The arrows below illustrate the temperature lift that can be achieved using heat pumps.17 18
Figure 5: Availability of waste heat and process heat demand in selected sectors across the EU28. Source: Agora Industrie, FutureCamp (2022) based on Marina et al. (2021).
Policy framework for promoting industrial waste heat utilization
As part of European climate policy, the use of industrial waste heat is increasingly coming into focus to support the development of a competitive European industry and circular economy in pursuit of climate neutrality. The deployment of high-temperature heat pumps aligns with the strategic direction of the EU 2050 Agenda and directly supports two core targets of the EU 2030 Agenda: a minimum 32% increase in energy efficiency and a 40% reduction in greenhouse gas emissions.
The following European directives and strategies essentially form the regulatory framework for industrial waste heat utilization and provide targeted incentives for its implementation:
1. Energy Efficiency Directive (EED)
The EED requires EU member states to systematically identify industrial waste heat sources and establish conditions for their utilization. This includes heat recovery in industrial facilities, integration of waste heat into heating networks, and efficiency standards for new installations.
2. Renewable Energy Directive (RED III)
Although industrial waste heat is not explicitly defined as a renewable energy source under RED III, its systemic contribution to decarbonization is recognized:
- Eligibility toward renewable targets: Waste heat can count toward national renewable energy quotas when used in district heating systems and replacing fossil fuels (Art. 2(2)).
- Integration into heating networks: RED III promotes the incorporation of waste heat into district heating systems as part of a sustainable heating supply (Art. 24).
- Hybrid systems: The combination of waste heat with renewable energy sources is supported.
- Heat pump funding: Technologies for upgrading waste heat – such as industrial heat pumps – are eligible for funding.
- Power-to-heat framework: RED III establishes a regulatory framework for the use of renewable electricity in heat generation, including in combination with waste heat sources.
RED III thus provides concrete incentives for energy-intensive industries to utilize waste heat – through heat sales to external networks, savings in the EU Emissions Trading System (EU ETS), and improved access to funding opportunities.
3. EU strategy for energy system integration
The EU Strategy for Energy System Integration (2020) aims to more closely link various energy-consuming sectors – particularly industry, buildings, and mobility – through sector coupling. In this context, industrial waste heat is highlighted as a cost-effective and sustainable energy source. The strategy further specifies and complements the core provisions of the Energy Efficiency Directive (EED) and the Renewable Energy Directive (RED III) by promoting the systemic integration of industrial waste heat into the energy infrastructure.
4. EU industrial strategy
The EU Industrial Strategy (updated in 2021) aims to build a resilient, competitive, and climate-neutral industrial sector. It acknowledges the importance of circular processes, including the use of industrial waste heat. Through targeted support for innovation and infrastructure investments, the strategy promotes the development and deployment of technical solutions for more effective recovery and utilization of waste heat in industrial processes.
Figure 6: EU directives and strategies promoting waste heat utilization. © GIG Karasek
Funding programs for waste heat utilization in industry
In addition to various EU programs, many member states also offer national funding initiatives that provide financial incentives for decarbonizing industrial processes. Germany plays a leading role with its federal funding program “Climate Protection Contracts” (Klimaschutzverträge), which supports large-scale industrial waste heat utilization in energy-intensive sectors. This program specifically funds measures for decarbonizing process heat, such as the use of high-temperature heat pumps, waste heat recovery systems, and renewable energy sources.
In the first round of funding, €2.8 billion was awarded to 15 companies – including BASF, for the world’s largest industrial heat pump with a capacity of 50 MW, which will be implemented by GIG Karasek. This system converts waste heat from a steam cracker into CO₂-free process steam. The second round of funding is already in preparation. Newly eligible areas include the production of industrial steam from waste heat and easier access for small and medium-sized enterprises. In addition, funding is being expanded to CCUS projects, a field in which GIG Karasek is also active with its ECO2CELL conversion technology.
Figure 7: Overview of relevant funding programs at the EU level as well as in Austria and Germany for investments in energy-efficient technologies such as industrial waste heat utilization and heat pumps. © GIG Karasek
The dilemma of sustainable investments under short-term planning horizons
Companies often face a dilemma in balancing short-term profit interests with long-term sustainability goals. Traditional incentive systems – focused on quarterly financial metrics – frequently lead to the systematic disadvantage of sustainable technologies. This issue is further compounded by the typical turnover of executives, whose tenures are often shorter than the payback periods of sustainability-related investments.
The solution requires a three-dimensional approach
- Mindset transformation through targeted awareness-building among decision-makers regarding the strategic value of sustainable technologies.
- Incentive system redesign that anchors long-term sustainability metrics on an equal footing with financial objectives.
- Governance reform in which supervisory boards and owners act as drivers of transformation.
Only the synergy of these measures enables companies to unlock the full potential of sustainable investments – both ecologically and economically. Organizations that successfully implement this shift not only generate ecological value, but also position themselves for long-term competitiveness in a rapidly transforming economic landscape.
Conclusion: Waste heat utilization in transition – from nice-to-have to strategic imperative
In the context of structurally high energy prices and binding climate targets, industrial waste heat utilization is becoming a strategic success factor. Industrial heat pumps offer both ecological and economic advantages: they reduce CO₂ emissions, lower energy costs, and strengthen energy security by reducing dependence on fossil fuel imports. With technological advances – such as the ability to supply process heat up to 200°C – and an increasingly stringent regulatory framework (EED, RED III, EU Energy System Strategy), the deployment of industrial heat pumps is evolving into a key measure for a sustainable and competitive industrial sector.
In upcoming articles, we will take a closer look at the differences between open and closed-loop heat pump systems, as well as GIG Karasek’s innovative heat pump solutions, which can generate process steam up to 215°C and are also suitable for combining smaller waste heat streams.
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