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Net-zero heat: Is it too hot to handle?

Changing the systems by which we produce and consume heat could generate powerful progress in the effort to combat climate change

Leads our manufacturing and capital productivity work for the automotive sector and advises automotive OEMs and suppliers on operations performance transformation programs, leveraging his broad experience in conventional and new powertrain technologies including batteries, hydrogen, and fuel cells across the entire value chain

Ken Somers

Brings a wealth of operational expertise to help clients from manufacturing industries increase their yields and energy efficiency

Godart van Gendt

Leads work on energy transition with a focus on power and mobility, supporting businesses and investors to identify and capture business opportunities aligned to the energy transition

Of all the measures that will be required to curb greenhouse gas emissions, transforming the way we produce and consume heat in industry and buildings is one of the largest and most intractable.

Heat—deployed to regulate the temperature in buildings and to support industrial processes at various temperatures—is more than double the energy demand of global electricity generation and is responsible for 55 percent of global energy emissions.1 Supply chains across industries, from food to cement, require either direct heat or steam for processes such as drying, calcination, or chemical reactions. Today, our heat generation technologies largely rely on natural gas and coal, with heating from gas alone responsible for more than 10 percent of total energy emissions.

Reducing emissions from heat—or aiming for net-zero—is thus a major decarbonization imperative, but to date, the efforts to do so are often siloed, separately considering topics like electrification, hydrogen, biomass and carbon capture, utilization, and storage (CCUS) for various end-uses. In this article, we will explore the potential benefits of a more integrated energy system and the role heat storage can play to accelerate this integration in the short term.

Transitioning to a fully decarbonized, stable, and reliable energy system while minimizing system costs has many complexities across generation, transmission, and use. It will require a combination of storage capacity for power, heat and hydrogen, as well as “sector coupling”—like turning power-to-heat, power-to-hydrogen, or hydrogen-to-heat.

For example, utilizing power during periods of abundant renewable supply to produce and store green hydrogen or heat would help the system cope with the inherent variability of renewable power. An integrated approach also enables 24/7 clean power and heat at lower costs.

A paradigm shift for power, heat, and hydrogen

Traditionally, power generation is centralized and operates with dispatchable capacity. Heat generation is localized using gas and coal boilers. Power and heat systems often operated independently.

Four seismic developments are shifting energy systems. First, the rapidly growing share of power generation from renewable sources (primarily wind and solar, both of which provide cheap but variable power); second, the prospective growth of green hydrogen based on renewable power and flexible electrolysis; third, the progressive electrification of heat in buildings and industry; and finally, emerging storage technologies for both power and heat.

These four trends are fundamentally reshaping the supply and demand of electricity which a future energy system will need to handle. The variability of wind and solar resources creates peaks and troughs in supply, while the emergence of the green hydrogen industry and the electrification of heat will over time create a substantial increase in demand. It makes sense to look for opportunities to couple the heat, power, and hydrogen sectors to create synergies. The coupling of these sectors creates an energy system that would be able to handle the more complex interplay between supply and demand in this new world (Exhibit 1).

Net zero heat: Is it too hot to handle?
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The challenges along this route should not be underestimated. One major difficulty is the vast scale of the build-out required in the coming decades, not just in terms of power generation, but also of transmission and distribution infrastructure. Power, heat and gas infrastructure investments will be required to manage higher average—and peak power capacity. For example, we estimate that the US will require a four-fold increase in total power generation capacity over the next two decades to meet projected 2040 demand.2 This alone will require a massive expansion of transmission and distribution networks to deliver power to where it’s needed.

Another major challenge in electrifying heat generation is the timeline. Given the scale of capex required and the length of the investment cycles in heavy industry and district heating, the day that electricity can provide all our heating needs still lies many years in the future.

Nevertheless, there are practical avenues that are readily available to provide a better match between electricity supply and demand as we continue to build out renewables and electrify heat. One such avenue is thermal flexibility—using thermal energy storage (TES).

Thermal storage technologies are not new. Molten salts, a well-known heat storage material, were first used in 1950, when Oak Ridge National Laboratory started to develop and test a nuclear-powered aircraft engine. The first solar power plant that used molten salts for energy storage was developed in 1993, and 6.5 GW of capacity has been developed since then.3 However, it is only recently that thermal storage started to be considered for stand-alone solutions for storage and release of electricity and heat. If widely deployed, TES would turn waste heat or electrified net-zero heat produced from variable renewables into a discrete and fungible energy resource with multiple end-use applications, driving significant emission reductions.

Three types of TES technology are currently available: sensible heat storage, which stores thermal energy by changing the temperature of specific solid or liquid materials such as silica or water; latent heat storage, which does so through changes in the state of materials (phase changes), eg, from solid-to-liquid or liquid-to-gas; and thermochemical heat storage, which uses reversible chemical reactions.

Net zero heat: Is it too hot to handle?
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Although deployment of TES today is negligible—less than 1 percent of global energy storage in 2019 was thermal4 —its potential is very significant. TES solutions can be applied across industrial, commercial, and residential applications, support a wide range of discharge temperatures (from cooling to high temperature heating of >1000 ˚C) and store heat for durations ranging from days to multiple months. Counterintuitively, thermal storage (power-to-heat) efficiencies exceed 90 percent.

Additionally, given that most TES technologies are based on simple and readily accessible materials such as sand and thermal bricks, they have a low cost, adding only a few incremental dollars for each MWh of heat stored.5 An increased adoption of these technologies would lead to increased knowledge and familiarity in industry – the term “levelized cost of heat” may become as widely adopted as “levelized cost of electricity” when comparing heating options.

Benefits of thermal flexibility

More widespread uptake of thermal flexibility could reduce the required buildout of generation, transmission and distribution infrastructure, as flexibility would only require that systems build to an “average” load instead of having to cater for peaks. This, in turn, would increase the utilization of power grids, thus reducing the societal costs of infrastructure investment. Early integrated modelling of a single site (eg, an alumina refining site) estimates that incorporating TES in the system could reduce overall capacity needs by 15 to 30 percent, as the integrated system can utilize existing power capacity to its maximum. This higher utilization is obtained by “energy shifting” as shown in Exhibit 3; using excess generation in the middle of the day to charge the storage system, and discharge during the rest of the day to provide the stable supply industry requires.

Net zero heat: Is it too hot to handle?
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As a second example, thermal flexibility could manage the large natural seasonal variations in demand for heat in residential buildings. Thermal storage can be charged by the energy of the sun during the summer, and supply peak demand in winter, thus reducing peak capacity requirements. Examples of this are already operating in the Nordic region, with solutions such as underground hot water “pits.”6

Thermal storage, now well past the R&D phase, is being used in commercial projects across sectors. Brenmiller Energy, for example, is replacing gas boilers in a food and tobacco production facility with 18.5 MW, 31.5 MWh storage systems to cover 100 percent of their steam requirements, showing how this is already taking hold as a viable, large scale, alternative to fossil fuels.

A call for evidence

These are early days, and many obstacles need to be overcome before widespread TES can become a reality. A crucial obstacle is the limited understanding of the potential of TES within integrated energy systems, and the lack of standardized benchmarks and business cases with which to establish the cost competitiveness of TES-enabled decarbonization options.

Broad collaboration between companies across the energy system and public policymakers could accelerate this understanding. TES is only one possible route towards reducing carbon emissions from heat production, but it is a powerful technology to further lower the costs of the energy transition.

The authors wish to thank the broader Electric Power & Natural Gas, Advanced Electronics, and Sustainability Practice partnership for numerous insightful contributions and conversations, as well as the Long Duration Energy Storage (LDES) Council membership for providing deep operational and technical expertise. McKinsey is collaborating with the LDES Council as a knowledge partner on an upcoming report on “Net-Zero Heat.”

1 “Global Energy Perspective 2022,” McKinsey, April 26, 2022.

2 “Navigating America’s net-zero frontier: A guide for business leaders,” McKinsey, May 5, 2022.

3 Samaan Ladkany, William Culbreth, Nathan Loyd, “Molten salts and applications I: Molten salt history, types, thermodynamic and physical properties, and cost,” Journal of Energy and Power Engineering, 2018,Vol. 12, 507–16.

4 International Energy Agency

5 Long Duration Energy Storage Council 2022 TES Benchmarking

6 IEA, Solar Heating & Cooling Programme

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