The Exchanges

Q You sort of made this point, but there are different temperatures needed to run different industrial processes. Some relatively low temperature processes will need a hundred degrees Celsius, for example. And at the other end of the spectrum, you have stuff like steel making, which is well over a thousand degrees Celsius. So how does that pie split out?

A Yeah. Which technologies are going to be applicable where, and you summed it up, and if we go all the way to the high end of the number, um, part of making cement is well over a thousand degrees Celsius. Yeah, pasteurizing milk, we need heated around 80 degrees Celsius. Making baby food all the way through refining petroleum and biofuels, we need heated around 200 C something like 80% of industrial heat is in the low to mid mid range temperatures below about 350 C. And then there's a chunk around 500. Making cement, for example, two thirds of the energy is at about 1100 C, and one third is about 1800. So, and that's really the highest that's in use. Steel making today, making steel with coal in blast furnaces, is at a higher temperature, but as you know, the steel industry is moving to new technologies that don't use coal, that run at different temperatures. They run actually at around a thousand.

AI assessment note: “something like 80% of industrial heat is in the low to mid mid range temperatures”

Q making, but just paint me a picture of typical industrial facility that needs, let's just say something that needs relatively high temperature heat, 500 degrees C or above, or something like that. Um, what does it look like? Where is the heat getting produced? Is it fossil fuels being combusted on site with pipes into the rest of the industrial process? What is the actual physical manifestation of this heat?

A Up to about 600, the vast majority of heat is moved around as steam. Steam is an excellent heat carrier, so when you walk in, you will see giant boilers, sometimes that are the size of a house, that are combusting fuel and making steam, and then start large insulated steam pipes running to the places where heat is used. In a food production facility, you might see six-inch steam lines. In a refinery, you might see steam lines that are two feet or larger in diameter. For higher temperature processes, making cement, for example, heat's used in a different way. You'll see large, giant tubes that are rotary kilns, and combustion of fuel is happening inside the kiln. So there are heat applications where the fuel is combusted in contact with whatever it is that we're making, and then you call those direct heating systems, and then most heat is indirect. That is, there's combustion, and then something that transfers the heat to whatever that you're cooking or melting or, yeah.

AI assessment note: “you will see giant boilers, sometimes that are the size of a house”

Q the toasters, as you've described, uh, directly, and get their heat straight from the grid, and they would have no need for anything sitting in between, like thermal storage, like what Rondo's doing, right? But the challenge with that is that, and you, and you can do that technically today, right? There's no, nothing stopping you from a technical standpoint from just electrifying industrial heat It's an economic problem, right?

A Yeah, it's an economic problem, and in a bit it's a technical problem, because you're absolutely right, and I should have mentioned that option, direct electrification live with electrical resistance heaters. There is a whole class of things like electric arc furnaces that also directly use electricity, and An electric boiler, you can pair it with a gas-fired boiler, and there are companies out there who've been doing this for a little while now, setting up software so that the electric boiler runs when the electricity price is X and the gas boiler runs at other times. That works just fine, but the upper limit that we typically see in the United States anywhere is anywhere that Maybe you'll get 30% of the hours of the year of clean power. You might get as much as 40% of the hours of the year of low cost power. Um, but so it's a solution that's on the margin. Interesting. It is not an answer to get 95% or 90% reduction. Um, and it is, so it's much lower cost from a capital cost. And it's mature technology. Electric boilers have been around for a long time, and if you're in You know, if you're in Northern Quebec or you're in lots of places in the world where there's a ton of hydropower, that's your answer, right? But the thing that you can have at arbitrary scale everywhere in the world is wind and solar. And in those domains, this matter of, do I want a small portion or do I wan…

AI assessment note: “Yeah, it's an economic problem, and in a bit it's a technical problem”

Q And if so, it, you know, to your point about where these things get placed, like, we could end up with, you know, a wave of industrialization in the upper Midwest where there's cheap wind And in the South, where there's good solar resources, but independent of where we see all that stuff today, because you remove the transmission constraint from the equation. Like, is this a totally crazy concept?

A No, these are the two, this is like, this is right at the heart of things. I'm really glad you mentioned all three of those things, because I would agree with you, for sure, we are headed toward huge industrial growth in the upper Midwest, and the whole corridor from You know, the Dakotas down to the panhandle. Um, Oklahoma had 2000 hours last year of negative wind prices. The IRA is going to bring vastly more of that intermittent negative price everywhere in the country. The production tax credit is tied into that economically. Now that's coming to solar. It is remarkable. Falling cost of generation, yet rising cost of electricity. Like, what's going on? Well, one is, Uh, and oh, you forgot to mention wind and solar deployments in the United States are slowing down. Not right, not speeding up, and you know, there's a 10 year interconnection queue in Oklahoma for new wind projects. The average interconnection time for new utility scale PV projects in California is seven and a half years. So some of what we're seeing is Rent extraction. Those who can get connected can charge prices that are not cost-based. There, I'm in the, I got my thing in the queue, so the, the answer to those high prices is, of course, high prices. That is, in a perfect market, um, the market would respond by building lots more transmission capacity. But the thing that's really driving that's, you know, tha…

AI assessment note: “I would agree with you, for sure, we are headed toward huge industrial growth”

Q We've talked a little bit about the fact that this is, the reason this is a ton of emissions, uh, is it's mostly combusting fossil fuels right now. What generally dictates which fossil fuels we are combusting in current industrial heat processes? Is it just whether a given location has access to coal versus natural gas, or is it a function of the process itself?

A That's a great question. For the vast majority, I think the answer is the former. That is, what is the historical, especially, and present availability of energy in what form? Uh, and also, what's the scale? Um, you, you don't, you don't find very many small coal-fired things. The coal, because of all the difficulties with emissions control and the complexity of coal combustion, Large somethings in some places in the world are fired by coal. Natural gas, its huge expansion in availability for the last 20 years has really been Moving, industry has moved off oil and moved off coal and onto natural gas around the world. Of course, in some places in the world today, in addition to the climate crisis that the fuel use is driving, there's a gas supply crisis in particular that's causing great disruptions for industry.

AI assessment note: “For the vast majority, I think the answer is the former.”

Q right, so we've got this massive category of energy consumption, corresponding massive category of emissions. Uh, not monolithic, but it shares common characteristics, those characteristics being the need for heat at various temperatures and in various formats. So let's talk about how we get rid of those emissions. How do you think of the kind of high level? Like, what are the categories of potential decarbonization solutions for industrial heat?

A Yeah, great question. The first test that we have to apply to every one of these categories is, what does it cost? Because for a lot of these industries, we're, you know, the things that we're talking about, whether it's making baby food or cement, this is not making computers where there's a large gross margin and energy is a small portion of the cost of production. We're talking about commodities where the margins in the business are small and energy in some cases is 40 or 60% of the total cost of production. So the number one thing about all the sources is What do they cost? Um, second, of course, is, uh, how available are they, you know, and, and that is tends to be by location. And then as you've said, all right, what are the temperatures? What are the needs of the process? So if we, we wind back from that and ask, right, what are the options to a zero carbon energy infrastructure for industry? One of the things that in some places you can do right now is buy biogas instead of renewable natural gas. There's a very limited supply of biogas. It's being aggressively taken up and it sort of typically trades at a, about a four times price premium to natural gas. So in some places where it's available with no change to anything at your facility, If you're willing to accept a big cost increase, alright, that's one pathway. Another pathway that involves very limited modifications …

AI assessment note: “Another pathway that involves very limited modifications to your facility is beginning to substitute hydrogen”

Q Let's talk industrial heat, uh, and let's start at the high level. So walk me through Why do industries use heat, and what's the right way to think about sort of categorizing the different industries and the ways that they use heat differently?

A Great question. Let's go up one clip more. Half of the world's final energy use is used for heating and cooling, and of that, about 95% of that is heat. Heat used for industry is about 25% of total world energy use and a little more than 25% of total world CO two emissions because it comes from burning coal, oil, and natural gas more than about 80% of all heat. So for scale, I think the, the unit is 99 exajoules. Of industrial heat in 2019. If we do a units conversion and ask ourselves, we want to repower that with renewables, it's about 10,600 gigawatts of renewables, wind and solar with typical capacity factors, needed to replace that fuel consumption. And as I think, as everyone knows, we're at a spectacular moment in world history because Those renewable electricity sources are now cheaper than the fuel being used today.

AI assessment note: “Let's go up one clip more. Half of the world's final energy use”