26/06/2026
The decarbonisation of industrial heat is emerging as one of the defining challenges — and opportunities — of the UK's journey to net zero. Process heat demand in UK industry is estimated at approximately 170 TWh per year, accounting for almost 25% of the UK's total heat demand and roughly 11% of final energy demand. The industrial sector is the third highest-emitting sectors in the UK, representing 12% of total greenhouse gas emissions in 2024 (46.5 MtCO₂e). For industrial end-users, energy technology providers, project developers and investors operating in this space, the prize is significant — but so is the complexity. Getting this transition right is not only essential for meeting climate targets, but also for strengthening industrial resilience in the face of volatile global energy markets and increasingly vulnerable supply chains.
The challenge
UK heavy industry contributes £152 billion in Gross Value Added to the economy and supports over 1.4 million jobs. The Climate Change Committee's ("CCC") Seventh Carbon Budget advice indicates that industry emissions should fall by 78% relative to 2023 levels by 2040 — an enormous transformation to deliver in a compressed timeframe. Electrification is expected to account for 57% of projected emissions reductions, complemented by carbon capture and storage (17%), hydrogen (7%), bioenergy (5%) and efficiency measures.
Progress, however, has been slow. The proportion of industrial energy use coming from electricity stands at only 28%, and the ratio of industrial electricity-to-gas prices remains above 4:1. UK industrial electricity prices were almost 50% higher than in France and four times higher than in the United States and Canada, in 2023. The CCC has identified making electricity cheaper as its highest-priority recommendation.
Industrial process heat spans a wide range of temperature requirements, each presenting distinct decarbonisation pathways and technology options:
- Low-Temperature Heat (<150°C) — used extensively in food and drink processing, drying, washing and space heating applications. This temperature range is well-suited to electrification via high-temperature heat pumps.
- Medium-Temperature Heat (150°C – 400°C) — required for processes such as distillation, sterilisation, chemical processing and certain manufacturing operations. Biomass steam systems, thermal energy storage and emerging high-temperature heat pump technologies are increasingly viable at this range.
- High-Temperature Heat (>400°C) — essential for cement kilns, steelmaking, glass production and other foundation industries. This range remains the most technically challenging to decarbonise and is where hydrogen combustion, electric arc furnaces, thermal energy storage and CCUS are expected to play the primary roles.
A growing portfolio of technologies
A range of technologies is now available or emerging to address industrial heat decarbonisation across these temperature bands, each bringing distinct legal, commercial and regulatory considerations.
Heat pumps
High-temperature heat pumps can supply heat for low and medium-temperature processes using only one-third to one-fifth of the energy of conventional boilers. Research from the University of Oxford (2025) demonstrated that heat pumps are the most cost-effective solution for decarbonising industrial process heat below 150°C, delivering costs up to 75% lower than hydrogen boilers and up to 40% lower than biomass alternatives. Combining heat pumps with thermal energy storage further reduces heating costs by up to 15%.
Biomass
Biomass steam systems have proven effective for medium-temperature heat applications, particularly in sectors such as food and drink manufacturing and distilling, where process temperatures of 100°C–250°C are typical.
Alternative fuels
Alternative fuels, including solid recovered fuel, represent a promising solution for high-temperature applications, particularly when coupled with carbon capture, utilisation, and storage (CCUS).
Thermal energy storage
Thermal energy storage ("TES") converts clean but variable electricity into reliable, around-the-clock industrial heat. Solutions such as large-scale modular thermal stores, including sand batteries, are demonstrating commercial viability for applications ranging from low-temperature processes through to the very high-temperature processes. For TES developers looking to deploy in the UK, the legal and commercial framework — from project structuring to offtake agreements and grid connection — requires careful navigation.
Hydrogen
Hydrogen shows particular promise for very high-temperature heat processes such as steelmaking and glass production. Two principal production pathways are relevant to industrial decarbonisation: green hydrogen, produced via electrolysis powered by renewable electricity, and blue hydrogen, produced from natural gas. The UK Government has confirmed funding for the first round of projects under the Hydrogen Allocation Round (HAR1), and the second round (HAR2) is now under way — representing a growing pipeline of projects that will test both production pathways and hydrogen end-use at industrial scale.
Carbon capture, utilisation and storage (CCUS)
CCUS is also progressing, with up to £21.7 billion committed over 25 years for Track 1 clusters in northern England. The cement and lime sectors are also actively pursuing CCUS at scale through initiatives such as the Peak Cluster project, which aims to capture over 3 million tonnes of CO₂ annually by 2030.
The policy landscape
The UK policy environment is evolving rapidly. The UK ETS cap is now aligned to net zero, and a Carbon Border Adjustment Mechanism ("CBAM") will commence on 1 January 2027 covering steel, cement, aluminium, fertiliser, hydrogen, ceramics and glass. The Industrial Energy Transformation Fund, which offered £201.5 million in grants to 162 projects, will not be extended following the 2025 Spending Review — leaving a significant gap in direct capital support. Major policy initiatives expected in the near term include the refreshed Industrial Decarbonisation Strategy, anticipated in 2026, and the Strategic Spatial Energy Plan, anticipated in Q3 2027, alongside continued development of the UK ETS. The CCC has recommended dedicated business models to support industrial electrification, complementing existing models for hydrogen and CCS.
How we can help
Deploying clean heat technologies in the UK involves a range of legal and commercial issues requiring specialist energy sector expertise — from project structuring and delivery models, through heat supply and offtake agreements including ESCO delivery models, to grid connection, funding, planning and EPC contracts. The challenges and opportunities differ at each temperature range, and the optimal delivery structure will depend on technology, site characteristics, funding route and regulatory context.
We are one of the UK's leading law firms in the energy sector. Our Energy & Resource Management Group advises across the full spectrum of clean heat and energy storage technologies — from biomass and heat pumps through to hydrogen, CCUS and thermal storage — and has acted on some of the most innovative and significant industrial energy projects delivered in the UK to date.
Our track record in industrial heat decarbonisation spans the food and drink sector, distilling, cement and building materials, engineering, and broader commercial and industrial purposes. We advise technology providers, project developers, industrial end-users, equity funders and public sector bodies on the full project lifecycle — from feasibility and business case through procurement, construction and operation to refinancing and asset management.
Whether you are a technology provider looking to deploy innovative heat solutions in the UK, a project developer structuring a new clean heat venture, or an industrial end-user exploring decarbonisation options across your process heat requirements, our team has the sector expertise and commercial insight to help you navigate the challenges, strengthen your industrial resilience and seize the opportunities ahead.
To explore how we can assist you with your decarbonisation scheme, please contact a member of our Energy & Resource Management team.
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