TECH

Industrial electrification is now a security imperative, finds analysis

Industrial electrification is becoming a matter of economic security as well as decarbonization, according to new Oxford analysis. Continued reliance on fossil fuels leaves 75% of global industry exposed to recurring price shocks, while electrification offers a pathway to stable and resilient energy costs.

The latest disruption linked to tensions around the Strait of Hormuz is only the most recent example of a broader pattern. The 2022 Russian gas crisis forced widespread factory closures and production shifts across Europe and beyond, with many energy-intensive industries yet to fully recover. The authors argue that such shocks are not isolated events, but symptoms of a structural vulnerability tied to fossil fuel dependence.

The impact has been global and persistent. In Asia, the 2022 LNG price spike forced factory shutdowns in Pakistan and Bangladesh and drove up costs for manufacturers in Japan and South Korea. Now, tensions around the Strait of Hormuz are once again feeding through into higher energy prices, renewing pressure on industrial producers across the region. The message is clear: fossil fuel shocks are not one-off events, but a repeated risk.

"Industry has now lived through two major fossil fuel shocks in three years. First the 2022 gas crisis and now Hormuz," says Jan Rosenow, Professor of Energy and Climate Policy at the University of Oxford. "At some point you have to ask: how many times does the alarm have to go off before we change the system?"

Industry's slow shift away from fossil fuels...Industry runs almost entirely on fossil fuels and is therefore uniquely exposed to these risks, the authors say. Yet, despite the exposure, it has been among the slowest sectors to transition.

The analysis highlights that the technologies needed to electrify industry are already becoming available at scale. Recent developments include the delivery a 95-tonne, 16-meter evaporator for one of the world's most powerful industrial heat pumps at BASF's Ludwigshafen chemical site, and the commissioning of Southeast Asia's first industrial heat battery at a cement plant in Saraburi, Thailand built entirely with local supply chains in just eight months. These projects demonstrate that industrial electrification is moving beyond pilot stages and beginning a global industrial shift.

"The technology to electrify industry exists today," says Professor Rosenow. "What's missing is the political will to fix the price signals and build the grids that would make it happen at scale."

Report findings...The new Oxford report, "High Voltage," provides the evidence base behind that shift. Drawing on more than 1,600 global climate scenarios alongside a systematic engineering review, the report finds that up to 90% of industrial energy demand could be electrified with existing and emerging technologies.

"What surprised us most in this research is how strong the convergence is across two completely independent lines of evidence," says Cassandra Etter-Wenzel, Researcher at the Environmental Change Institute, University of Oxford. "Detailed engineering studies and 1,600 global climate scenarios both point to the same conclusion: up to 90% of industrial energy demand could ultimately be electrified. The potential is not the constraint. The question is whether policy moves fast enough to realize it."

The authors emphasize that key electrification technologies, like heat pumps, electric boilers, heat batteries, and resistance heating, are already proven and commercially available. But deployment is being held back by policy and market failures.

Price, grid and finance barriers...Electricity prices remain artificially expensive relative to gas in many regions due to legacy tax and levy structures that disproportionately burden electricity. Reforming these price signals through electricity pricing reform, carbon pricing, and targeted support for electrified industrial heat will be crucial.

Grid access is another major constraint. Even where the technology exists and the economics work, long connection timelines stall industrial projects . Governments need to streamline permitting, enable anticipatory grid investment, and prioritize industrial connections to unlock progress.

Finally, first-of-kind industrial electrification projects face technology and integration risks that private capital won't bear alone. Instruments like Carbon Contracts for Difference—as used to support the BASF heat pump—grants, and concessional finance are essential to de-risk early deployment and drive down costs for what follows.

Electrification as a resilience strategy...The authors stress that reducing fossil fuel dependence is not only about emissions, but also about resilience. Each unit of fossil fuel replaced with domestic clean energy reduces exposure to geopolitical disruption and price volatility.

"The industries that electrify fastest will stop being victims of the next crisis," says Professor Rosenow. "Every unit of fossil fuel eliminated from an industrial process is a unit that can no longer be held hostage by a pipeline shutdown, a Strait closure, or a price spike."

Industrial electrification has evolved from a matter of decarbonization to a strategic security imperative. New research from institutions like the University of Oxford argues that fossil fuel dependence is now a structural vulnerability, leaving 75% of global industry exposed to recurring price shocks and geopolitical disruptions. 

The security case for electrification...Modern energy security is no longer just about securing oil and gas supplies; it is about the freedom from importing them. 

Resilience against geopolitical shocks: Unlike fossil fuels, which can be "held hostage" by pipeline shutdowns, strait closures, or price spikes, domestic clean energy eliminates exposure to external geopolitical leverage.

Economic stability: Electrification offers a pathway to stable and predictable energy costs. In the EU, large-scale electrification could cut fossil fuel dependence by two-thirds by 2040, delivering net savings of €29 billion per year in fuel imports.

"Security dividend": Transitioning to a distributed, electrified energy system provides a "security dividend" by creating a more resilient, decentralized network that is less vulnerable to centralized infrastructure sabotage. 

Industrial and defense implications...The shift toward electricity is increasingly viewed through the lens of national defense and industrial survival. 

Defense integration: Groups like Eurelectric have noted that energy systems are now a "second line of defense". There are calls to allocate a portion of defense spending (such as NATO's 1.5% GDP investment goal) toward energy infrastructure and clean innovation to bolster civil preparedness and military resilience.

Industrial competitiveness: Access to reliable, low-cost electricity is becoming a primary determinant for corporate site selection. Countries like China are pulling ahead, electrifying their energy systems by 10 percentage points each decade to anchor global manufacturing dominance.

Operational benefits: Electric equipment often provides better precision, safety, and energy efficiency—often up to three to four times higher than fossil fuel systems. 

Key strategic challenges...While the security benefits are clear, several "bottlenecks" remain to achieving this at scale(below): 

Grid capacity: The global grid must add or replace 80 million kilometers of lines by 2040 to handle the new load.

Technology gaps: While 60% of industrial heat can be electrified today, high-temperature processes still require further innovation.

New dependencies: The transition creates a new reliance on critical raw materials and technologies, currently dominated by China

Provided by University of Oxford