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How renewable energy can shield industries from fossil fuel shocks, by IRENA – EnviroNews
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Renewable energy is emerging as a critical tool for strengthening industrial resilience and reducing exposure to volatile fossil fuel markets, according to the International Renewable Energy Agency (IRENA).
James Walker, Team Lead, Renewable Gases at IRENA, said recent shocks in global fossil fuel markets had demonstrated with “glaring clarity” the resilience advantages enjoyed by countries with higher levels of domestic renewable energy capacity.
In an analysis of the opportunities for renewable energy in industry, Walker argued that the benefits of renewables extend beyond electricity generation, with renewable solutions capable of meeting growing energy demands across both traditional industrial sectors and emerging industries.
He identified iron and steel, chemicals and cement as among the most energy-intensive sectors, describing them as “hard-to-abate” because their production processes continue to depend heavily on fossil fuels for high-temperature heat and chemical feedstocks.
According to him, however, growing technological innovation and declining renewable energy costs are creating new opportunities for industries to reduce fossil fuel dependence while improving energy security.
Electrification Gains Ground
Walker identified industrial electrification as one of the major pathways through which renewable energy can transform energy-intensive industries.
He noted that technological advances, including novel electric boilers and heat pumps, are expanding the range of temperatures that can be achieved using electricity for industrial applications.
Depending on operating conditions, he said, heat pumps can also provide highly efficient solutions for industrial heat requirements.
IRENA estimates that approximately 34 per cent of total final energy consumption in industry could be supplied directly by electricity by 2035, up from 27 per cent in 2023.
Walker said meeting this additional electricity demand with domestically or regionally generated renewable energy would enable industries to reduce their exposure to fossil fuel commodity markets and associated price volatility.
Green Fuels Offer Alternative to Fossil Feedstocks
Beyond electrification, Walker pointed to renewable bioenergy, including biofuels and biogases, as well as green hydrogen and hydrogen-derived commodities, as other important pathways for industrial decarbonisation and energy security.
He explained that renewable-based gases and fuels can replace fossil fuels in a range of industrial processes, including applications where fossil fuels are currently used as chemical feedstocks.
Locally produced renewable hydrogen, he said, could strengthen the resilience of iron and steel value chains, while biogases could serve as renewable energy carriers in sectors such as chemical manufacturing.
The localisation of renewable fuel production could therefore help industries reduce their dependence on imported fossil energy and shield critical value chains from international market disruptions.
Renewables to Power the AI Revolution
Walker also identified the rapid expansion of artificial intelligence (AI) and digital technologies as a major emerging driver of energy demand.
According to him, AI could play an important role in the energy transition by improving the forecasting, monitoring and control of energy systems with high shares of renewables.
AI-powered tools could, for instance, improve weather forecasting and enable more responsive management of flexible electricity generation and demand.
However, the deployment of AI at scale will itself require enormous amounts of electricity, particularly as demand for data centres continues to grow.
Walker noted that data centres are already becoming significant sources of energy demand, with many developers facing difficulties securing reliable electricity supplies and connections to existing power networks.
Data Centres Could Drive Renewable Microgrids
Against this backdrop, Walker said data centre operators have an opportunity to incorporate renewable energy into their power strategies from the outset.
One option is for operators to develop renewable-powered microgrids alongside their facilities, allowing them to generate their own electricity while reducing dependence on fossil-fuel-based power and potentially avoiding expensive grid connection requirements.
The development could also accelerate investment in local renewable energy infrastructure and create new opportunities for industrial-scale clean energy deployment.
Competition for Renewable Energy Looms
Walker suggested that competition for reliable renewable energy could become a defining feature of the next phase of the energy transition as traditional energy-intensive industries compete with rapidly expanding sectors such as data centres.
“Will data centres outcompete traditional industries? Or will there be sufficient renewable energy to go around?” he asked, highlighting the emerging competition for resilient energy supplies.
He said the answer would depend largely on geography and the availability of renewable energy resources in different regions.
Nevertheless, Walker stressed that expanding renewable energy supply offers an opportunity to unlock green industrialisation and accelerate industrial development across many countries.
Increasing renewable energy deployment, he said, could support job creation, strengthen local economies and provide industries with a more resilient energy foundation.
For developing economies in particular, the transition could offer an opportunity to move beyond simply replacing fossil-fuel generation and instead build new industrial value chains around renewable electricity, green hydrogen, biogases and other clean energy technologies.
The growing convergence between energy security, industrial competitiveness and renewable energy, Walker concluded, suggests that countries able to rapidly expand reliable domestic renewable energy capacity could be better positioned to attract new industries and withstand future energy market shocks.
