A Novel Temporal Mixed-Integer Market Penetration Model for Cost-effective Uptake of Electric Boilers in the UK Chemical Industry

Abstract

The UK chemical industry is the largest consumer of natural gas for process heating and power generation, with an annual consumption of 26.3 TWh and accounts for 2% of UK’s total emissions. Industrial electrification enables moving away from fossil fuels to electricity for generation of lower carbon process heating. This study aims to accelerate the adoption of electric boilers in the UK's chemical industry, aligning with the UK’s ambitious 2035 industrial decarbonisation goals while considering economic impacts, by designing market-based policy interventions and comparing two adoption patterns. A novel multi-period Mixed-Integer Market Penetration Optimisation Model is developed and applied to inform decisions about transitioning from natural gas to electric boilers. The model is applied to a case study of all the heating systems (490 boilers) in the UK chemical industry from 1 MW to 60 MW boilers. At 100% uptake of electric boilers in 2033, the total carbon emissions reduce by 89%, which is above the 2035 UK industry goal of 60% reduction. Results show that effectively implementing a gas tax, electricity subsidy, annual grant and carbon tax can generate sufficient demand-pull to reduce the cost of electric boilers from 30 to 85% depending on the boiler size. A carbon tax starting at £280 per tCO2e and reducing to £170 per tCO2e coupled with electricity subsidies is essential for this transition. The policies are designed such that a win-win is achieved between government and industry; specifically, revenue from the carbon tax and gas tax is used to support the grant and electricity subsidy thereby achieving cost neutrality for government. The research establishes a robust policy timeline that can drive industrial electrification in the UK's chemical sector. It highlights the need for a multi-faceted approach, incorporating various policy instruments to overcome the barriers of high initial capital costs.