Decarbonization of European Heavy Industrial Companies Could Generate More than 200 Billion Euros Annually by 2030, According to Accenture Research

Heavy industrial companies in Europe could generate more than 200 billion euros annually in net value through decarbonization by 2030, according to new research from Accenture (NYSE: ACN). Accenture’s new report, “Energizing Industry,” reveals this decarbonization will require coordination between the public and private sectors.

While future prices for carbon dioxide (CO2) emissions and green electricity remain uncertain, the research predicts the annual net value of industrial decarbonization will more than double between 2020 and 2030 – from around 100 to just over 200 billion euros per year. Accenture analysis of existing and emerging technologies suggests this figure will stabilize between 2030 and 2040.

However, new technological innovations are expected to emerge, which could lead to growth in value continuing over time. Most transformative solutions, including electrification technologies and the process of capturing waste CO2, known as carbon capture, are not yet financially attractive compared to unabated natural gas, prompting many companies to focus on increasing efficiency in industrial processes.

“Industrial companies across Europe are struggling with uncertainty around the fragmented regulatory environment, infrastructure challenges, the development of key technologies and their pricing,” said Götz Erhardt, a senior managing director at Accenture who leads the Resources industries group in Germany, Austria and Switzerland. “That’s why decarbonization efforts are not progressing fast enough, despite the potential for innovation and value creation. However, public and financial support is at an all-time high, and, as key enablers of the energy transition, European industrial companies need to reimagine their operations at a faster pace.”

Hydrogen is the most promising technology for significant decarbonization progress in heavy industry

The report shows that firms are already taking action – 40% of investments during the past five years were linked to decarbonization, including investments in renewables, hydrogen, intelligent cloud and energy distribution.

Even so, an evaluation of all global CO2 patent filings since 2013 revealed that the growth of new technologies or applications for the mitigation of or adaptation to climate change may be slowing. Instead, patents are increasingly focused on cost advantages and scale, indicating technological maturity.

However, Accenture analysis reveals European industrial firms are still investing in some new areas. Chemical companies are spending heavily on 3D printing, biofuels, hydrogen and battery technology; energy companies are more focused on platform ecosystems, cloud technologies and renewable energy; and mining, metals and building materials companies are concentrating larger investments in energy distribution and chemicals, such as hydrogen.

For heavy industry, the report suggests hydrogen could significantly reduce emissions in operations, as it could partially replace conventional fuels. The total net value of hydrogen adoption is forecast to increase from around 20 to 100 billion euros annually between 2020 and 2040. As a comparison, switching to natural gas would follow a decreasing trend, from generating 11 billion euros in total net value in 2020 to 6 billion euros in 2040.

Private and public sector coordination required to accelerate industrial decarbonization

The heavy industrial firm executives interviewed for this research indicated they are ready to drive the change required to accelerate industrial decarbonization, although it will be key to work with government leaders on this complex transition. Without robust action from the public sector, industrials will be at competitive risk, so innovation and collaboration between the sectors will be critical to ensure they can deliver additional value from industrial decarbonization.

European industrial firms could take these actions:

1. Focus quickly on driving efficiency and identify new business models, for example, by benchmarking against industry peers and leaders.
2. Adopt new technologies, more expansive carbon-pricing efforts, joint investments and alliances across the value chain and improved supplier pre-qualification, based on carbon footprint.
3. Foster an innovative entrepreneurial culture, enabling them to pivot to new opportunities ahead of their industry peers.

Additionally, targeted public sector intervention in the following areas could help facilitate a successful industrial transition to a carbon-free economy. This includes:

1. Implementing a framework that ensures companies are able to successfully internalize carbon's hidden cost.
2. Setting a precise and robust carbon price mechanism with a significant base price, increasing predictably over time as a guide to technological innovation and investment.
3. Stimulating the hydrogen economy on both the supply and demand sides through a broad set of measures, including quotas and tax breaks.

“Industrial decarbonization in Europe is a major opportunity for both energy producers and industrial energy customers,” added Erhardt. “But while they are capable of driving transformational change and redefining business models, they need support from the public sector, given the investments required and the uncertainty of the pace and scope of technological innovation. Successful industrial decarbonization requires a multi-faceted approach with the public and private sectors working in coordination to ensure Europe retains its competitive advantage.”

Research Methodology

Accenture’s decarbonization value modeling analyzes the cost reduction potential from applying new energy technologies in selected heavy industrial sectors in Europe. The model addresses expected changes in the heavy industrial sector supply and demand and the impact on energy consumption, while comparing selected technology solutions based on the production, energy and emission costs, to predict the most attractive alternative to incumbent energy technologies. Additionally, in exploring how the energy transition has progressed in recent years, Accenture conducted a patent and investment analysis. To assess the qualitative implications of the energy transition for European industrial companies and validate the outcomes of the other analyses, Accenture also conducted expert interviews with a study group of 30 companies.

In this report, Accenture defines “industrial companies” those that serve heavy industry, both the providers of energy (from the utilities and energy industries) as well as those that are significant energy consumers (chemicals, steel, metals and cement industries).

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