Balancing energy costs and investment needs on the way to climate neutrality: Views on a flexible EU energy system

Access to secure supplies of affordable energy remains one of the EU chemical industry’s greatest enablers in restoring industrial competitiveness and succeeding in its climate neutrality ambitions. To this end, significant changes to Europe’s energy system are needed. Prioritising the deployment of new projects for low-carbon, renewable, and nuclear energy — particularly those with baseload capabilities — is key.
Cefic’s new paper, Understanding and Facilitating Industrial Flexibility in the Chemical Industry, examines the capacity of the chemical industry to dynamically consume and produce electricity in an increasingly intermittent power system, its challenges and enablers.

Industrial flexibility in the chemical industry: challenges and opportunities

One way to potentially address the challenges of rising energy costs and the shift to a climate-neutral energy system is through industrial flexibility, which refers to the ability of chemical plants to adjust their electricity consumption based on supply and demand conditions. For example, a site might reduce energy use during high-price periods or ramp up production when electricity is more affordable.

While this adaptability could support energy system balance, it comes with significant challenges. Some of these challenges are structural, as the chemical industry relies on stable, continuous processes to ensure efficiency and product quality. Its operations follow a baseload profile, meaning a consistent energy supply is critical. Interconnected processes, strict safety standards, and limited onsite storage for hazardous materials further restrict flexibility.

Other challenges may be addressed with the right incentives through appropriate remuneration. Done effectively, these measures could help the EU chemical industry manage energy costs and balance investment needs during its transition to climate neutrality. That said, flexibility must complement, not replace, competitive baseload supplies. As such, Cefic recommends:

• Market Access and Incentives: Participation in flexibility markets – including day-ahead, intra-day, or capacity markets – should be voluntary, fairly remunerated, and open to all market participants. Service providers such as aggregators can help facilitate flexibility in market development and access.
• Energy Storage and On-Site Generation: Support investments in energy storage and on-site generation technologies with harmonised EU-level funding to reduce upfront costs and operational risks.

Learn more about the challenges, opportunities, and recommendations in Cefic’s full paper.