Renewable energies – preconditions for the transition to climate neutrality in the chemical industry

According to the CEFIC (European Chemical Industry Council) position paper from May 2023, the electricity consumption of the chemical industry in the EU was 163 TWh in 2020. This makes it the largest electricity consumer in Europe. The demand for electricity in this industry will continue to increase due to the introduction of technologies such as e-crackers, hydrogen production plants, carbon capture and storage, heat pumps, and chemical recycling.

Investments of more than € 68 billion are needed to make production almost completely climate-neutral by 2050. The German chemical industry’s demand for electricity would thereby multiply to 685 TWh from the mid-2030s. This even exceeds the total electricity consumption in Germany in 2022 of 484 TWh.

The mentioned technologies rely on the electrification of industrial processes, which is crucial if a climate-neutral society is to be achieved as a result. However, energy prices in Europe are much higher compared to other regions. To address this problem and strengthen competitiveness, a comprehensive strategy is needed that includes reforms in the electricity market, industrial and trade policies, and climate and environmental measures. The European Commission’s proposal to amend the European electricity market is an important step toward improving Europe’s competitiveness. A well-designed electricity market can greatly support the industrial sector by facilitating access to electricity supply contracts.

The chemical sector is exposed to international competition. Energy-intensive companies are burdened by persistently high energy prices in the EU. For example, basic chemicals, as a major energy consumer, relies on a reliable supply of electricity at competitive costs and is directly affected by potential supply uncertainty and future cost increases. At the same time electricity-intensive processes such as the chlor-alkali electrolysis are the starting point for materials that are indispensable for implementing the energy transition. For example, epoxy resin, an essential component of high-performance rotor blades for wind turbines, is based on the basic chemical chlorine.

To meet these challenges and prepare the EU for a potential energy crisis, a market framework is needed that integrates the cost-effective use of renewable and low-carbon electricity. This framework should provide the capacity to meet increasing electricity demand while promoting demand flexibility and passing on the benefits of low-cost electricity to consumers.

Long-term contracts play a critical role in investing in sufficient capacity and renewable and low-carbon technologies. For consumers, they are important for reducing price and volume risks and enabling necessary investments in the transition to carbon neutrality, such as electrification. For generators, they facilitate financing and lower capital costs by ensuring long-term, reliable sales.

So-called power purchase agreements (PPAs) already provide many of the benefits that long-term contracts can have. However, they are constrained by a limited availability of new capacity. In addition, administrative hurdles hinder the conclusion of cross-border PPAs, for example. In summary, even large industrial consumers may find it difficult to access PPAs in the quantities that are optimal for them.

As the share of renewables increases, greater demand flexibility and additional storage and flexible generation capacity will be required. Systems will also be needed to convert excess electricity to other energy sources. Proactive investment in energy infrastructure and cross-border interconnections is necessary to improve the integration of renewable generation across Europe.

The transformation of the chemical industry needs huge investments. In addition to requiring large capital investments for technologies, the transition also demands high operating costs to modify production processes and procure alternative energy and feedstock sources.

The chemical industry must be able to purchase low-cost carbon-neutral electricity. In chemical processes, electricity can be used either directly or indirectly. Indirect use of electricity can be considered to generate heat and steam or for low-temperature and high-temperature processes (e.g., e-crackers). Direct use of electricity can be via electrochemistry or alternative forms of energy (e.g., ultrasound and plasma).

Adequate power supply will also be important for hydrogen production. The chemical industry is both a major producer and consumer of hydrogen. Currently, the most common method for hydrogen production in the EU is still the reforming of natural gas or the residual fraction of crude oil. These methods result in significant CO₂ emissions. At the same time, technologies such as methane pyrolysis or photo electrocatalytic cracking are being developed to produce hydrogen at low cost, in addition to water electrolysis. More efforts to support the development of this alternative technologies are needed to reduce CO₂ emissions on one hand and to cover the demand on power the other hand.

According to the Arbeitsgemeinschaft Energiebilanzen e.V. and the VCI in July 2023, the chemical and pharmaceutical industry in Germany accounted for 10.6 percent, or 53 TWh, of electricity consumption in 2021.

Total electricity consumption: 497 TWh

Source: VCI Juli 2023: Energiestatistik – Daten und Fakten; AG Energiebilanz

Almost 43 percent was still accounted for natural gas as an energy source in the chemical and pharmaceutical industry. This is currently still by far the most important energy source for the industry.

2022, the total share of renewable energies in gross electricity generation in Germany was almost 44 percent. The share is increasing in the long term. In 2022, the share of 2020 was reached again after a weak previous year (low wind supply, little expansion).

Total electricity generation: 583 TWh

Source: VCI Juli 2023: Energiestatistik – Daten und Fakten; AG Energiebilanz

Within renewable energies, wind power (onshore and offshore) is becoming increasingly important in Germany. In 2022, it accounted for a good 50 percent of the total, with onshore installations making up the largest share.

Source: AG Energiebilanz; Arbeitsgruppe Erneuerbare Energien-Statistik – AGEE-Statistik 2023

If we take a closer look at the investments in the construction of renewable energy plants from 2015 to 2022, we see that the largest share of these investments will go to photovoltaics. Due to the conditions in Germany, hydropower hardly plays a role. However, investments in offshore/onshore wind energy and geothermal energy are also increasing.

Source: AG Energiebilanz; Arbeitsgruppe Erneuerbare Energien-Statistik – AGEE-Statistik 2023

The reason for a drastic drop in investment in offshore wind energy in the years 2018 to 2020 was the lack of a coastal sea regulation until 2020, which severely slowed down potential investments. Only a legal anchoring in a wind-energy-at-sea law led to a 20-GW expansion target by 2030 and a planned 40 GW by 2040. This opened a perspective for the industry and made investments reliable for planning again.

The chemical industry forms the foundation of numerous value chains and is a significant driver of innovation in diverse sectors. Its products and creative innovations contribute significantly to the triumph of a wide range of industries.

From cleaning and care products to pharmaceuticals and chemical fibers in textiles, adhesives, paints, coatings, and fertilizers – chemical products permeate all areas of life and are indispensable components of modern everyday life.

This requires energy, and so far, mainly non-renewable energy sources such as fossil fuels have been used. However, these sources emit CO₂ and other greenhouse gases.

Some chemical companies have already gone so far as to switch completely to renewable energy sources to avoid these emissions. In this way, they ensure access to important products while reducing their environmental impact.

Some examples by energy source:

Since 2020, CABB GROUP’s Kokkola site in Finland (specializing in fine chemicals for the agrochemical industry) has sourced all its electricity needs from 100 percent renewable energy. The electricity needed to run the site comes from hydropower plants. This switch to renewable energy will reduce the site’s CO₂ emissions by approximately 5,800 metric tons per year. This is roughly equivalent to the average individual carbon footprint of nearly 830 EU citizens.

SABIC’s (a Saudi Arabian chemical and metals group) polycarbonate plant in Cartagena, Spain, is set to become a large-scale chemical production site powered entirely by renewable energy by 2024. The company has reached an agreement with Iberdrola, one of the world’s largest energy companies, to build a 100 MW solar plant with 263,000 PV modules. This would make it the largest industrial renewable energy plant in Europe. The new PV plant will result in an annual reduction of 80,000 tons of CO₂ emissions.

BASF in Germany and RWE have presented a project idea that shows how the industrial production of basic chemicals can be made sustainable and fit for the future. By 2030, RWE will develop, build, and operate a 2-GW offshore wind farm to supply renewable electricity to the Ludwigshafen chemical site while enabling CO₂-free hydrogen production.

The renewable electricity, in combination with CO₂-free technologies such as electrically heated steam cracker furnaces, will be used to produce basic chemicals that are currently based on fossil fuels. These plans could result in avoiding about 3.8 million metric tons of CO₂ emissions annually, of which 2.8 million metric tons would be realized directly at BASF in Ludwigshafen. RWE intends to use 20 percent of the green electricity from the new offshore wind farm to produce hydrogen. The green hydrogen could also be used by other industrial customers, resulting in annual savings of more than one million metric tons of CO₂.

In summary, the geographic location determines which renewable energy sources companies have access to.

Nevertheless, these companies prove that with a little creativity, smart solutions are available.

But there are already many chemical industry projects across Europe that use green energy.

Of particular interest:



Project ONE is the largest investment in the European chemical sector in a generation. The new cracker in Antwerp will have the lowest carbon footprint of any European cracker. It is twice as good as the best plants in Europe. The plant has been designed to use low-carbon hydrogen. Once enough of it is available, the cracker will operate in a carbon-neutral manner.

INEOS Olefins Belgium has announced that it is providing € 3.5 billion to finance the construction and operation of the most sustainable cracker in Europe. Startup is expected in 2026.


Solvay has developed a solar plant project at its limestone quarry in Belgium to increase the use of renewable energy for the site. Covering 1.4 hectares, this photovoltaic installation is one of the largest solar installations in Belgium.



GreenYellow is establishing itself in Eastern Europe through a partnership with Solarpro. The two partners have an ambition to install 100 MW of capacity in the region by 2025. The first joint project will be a 4 MW photovoltaic power plant for chemical company Solvay in Bulgaria. The plant will produce 5,300 MWh of green electricity annually and will be built on an industrial site owned by Provadsol, a subsidiary of Solvay. It will be operated under a solar-as-a-service (SaaS) contract, with GreenYellow acting as the main investor and Solarpro responsible for construction and operation of the asset.



Solvay has signed a 10-year Utility Power Purchasing Agreement (PPA) with hydropower company Statkraft to purchase electricity from the Pajuperankangas wind farm. The agreement enables the group’s Voikkaa site in Finland to run on 100 percent wind power. This contributes to the decarbonization of hydrogen peroxide production on site and supports the achievement of Solvay’s sustainability goals.

Statkraft recently signed a ten-year power supply agreement with ABO Wind, the developer of the project. The wind farm, which is currently under construction, will consist of 14 turbines that are expected to be connected to the power grid in the fall of 2023. They will have a combined installed capacity of around 86.8 megawatts and will be able to produce enough electricity to supply 14,000 Finnish households heated by electricity.



In December 2019, Covestro signed a supply agreement with energy company Ørsted for electricity from offshore wind turbines. Starting in 2025, Ørsted will supply Covestro’s production sites in Germany with ten years of electricity from renewable sources generated by a newly built wind farm off the German island of Borkum. By the end of 2022, Covestro will already have covered 12 percent of its global energy needs with electricity from renewable sources. This figure is expected to rise to 16 to 18 percent in 2023.

The Leverkusen-based materials manufacturer will purchase 100 MW of the green electricity it produces at an indexed fixed price from the Borkum Riffgrund 3 offshore wind farm over a ten-year period starting in 2025. The PPA will cover a significant portion of the electricity consumption for Covestro’s production sites in Germany.

This makes Covestro the first major chemical company in Germany to sign a long-term power purchase agreement from a new facility with a renewable energy provider.


BASF, SABIC and Linde have begun construction of the world’s first demonstration plant for electrically heated large-scale steam cracker furnaces. By using electricity from renewable sources instead of natural gas, the new technology has the potential to reduce CO₂ emissions from one of the most energy-intensive production processes in the chemical industry by at least 90 percent compared to technologies commonly used today.

The demonstration plant will be fully integrated into one of the existing steam crackers at BASF’s Verbund site in Ludwigshafen. It will test two different heating concepts, process about four metric tons of hydrocarbon per hour and consume six megawatts of renewable energy. The demonstration plant is scheduled to come on stream in 2023.

Steam crackers play a central role in the production of basic chemicals and require a significant amount of energy to break down hydrocarbons into olefins and aromatics. Typically, the reaction is carried out in furnaces at temperatures of about 850 degrees Celsius. Today, these temperatures are achieved by burning fossil fuels. The project aims to reduce CO₂ emissions by running the process on electricity.



Solvay has signed a 10-year Corporate Power Purchase Agreement (PPA) with Falck Renewables S.p.A for the development of a solar project in the Puglia region. The new solar power project will have a capacity of 41.1 MW and produce about 70 GWh of electricity per year, equivalent to the energy needs of about 26,000 households.

70 percent of the electricity generated by the solar plant will go to four of Solvay’s six Italian sites: Bollate, Ospiate, Livorno and Rosignano. This will result in an annual reduction of CO₂ emissions of over 15,000 tons.

The project is designed to integrate renewable power generation and agricultural activities: It will include an alternating array of solar panels and rows of olive trees. The management of the olive grove will be entrusted to specialized operators, which will generate new local jobs and income.

This project is part of the Solvay One Planet sustainability roadmap, which aims to reduce greenhouse gas emissions by 26 percent.



The Hollandse Kust Zuid wind farm, which is currently under construction, successfully generated its first electricity. Although the first turbines are still in the test phase, they are already producing electricity, which is fed onshore via an offshore substation and fed into the Dutch grid. The wind farm is in the North Sea about 18 to 35 kilometers off the coast between The Hague and Zandvoort and is owned by BASF, Vattenfall and Allianz.

So far, 36 turbines have been installed. When fully operational in 2023, Hollandse Kust Zuid will be the largest subsidy-free offshore wind farm in the world, with 140 turbines and an installed capacity of 1.5 GW.

United Kingdom


In 2023, TotalEnergies and its partner SSE Renewables will inaugurate Scotland’s largest offshore wind farm. The Seagreen project in northeast Scotland, a joint venture between TotalEnergies (51 percent) and SSE Renewables (49 percent), will meet the energy needs of 1.6 million U.K. homes when completed.

The first turbine of the Seagreen offshore wind farm is located 27 km off the coast of Angus in Scotland and has been generating electricity since August 2022. Once all 114 turbines are operational, the wind farm will provide enough green energy to power more than 1.6 million homes, equivalent to two-thirds of all Scottish households. Ultimately, the green power generated by Seagreen will replace more than 2 million tons of carbon dioxide from fossil fuel power generation each year.

According to the German Association of Energy and Water Industries (Bundesverband der Energie- und Wasserwirtschaft e. V. BDEW), the average electricity price for industrial electricity was again 26.50 ct/kWh as of July 2023. This means that industrial electricity is now slightly cheaper again but is still far too expensive for industry.

Electricity price for the industry (incl. Electricity tax)

Source: BDEW-Strompreisanalyse Juli 2023

Average electricity prices for new contracts in the industry in ct/kWh (including electricity tax), annual consumption from 160,000 to 20 million kWh, medium voltage supply.

* Renewable Energy Act Surcharge is no longer applicable as of 01/07/2022; Status: 07/2023

We can see that there are already numerous efforts and projects in the chemical industry to integrate renewable energies into their own processes to achieve the climate targets. But of course, this is still far from enough. This will require further major efforts and investments and the appropriate political framework conditions to ensure that this can happen under economic conditions.

The actual government is discussing facilitations for the industry, and Minister Habeck favours an industrial electricity price. If you want to maintain existing production in Germany and push investment in climate-friendly technologies, you can’t get around competitive electricity prices for industry, according to a recent position paper. According to his plan, energy-intensive companies would pay only 6 cents per kilowatt hour of electricity, limited to 80 percent of consumption. Habeck therefore advocates a price cap as a “finite subsidy.” The aim, he says, is to keep investments in the transformation toward a climate-neutral economy in Germany.

Fields of action renewables for chemical industry

Source: SVP-Research 2023

In the next and final article in our series, which took us through six important fields of action on the road to a climate-neutral chemical industry, we sum up. What are the most important fields of action that should currently be addressed most urgently? As we have seen, there is no alternative to the transformation of the chemical industry toward climate neutrality. Are there any demands from the chemical industry to politicians and where do we currently stand on the transformation path?

Dr. Ronald Hinz, Market Intelligence Senior Expert