Data released on Thursday by the Institute for Energy Economics and Financial Analysis found industrial-scale electrification using heat pumps was critical to decarbonisation, but was largely overlooked in Australia.
"The majority of the opportunity lies in Victoria and Western Australia, which are both facing material excess gas demand in the coming years," the research report's co-author Amandine Denis-Ryan said.
By global standards, the Australian market was in its "infancy" with a lack of expertise, a limited supply chain and industrial applications ignored by the federal government, the report found.
Recent emissions projections reveal a "surprising" lack of expected progress in sectors where heat pumps could play an immediate role and the "lack of focus" continued in recent decarbonisation pathways prepared for the government, the institute said.
And yet the technology could replace up to 17 per cent of Australia's gas use in industrial processes that need up to 250C of heat, which would also ease gas supply pressures.
Victoria's food and beverage sector could shift from gas to commercially available heat pumps and save 14 petajoules of gas in the next 10 years, which would reduce the state's industrial gas use by more than a third (36 per cent).
WA's alumina refineries could save over 74PJ of gas, equivalent to 10 per cent of the state's demand, by making the switch.
The report said a key risk for Australian decision makers was that the wrong assumptions had been made in the past, including an overestimation of high-temperature heat requirements and "overly optimistic estimates" of demand for hydrogen and other alternatives.
While there was no available data on the price paid for electricity by industrial users, researchers said there was no reason to believe process heat requirements and supply efficiencies would materially differ from the US or Europe.
Climate policies and carbon taxes elsewhere were also changing the business equation, the report found, with Europe's Climate Border Adjustment Mechanism expected to add to pressure on Australian industry.
According to the International Energy Agency, heat pumps are far more energy efficient and can be cheaper to run but need government support to overcome barriers.
A heat pump uses methods similar to a refrigerator or an air conditioner to extract heat from the air, ground, nearby sources of water or waste heat from a factory.Â
Although a pilot project at Alcoa's alumina refinery south of Perth recently closed due to a cost blowout, the institute recommended taxpayer support for future trials.
"The industry still believes the technology could play an important role in the sector, but has stressed the need for further government support to demonstrate the technology and de-risk future investments," co-author Cameron Butler said.
The report suggested heat pumps for making textiles, pulp and paper, and wood and wood products were also worth a try.
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