Key Details
IRENA’s expert analysis, Three Ways Renewable Energy is Critical for the Industries of Tomorrow, reframes renewable power as an input into industrial competitiveness and energy security, particularly for energy-intensive manufacturing and rapidly expanding data centres.
Electrify industrial processes: Electric boilers and heat pumps are making it possible to replace fossil fuels across a wider range of industrial heating applications. IRENA estimates that electricity could directly meet 34% of final industrial energy consumption by 2035, up from 27% in 2023.
Use renewable fuels where direct electrification is difficult: Green hydrogen, biofuels and biogas can supply high-temperature heat, chemical feedstocks and energy for processes that cannot readily run on electricity.
Power digital infrastructure with renewables: Data centres can integrate renewable electricity into their design, including through nearby microgrids, instead of adding their entire demand to fossil-fuel-dependent grids.
Industrial Electrification Is Moving Beyond Low-Temperature Heat
Steel, cement and chemical production have traditionally depended on fossil fuels for heat and, in some cases, as chemical feedstocks. New electric boilers and higher-temperature heat pumps are expanding the range of processes that can be electrified.
The economic case becomes stronger when fossil-fuel prices are volatile. Industries powered by domestically or regionally generated renewable electricity may face lower exposure to disruptions in global coal, oil and gas markets.
This does not mean every industrial process can be electrified immediately. Its feasibility depends on the required temperature, production design, electricity prices and access to dependable round-the-clock power.
Renewable Fuels Should Target Processes Electricity Cannot Serve
Green hydrogen and renewable bioenergy can complement electrification rather than compete with it. Their strongest role may lie in industrial applications where direct use of electricity is technically difficult or inefficient.
Renewable hydrogen could reduce fossil-fuel dependence in iron and steel value chains, while biogas and other bio-based fuels may substitute conventional fuels or feedstocks in chemical production. Local production could also provide a buffer against international fuel-market shocks.
The distinction matters for public investment: scarce green hydrogen and sustainable biomass should be directed towards genuinely hard-to-electrify uses, instead of applications that could be served more efficiently by renewable electricity.
Data Centres Will Compete with Manufacturing for Clean Power
AI and digitalisation create a two-way relationship with the energy transition. AI can improve renewable-energy forecasting and help balance variable supply, but the data centres supporting AI require substantial and reliable electricity.
IRENA expects competition for renewable energy to intensify between data centres and traditional energy-intensive industries. The outcome will depend on geography, available renewable resources, transmission capacity and the speed at which new generation can be connected.
Renewable microgrids located near data centres could reduce pressure on the wider network. Their viability will still depend on storage, backup arrangements, land availability and local grid conditions.
Policy Relevance
Plan energy and industry together: Renewable generation, transmission and storage plans should reflect the future demand of steel, chemicals, manufacturing clusters and data centres—not treat them as separate policy domains.
Electrify before subsidising fuels: Direct renewable electrification should be prioritised wherever technically viable. Green hydrogen and sustainable bioenergy should be reserved for processes that electricity cannot efficiently serve.
Assess data centres as major power users: Approvals and incentives should consider grid availability, additional renewable capacity, storage, water requirements and possible effects on other consumers.
Use geography as an industrial advantage: Renewable-rich states can attract energy-intensive industries, but only where transmission, land, storage and supporting infrastructure are developed alongside generation.
Measure reliable supply, not installed capacity alone: Industrial competitiveness depends on when and where clean electricity is available, its price and its ability to support continuous operations.
Relevant Question for Policy Stakeholders: How should India coordinate renewable-energy allocation, grid expansion and industrial siting as manufacturing and data centres compete for dependable clean power?
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