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  • Chris Jenkins

We're Going to Need a Lot More Electricity

As we switch our ‘energy mix’ from fossil fuels to renewable energy for everything from moving our cars to making steel, the world will need a lot more electricity.

When we think of electrification, we typically consider the popular topics of renewable energy and EVs. But many industrial processes, like cement, steel, and ammonia production, need to decarbonise too. These processes use a lot of energy, either as heat or electricity, and rely primarily on fossil fuels. To decarbonise, they’ll need to switch to renewable energy, which usually means electrification. Today, we consider how much more electricity demand we will put on the grid if we electrified our worst-emitting industrial processes.

Electricity transmission lines and poles
Photo by Andrey Metelev on Unsplash

Much like transport, energy is integral to industrial processes. Either through the application of primary electricity or through heat, the fundamental building blocks of our society would not exist without energy transformations. Historically, this energy has been supplied in the form of fossil fuels, largely due to their high energy density and ease of extraction. The obvious trade-off is the corresponding emissions (CO2) inherent when a carbon-carrying fuel is combusted in our (oxygenated) atmosphere. Strategies do exist to remove anthropogenic CO2. We’ve already covered direct air capture in a previous post. The technology exists but high energy requirements will prevent meaningful scale over the next few decades. Hence, to decarbonise it is important to find alternate sources of energy that do not rely on the combustion of carbon carrying materials.

Let’s look at how much energy we consume today. In 2019 (pre-Covid), the world consumed the equivalent of about 174,000 TWh of energy, of which 84.3% was derived from fossil fuels – coal, oil, and natural gas. The International Energy Agency found that 50% of this energy use is heat (split evenly between industrial heat and heating buildings for space and water), 30% was for transport, and 20% was for electricity. The flowchart below, from DNV’s Energy Transition Outlook 2022, shows that the vast majority of energy is sourced from oil, coal, and natural gas, and only about 20% is in the form of electricity (coloured in light blue).

Energy Flows 2020, DNV Energy Transition Outlook 2022
Energy Flows 2020, DNV Energy Transition Outlook 2022

If the world transitioned tomorrow to 100% renewable electricity for all our energy demands (heat, transport, power), our electricity supply would need to increase by 5-8x and we would need over 300x the amount of renewable electricity generation compared to today. These are some sobering numbers, but they demonstrate how deeply we rely on fossil fuels.

In reality, our energy mix will likely never be 100% renewable energy, and ‘renewables’ can come in many forms such as concentrated solar power or geothermal technology, which also supply heat. For simplicity, we’ll assume that both power and heat can be provided purely by renewable electricity. So, whilst it’s not 100% accurate, it provides a baseline for where we “should” be at.

We’ll start by looking at transport, as it’s a good sector to show the efficiency gains from electrification. Then we’ll dive into the electrification of cement, steel, and ammonia along with the corresponding demand this will bring to the grid. Shifting from fossil fuels to electricity will remove their CO2 emissions, however, will introduce new and significant demand to an already strained power network.

If there’s one key takeaway from this, let it be that electrification will happen, and as it does, will demand a significant boost in grid capacity as sectors transition from a fossil fuel to grid dependence.

Electrifying Transport

Nearly 10% of global car sales were electric in 2021, four times the market share in 2019. This success has been driven by sustained policy support, a growing number of countries pledging to phase out internal combustion vehicles, and the price gap continuing to shrink between EVs and conventional cars.

Could the increase in EVs soon overload the electricity demand on our grid? Thankfully, the growth of EVs would not drive a significant increase in electricity demand. McKinsey predicted that at a 40% adoption of EVs, Germany’s electricity demand would only increase by 4% compared to 2015. The trend is similar globally – electrification of transport will not significantly increase energy demand.

Why is this the case, when today 30% of our total energy usage is for transport? One benefit of electrification, amongst many, is that electricity is typically a more efficient medium to convert energy. The typical modern petrol engine manages to deliver <30% of all the energy contained within the fuel to the wheels after drivetrain, cooling, and fundamental combustion efficiencies are considered. An EV, on the other hand, deploys 77% of the available energy. So, although we’ll need more electricity to power our EVs, we’ll need a lot less total energy compared to moving our cars with fossil fuels.

Charging infrastructure and batteries are still challenges, (although given the recent release of the 2 million km battery this may not be a problem for much longer) but electrification presents strong promise in many applications.


Concrete is a (literal) building block for our society. It will be key in the development of emerging economies (look at China’s massive spike in concrete consumption over its economic boom).

Cement, the glue that holds the components of concrete together, is a key component and draws the majority of energy in concrete production. Cement is formed by the firing of ground limestone and clay at ~1,450oC, effectively sintering the materials together into a compound called clinker. Clinker is ground and distributed for mixing as cement.

The process demands 1.05 MWh/Mt with a global production scale of 4.1 billion tonnes. Around 10% of this total is already electrified and largely relates to the grinding and crushing the raw and processed materials.

Considering the current market size, complete electrification of the cement industry would then demand an additional 3,870 TWh of power or 15.3% of all electrical energy consumed globally in 2021. That’s a similar demand increase to the electrification of transport – not a massive increase, but you can see it’s starting to add up.

The technology to electrify already exists. Companies such as Calix are investigating flash reactors, powered by electricity, to decarbonise clinker production. Other solutions seek to substitute some percentage of clinker for a greener material (Terra CO2, Ashcor, etc.) which has a lesser but still material impact on the emissions footprint.

Given the sheer size of the concrete market, any improvements stand to make a significant dent in global emissions. Our key considerations surround the scalability of the production and its impact on the certification of the concrete for use in civil structures.


Steel, another fundamental material, is rooted in fossil fuel combustion. Its production accounts for 8% of all emissions globally. Exposed to similar global market pressures as cement, steel is set to steadily grow over the next decade.

Historically, steel has been produced by refining iron ore in a blast furnace to remove impurities and boost metallisation before final processing in a basic oxygen furnace. These steps produce emissions from both combusted fossil fuels (~75% from coal) and chemical reactions within the process. The total energetic requirement of steel production sits at about 6.8 MWh/Mt, supplied primarily from coal.

At a current market production of 1,878.5 Mt, a direct substitution of coal for electricity would demand an additional 12,800 TWh or 50.4% of additional electricity production based on 2021 data. That’s quite significant. Added to the electricity demands from electrification of cement and transportation, it adds up to a doubling of our electricity supply.

The green steel market is hotly contested, with the most progress made in direct reduction of iron ore through green hydrogen (H2 Green Steel, GravitHy, etc). There are also electrolysis processes mimicking the aluminium pathway (Boston Metals), and hydrometallurgical that seek to chemically reduce and then electrically extract iron (Electra Steel, Siderwin). Each of these produces a “green iron” which can then be fed into an electric arc furnace, removing any hydrocarbon combustion from the value chain.

What’s exciting here is that the coal blast furnace/basic oxygen furnace preplacements typically have lower energy requirements (although certainly present other challenges with hydrogen storage and corrosion) which could reduce their total impact on the grid. For example, the direct reduction of iron + electric arc furnace approach is currently ~26% less than blast furnace/basic oxygen furnace but will require validation at scale. We expect to see improvements to this figure in the future.


Ammonia has gained significant interest in climate circles for two reasons. First and positively, it has played an instrumental part in facilitating population growth over the last ~100 years through improved food production. Unfortunately, this has also come with a large emissions footprint, producing 1.8% of all CO2.

Ammonia, a combination of hydrogen and nitrogen atoms is a stable chemical that has seen predominate application as a synthetic fertiliser (commonly used to make urea). In this form it provides nitrogen for plants, saturating the soil beyond levels that nature can provide which has the effect of boosting their yield and allowing for more crops to be grown within the same amount of land. Around 75% of all ammonia produced is used in agriculture whilst the rest is found in cleaning chemicals, explosives, and other miscellaneous compounds.

The synthetic method to make ammonia (NH3), known as the Haber Bosch process, combines nitrogen and hydrogen at high temperatures and very high pressure in the presence of a catalyst to create liquid NH3. The lion’s share of energy comes from the hydrogen production, which is typically via steam methane reforming (SMR). SMR is another process that takes place at pressure and temperature, whereby steam reacts with methane to extract hydrogen, along with CO2 and CO. This results in a total energy cost of 7.8 MWh/tonne to produce.

At current global production of 176 million tonnes, electrification of ammonia production would demand an additional 5.41% of grid capacity.

The technology to electrify exists already. SMR can be substituted for green hydrogen via electrolysis and new catalysts are already showing that the ammonia synthesis can take place at much lower pressures and temperatures which makes complete electrification possible. However, green hydrogen is energy intensive and difficult (plus expensive) to store as pure hydrogen.

Interestingly, ammonia has twice the volumetric energy density of liquid hydrogen and is easily transported with existing infrastructure. Alternate uses for ammonia as a fuel or hydrogen carrier are exciting and a space that we are optimistic about at Twynam.

So what?

The additional capacity required to electrify is immense. Just these 3 commodities would require a 70% increase in global electricity production capacity to service the current market. And we haven't even covered the demand increase from electrifying the heating of our homes.

Future growth will only compound this issue. Given that current electricity growth estimates predict a steady annual capacity growth of 3.7% per year till 2030, electrification will not happen overnight.

Although the share of electricity and total energy production that is renewable is increasing, the total amount of fossil fuels we burn continues to increase every year. Money, innovation, and (human) energy must go towards the decarbonisation of fossil-fueled industries. Simultaneously, we must significantly increase the renewable electricity supply and grid capacity.

At Twynam, we are keenly aware of the need to electrify different industrial processes and the subsequent increase in energy demand and grid infrastructure. This is especially true because these areas are underfunded compared to their emissions impact. Industrial processes contribute significantly to global emissions but are harder to decarbonise and receive less than their ‘fair’ share of investment. PwC’s State of Climate Tech Report 2022 showed that the Built Environment (heating and cooling, keeping the lights on, construction) and Industry (iron and steel, concrete, plastics) account for 51% of emissions but received only 13% of venture funding. Mobility gets the lion’s share of venture investment.

Source: PwC State of Climate Tech Report 2022, analysis of Dealroom data.
PwC State of Climate Tech Report 2022, analysis of Dealroom data.

We try to invest in areas that are underfunded compared to their climate potential so that we can make an outsized impact with our investments. Luckily, these overlooked opportunities represent big markets. Industry, Agriculture, the Built Environment and Clean Energy are some of our focus areas. If you’re a startup, researcher, or investor in this area, reach out! We’d love to chat.


Twynam Funds Management Pty Ltd ACN 665 482 119 (Twynam Funds Management) is a corporate authorised representative (CAR) (CAR Number 1302016) of Boutique Capital Pty Ltd ACN 621 697 621 (Boutique Capital) AFSL 508011.

Any information or advice is general advice only and has been prepared by Twynam Funds Management for individuals identified as wholesale investors for the purposes of providing a financial product or financial service, under Section 761G or Section 761GA of the Corporations Act 2001 (Cth). Any information or advice given does not take into account your particular objectives, financial situation or needs and before acting on the advice, you should consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If any advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument and consult your own professional advisers about legal, tax, financial or other matters relevant to the suitability of this information.


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