Latest / The Manufacturing Podcast with Fexingo: Factories, Supply Chains, and Industrial Business / How a Swedish Factory Uses Heat Pumps to Cut Steel Emissions
Transcript
- Lucas: There's a number that sticks in my head whenever people talk about cleaning up heavy industry: steel production generates roughly 7 percent of global carbon dioxide emissions. Luna: It's one of those 'hard to abate' sectors everyone points to. You can't just plug a steel mill into a solar farm and call it a day. Lucas: Right. The heat required to melt iron ore and turn it into steel is immense — we're talking temperatures above 1,500 degrees Celsius. So a lot of the conversation has focused on hydrogen, because burning hydrogen produces only water vapour. But there's another path that's much less flashy and, honestly, more immediately deployable: industrial heat pumps. Luna: Heat pumps. Like the ones in my basement. Lucas: Same principle, but scaled up about a thousand times and running at much higher temperatures. There's a factory in Sweden — Ovako's Hofors plant — that installed a 20-megawatt heat pump system that captures waste heat from the steel-making process and feeds it back into the factory's district heating network. It's been operating since late 2023, and the results are pretty concrete. Luna: We should say — this kind of content takes time to research and produce. And we deliberately keep these episodes free of ads. If you find the show useful, you can support that choice at buy me a coffee dot com slash fexingo. No pressure, just an option. Lucas: Yeah, and we really appreciate those who do. It keeps the conversation independent. Back to the heat pumps — Ovako's system reduced the plant's natural gas consumption by about 50 percent. That's a significant dent in a factory that runs 24/7. Luna: Fifty percent is huge. How do they get the heat pump to work at steel-mill temperatures? Normally, heat pumps top out around 80 degrees Celsius. Lucas: That's the clever part. They're using a multi-stage system with a different refrigerant — one that can operate up to 120 degrees Celsius. And they're not trying to replace the furnace; they're capturing the heat that would otherwise go up the chimney. The waste heat from the cooling process is around 90 degrees. The heat pump boosts it to 120, and that's hot enough to preheat steel billets before they go into the furnace or to supply the local district heating network. Luna: So it's not eliminating fossil fuels entirely, but it's drastically reducing the amount needed for the same output. Lucas: Exactly. And the economics work because the plant was already paying for natural gas. The heat pump investment — I think the project cost around $15 million — has a payback period of roughly three to four years, based on energy savings alone. That's not a charity project. That's a solid capital investment. Luna: What's the catch? If it's so straightforward, why aren't all steel mills doing this? Lucas: Good question. First, the temperature lift matters. Ovako's waste heat starts at a relatively high temperature — 90 degrees — because of the specific cooling process they use. Many older mills have lower-grade waste heat, around 40 to 60 degrees, which makes the heat pump less efficient. Second, the upfront capital is still significant for a technology that's not yet standard in the industry. And third, you need a use for the heat. In Hofors, they pipe it into the town's district heating system, so they get revenue from selling heat to the municipality. Not every plant has that nearby demand. Luna: So it's a bit of a perfect storm: the right temperature, the right infrastructure, and a local heat customer. Lucas: Exactly. But the broader lesson is that electrification can make real inroads in heavy industry if you target the parts of the process where heat is needed at lower temperatures — preheating, drying, space heating. You don't need to replace the entire blast furnace with a hydrogen-powered one overnight. You can chip away at the natural gas bill one heat pump at a time. Luna: That pragmatic approach feels more realistic than waiting for a hydrogen economy that may not materialise at scale for another decade. Lucas: And that's the tension. The hydrogen route for steel — like Sweden's HYBRIT project — aims for near-zero emissions by using green hydrogen to directly reduce iron ore. That's transformational, but it also requires massive amounts of renewable electricity and a whole new hydrogen infrastructure. Heat pumps, by contrast, are a bolt-on technology. You can retrofit them onto existing plants without shutting down production. They reduce emissions by 20 to 50 percent, which is meaningful and immediate. Luna: Any other factories doing this? Or is Ovako unique? Lucas: There are a few. ArcelorMittal has piloted heat recovery systems in Belgium. Tata Steel in the Netherlands is looking at similar projects. But the Ovako installation is the largest and most publicised. And it's not just steel — cement plants, chemical facilities, and food processing all have waste heat that could be captured. The International Energy Agency estimates that industrial heat pumps could reduce global industrial CO2 emissions by about 500 million tonnes by 2030 if deployed widely. Luna: That's roughly equivalent to taking 100 million cars off the road. Lucas: Right. And the technology isn't exotic. The heat pump itself is built by a company called Siemens Energy, using off-the-shelf components. The innovation is in the system design and the willingness to be the first mover. Ovako's parent company, which is part of the Swedish engineering group Sandvik, took a measured risk. And now they're sharing the data openly so others can copy it. Luna: That's the kind of case study that makes you think: maybe the climate solution for heavy industry isn't a silver bullet, but a thousand smaller adjustments. Lucas: I think that's exactly right. And it's a useful corrective to the narrative that we need a single breakthrough technology. Sometimes the most impactful thing you can do is take waste heat that's currently being vented into the atmosphere and put it to work. Luna: So what's next for Ovako? Are they scaling up? Lucas: They're exploring a second heat pump at another site in Sweden, and they're also looking at using the captured heat to generate electricity — a combined heat and power setup. But more importantly, they've published a white paper detailing the engineering specs, the costs, and the operational data. They want other mills to replicate it without having to reinvent the wheel. Luna: That open-source approach is refreshing in an industry that usually guards its processes closely. Lucas: It is. And it might be the fastest way to drive adoption. If ten more steel plants install similar systems in the next five years, we're talking about millions of tonnes of avoided emissions. Not bad for a technology that's essentially a bigger, hotter version of the box in your basement. Luna: One last thing — what about policy? Are governments supporting these retrofits? Lucas: In Sweden, yes. The project received funding from the Swedish Energy Agency, and there are EU grants for industrial decarbonisation. But in many other countries, the incentives are still too small or too bureaucratic. If you're a plant manager in Ohio or Poland, the payback period might be five or six years without subsidies, which makes it harder to get board approval. Luna: So there's a policy gap. But the technology is proven. Lucas: Proven and deployable. And that's the story that often gets lost in the hype around hydrogen and carbon capture. Heat pumps are boring. They work. And they can start cutting emissions today. Luna: Boring but effective — a good summary for a lot of industrial innovation, I think. Lucas: Exactly. Next time you hear about a 'breakthrough' in green steel, remember the humble heat pump. It might already be doing more, right now, than the next big thing.