Executive Summary

The industrial sector is a pillar of the United States’ economy, manufacturing everything from steel to food products. It also emits 30 percent of the country’s greenhouse gases (GHG),[1] mainly from burning fossil fuels to create heat for industrial processes. Besides reducing heat demand through efficiency improvements, electrification powered by clean energy is the best option to eliminate GHGs and other pollution from industry. Compared to clean electricity, green hydrogen uses much more energy, sustainable bioenergy is in short supply, and carbon capture fails to address upstream methane leakage or capture all on-site carbon dioxide (CO₂).[2] No technical barriers exist to electrified heating, as electricity can deliver heat at any temperature demanded by industry.

However, most U.S. industrial firms need economic incentives to electrify, as they pay roughly 4.7 times more for electricity than for the same amount of energy from natural gas, on average.[3] While the superior efficiency of electrical heating compared to fossil fuel combustion (thanks to heat pumps at low temperatures, and by avoiding energy losses in exhaust gases at high temperatures) makes up some of this “spark gap,” electricity is still the more expensive option in most cases today.

Closing the spark gap will be the single most important step in decarbonizing U.S. industry, since energy costs dominate the lifetime expense of owning and operating industrial heating equipment. 

Fortunately, utility regulators have several tools at their disposal to lower the cost to serve industrial customers, lowering industry’s prices without necessarily increasing expenses for others: namely, adopting electricity rates that better reflect the cost of service and regulations that accelerate clean energy buildout and grid modernization. Regulatory action will be crucial in creating an environment where clean, electrified industry can thrive, boosting U.S. competitiveness for decades to come.

[1] U.S. Environmental Protection Agency. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2022. 2024. https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks.

[2] Rissman and Sawe. The Industrial Zero Emissions Calculator. 2024. Energy Innovation. https://energyinnovation.org/report/industrial-zero-emissions-calculator/ 

[3] U.S. Energy Information Administration. State Energy Data System (2025 updates). Table E5. Industrial sector energy price estimates, 2024. https://www.eia.gov/state/seds/data.php?incfile=/state/seds/sep_sum/html/sum_pr_ind.html&sid=US