How to value flexible operation in Energy-Intensive Industries: Technical and economic assessment in the EU

The views expressed in this report are the views of the authors only and do not necessarily represent the views of Compass Lexecon, its management, its subsidiaries, its affiliates, its employees or its clients.

Compass Lexecon advised smartEn, the European business association representing the demand-side flexible energy industry, on the potential economic benefits associated with smart electrification in energy-intensive industries in Europe in 2030. We modelled the operation of five key industrial sectors to estimate the economic benefits of flexibility provision in energy-intensive industries: iron and steel, aluminium, paper, glass, and cement.

Situation

The European Union (‘EU’) has pledged to cut greenhouse gas emissions and achieve climate neutrality by 2050. This will require low-carbon energy supply and an electrification of end-uses, in particular in industry intensive sectors. At the same time, the competitiveness of the EU industry also remains at the forefront of the policy debate.

The flexible operation of electrified industrial processes ('smart electrification') , especially in electro-intensive applications, is perceived as an opportunity both for the industry (improving the business case for electrification or decarbonisation) and for the power system.

SmartEn, the European business association representing the demand-side flexible energy industry, asked Compass Lexecon to assess the potential economic benefits associated with smart electrification in energy-intensive industries in Europe in 2030.

Our Role

A Compass Lexecon team produced an economic assessment of the potential benefits associated with flexible electric production processes in five energy-intensive industries in Europe in 2030.

In the study, we estimate the potential benefits (at installation level) of electricity demand flexibility provision for five different energy-intensive industries: (i) iron and steel, (ii) aluminium, (iii) paper, (iv) glass, and (v) cement.

We use a co-optimisation model to simulate the optimal operation of the plants in the EU electricity market in 2030, accounting for the opportunity costs of lost production but also for the potential economic gains associated with the monetisation of electricity demand reductions in power markets. We estimate potential revenues from flexibility in EU electricity markets in 2030 for the five industrial processes modelled, and assessed the contribution of flexibility revenues in reducing the decarbonisation cost gap and boosting competitiveness.

Outcome

We presented the results of our report at FlexCon, a smartEn event on flexible energy in Brussels on 25 September 2025, where we presented the study and discussed the case for smart, flexible electrification in a panel together with representatives of energy-intensive industries, flexibility aggregators, and representatives from the European Commission.

The Team

The Compass Lexecon team was led by Fabien Roques and Florian Bourcier, with support from Guillaume Pugliese, Peter Chawah, and Philipp Stein.

They worked closely with a team from smartEn, led by Michael Villa, Andres Pinto-Bello, Tzeni Varfi, and Quentin Donnette.

View the report here.