Strategic steam electrification in the dairy industry: analysis of TCO, technical feasibility and regulatory future.

The European dairy industry, responsible for processing more than 150 million tons of raw milk annually, is facing a historic turning point.

The traditional reliance on natural gas for steam generation – essential in pasteurization, UHT sterilization and CIP cleaningprocesses –has become a strategic liability due to volatile energy markets and the imminent implementation of more aggressive carbon pricing mechanisms, such as the ETS2.

This white paper, designed for plant engineers and financial managers, presents a comprehensive analysis of the feasibility of replacing combustion boilers with Power-to-Heat systems.

Through a detailed Total Cost of Ownership (TCO) breakdown, the analysis demonstrates that the convergence of thermal efficiency above 99%, 80% lower maintenance costs and the monetization of energy savings in Spain reverses the traditional economic equation.

While the unit cost of electricity has historically been a barrier, the integration of thermal storage (TES) and active demand management allows for price arbitrage in an electricity market with high renewable penetration, offering new dairy plants a competitive advantage in operating costs and regulatory resilience for decades to come.

1. The imperative of decarbonization in dairy processing.

1.1. The Sector’s Thermal Footprint

The dairy processing sector is characterized by a heat-intensive energy demand. Unlike other manufacturing industries where motive power (engines, compressors) dominates consumption, in a typical dairy plant, approximately 70 % of the total energy is consumed in the form of heat, mostly generated by natural gas combustion.

This energy profile is responsible for the emission of approximately 20 million tons of CO₂ equivalent per year in Europe, a figure comparable to the annual emissions of 4 to 5 million passenger vehicles.

The thermodynamics of dairy processing are particularly complex due to stringent food safety requirements. Critical unit processes operate in temperature ranges that, although technically considered “low temperature” (<150 °C), present specific challenges for electrification technologies such as conventional heat pumps.

Thermal demand profile in dairy processes

Saturated steam remains the heat transfer fluid of choice due to its high energy density, excellent heat transfer coefficient and food safety when generated as culinary steam.

However, the generation of this steam by natural gas-fired shell boilers introduces systemic inefficiencies and economic vulnerabilities that new facilities must avoid.

1.2 Structural vulnerability of the fossil model

Designing a new factory (2025-2026) based on gas-fired boilers implies taking structural risks that did not exist a decade ago.

Volatility in the gas market, exacerbated by geopolitical tensions, has shown that operating costs (OPEX) can triple in a matter of months. In addition, the European Union has set out a clear roadmap to make the use of fossil fuels more expensive.

The emissions trading system (EU ETS) and its expansion to the building sector and small/medium industry(ETS2) from 2027-2028 will create a carbon price signal that will directly impact the waterline of heat-intensive industries.

he forecasts indicate that the price of carbon could escalate from current levels (~60-70 €/tCO₂) to more than 120-130 €/tCO₂in the 2030s, which would represent an unbearable operating cost overrun for plants that have not transitioned to clean technologies.

2. Technological anatomy: electric vs. gas boilers

For the plant engineer, the choice between a gas and an electric boiler is not just a question of fuel, but of design and operating philosophy. The electric boiler represents a radical simplification of the plant’s thermal infrastructure.

2.1 Inevitable combustion inefficiencies

A modern gas boiler, even equipped with economizers, operates under unavoidable physical limitations. The nominal thermal efficiency (over the Lower Heating Value – LHV) can approach 95 % under laboratory conditions, but the actual seasonal efficiency in a dairy plant usually drops to 75-85 % due to various operational factors:

Chimney losses

Even with heat recovery, a significant amount of thermal energy is expelled to the atmosphere with the flue gas. The stack temperature must be kept above the acid dew point ( except in very specific condensing boilers) to avoid corrosion, which limits heat recovery.

2. Blowdown losses

Gas combustion does not directly affect water, but Total Dissolved Solids (TDS) management in shell boilers requires continuous and bottom blowdowns. These blowdowns expel water at saturation temperature (e.g. 10 bar at 184 °C), wasting energy as well as treated water and chemicals.

3. On and off cycles

The dairy industry has varying demands. A gas-fired boiler that cycles frequently suffers from pre-flush (introduction of cold air to clean the combustion chamber before firing, cooling the boiler) and post-flush losses.

4. Excess air

To ensure complete and safe combustion (avoiding CO formation), burners operate with excess air. This air (mainly unreacted nitrogen and oxygen) enters at ambient temperature and exits hot through the chimney, acting as a thermal energy thief.

2.2 Electric boilers: 99.5 % efficiency

Industrial electric boilers, such as those developed by GICONMES, operate under radically different physical principles, virtually eliminating all losses associated with combustion.

2.2.1. Resistive boilers

In these units, typically used for power ratings up to 3-5 MW, the conversion from electrical to thermal energy occurs by means of direct immersion shielded resistors.

Efficiency

Virtually 100 %. All current flowing through the heating element is dissipated as heat in the surrounding water. The only losses are radiation losses through the insulation of the boiler body, which are minimal (< 0 .5 %) due to the use of high-density, low surface temperature insulation.

Modulation (Turndown Ratio)

Unlike gas burners, which have limited modulation ratios (e.g. 1:4 or 1:10), an electric boiler with thyristor control (SSR) can modulate its output almost infinitely, from 1 % to 100 %, adapting exactly to the demand of the pasteurization process without wasting energy in hysteresis cycles.

2.2.2. Electrode boilers (high voltage)

For massive steam demands (> 5MW up to 50 MW or more), jet or immersion electrode boilers are used. In this type of equipment, water acts as a conductive resistance between electrodes connected to medium or high voltage(6 kV-25 kV).

Dynamic response

These boilers can go from minimum load to full load in a matter of seconds, a critical capability for responding to peak start-ups of large evaporators or drying towers in the dairy industry.

Compactness

By eliminating the need for low-voltage transformers for the main power, the physical footprint of the system is significantly reduced as well as electrical transformation losses.

2.3 Direct technical comparison

3. Economic Analysis: Total Cost of Ownership (TCO)

The traditional argument against electrification has been the price differential between gas and electricity(spark spread). However, a rigorous 20-year Total Cost of Ownership (TCO) analysis reveals that, for a new plant, the electric boiler is often the most cost-effective option.

TCO fully integrates CAPEX, energy OPEX, maintenance OPEX and future regulatory costs.

3.1 CAPEX: the error of looking only at the equipment

When comparing budgets, one often makes the mistake of looking only at the price of the equipment (“the iron“). However, the installation of a gas boiler involves massive peripheral infrastructure costs that an electric boiler completely eliminates.

Comparative Breakdown of Initial Investment (New Project)

Note: Estimates based on industrial engineering standards for average installations in Spain. The cost of gas connection varies greatly depending on the distance to the distribution network.

3.2 OPEX: maintenance changes the rules

Maintenance is the “silent” cost that erodes the profitability of gas boilers. A combustion boiler is a complex machine, with moving parts, ignition systems, fans and elements exposed to high temperatures and acid corrosion.

According to technical data provided by GICONMES and comparative studies, the difference between technologies is abysmal:

Gas boiler maintenance

Usual tasks:

• Soot cleaning in flue pipes (mandatory to maintain efficiency).
• Burner adjustment.
• Regulatory gas analysis (OCA).
• Overhaul of gas valve trains.
• Replacement of ignition electrodes.
• Refractory repair.

Annual cost: 8.000 € – 12.000 €
20-year impact: 160.000 € – 240.000 €

Electric boiler maintenance

Usual tasks:

• Inspection of contactors and relays.
• Re-tightening of electrical connections.
• Cleaning of the tank (very reduced if the water treatment is correct).

There is no burner, no combustion chamber and no fouling flue pipes.

Annual cost: 3.000 € – 5.000 €
20-year impact: 60.000 € – 100.000 €

Net maintenance savings

A plant can save between €100,000 and €140,000 over the lifetime of the equipment simply by eliminating combustion.

In addition, planned and unplanned downtime is drastically reduced, improving the plant’s Operational Availability (OEE).

3.3 Energy OPEX and arbitrage

Herein lies the main challenge. Historically, gas has been cheaper per MWh. However, three key factors are rapidly closing this gap:

1. Differential efficiency

To obtain 1 MWh of useful heat, approximately 1.25 MWh of gas is needed (assuming an efficiency of 80 %), compared to only 1.01 MWh of electricity. This intrinsic efficiency difference structurally penalizes combustion-based solutions.

2. Falling electricity prices

Forecasts for Spain (2026-2030) place the average electricity price in the wholesale market at around 55 €/MWh, driven by the massive penetration of photovoltaic and wind energy. This structural trend puts downward pressure on the cost of electricity in the medium and long term.

3. Arbitration with thermal storage (TES)

A study shows that by integrating a thermal energy storage (TES) system – through hot water tanks or steam accumulators –with a capacity of 5 hours, it is possible to avoid electricity consumption during peak hours.

This allows:

• Charge the system during cheap solar hours (or even with negative prices).
• Discharge steam during electrical price peaks.

Economic impact

This strategy reduces the effective average cost of electricity by approximately an additional €10/MWh.

Breakeven

The study suggests that the 5-year break-even point is reached when the price differential between gas and electricity is less than €10/MWh. However, by including maintenance savings and avoided CAPEX, economic viability extends even to significantly higher differentials.

4. The impact of CO₂ (2026-2040).

No analysis of industrial investment is valid today without considering the price of carbon. The European Union has activated mechanisms that monetize pollution, turning emissions into a direct operating cost.

4.1. The ETS2 mechanism (from 2027)

No analysis of industrial investment is valid today without considering the price of carbon. The European Union has activated mechanisms that monetize pollution, turning emissions into a direct operating cost.

4.1. The ETS2 mechanism (from 2027)

Until now, many medium-sized industries have escaped emissions trading. The new ETS2 system will cover emissions from the use of fuels in industrial processes and buildings that were not included in the original ETS.

Economic impact of ETS2

From 2027-2028, fuel suppliers will pass on the cost of emission allowances directly in the price of natural gas.

Carbon price forecasts:
Analysts expect the carbon price to reach €126 €/tCO₂ in 2030.

Impact calculation for a dairy plant

Assume a 3 MW gas boiler operating 4,000 hours per year:

• Gas consumption: ~14,000 MWh/year
• Emissions (factor 0.202 tCO₂/MWh): ~2,828 tons of CO₂/yr.
• Extra cost in 2030 (at €100/tCO₂): €282,800/year

This additional annual cost, close to €300,000, destroys any competitive advantage that gas might have in the price of the molecule.

In contrast, an electric boiler, powered by renewable energy with Guarantee of Origin (GoO), presents zero emission costs, acting as a real financial insurance against future climate regulation.

5. Operational advantages and food safety

For the plant engineer, operational peace of mind is as valuable as financial savings. Electric boilers bring intangible benefits that directly impact the quality of the dairy product.

5.1. Absolute hygiene and clean steam

The dairy industry constantly struggles with cross-contamination. A gas boiler introduces inherent risks: combustion fumes, in-plant hydrocarbon storage and possible leaks.

The electric boiler is intrinsically clean. It generates no residues, odors or particles. It is the standard technology for the generation of Pure Steam or Culinary Steam, used in direct injection (e.g. in the production of pasta filata cheese or in the sterilization of UHT lines), eliminating the risk of contaminating milk with volatile compounds from combustion.

5.2. Reliability and redundancy (modular architecture)

Modern electric boilers, such as the GICONMES industrial series, are designed with modular architecture. A 1 MW boiler can incorporate 20 or more independent resistor stages.

Fault tolerance

If a resistor or contactor fails, the boiler loses only a tiny fraction of its output (e.g. ≈5 %) and continues to operate. In contrast, if the burner or fan of a gas boiler fails, production stops at 100% until the intervention of a specialized technician.

Non-stop maintenance

Many electrical maintenance tasks can be performed hot or with minimal partial shutdowns, ensuring the continuity of the plant‘s critical steam supply.

5.3. Containerized solutions: design flexibility

For plant expansions or new factories with space constraints, containerized Power-to-Heat solutions ( GICONMES PS series) offer an unparalleled logistical advantage.

No auxiliary building

There is no need to build a civil works boiler room. The industrial container is installed directly on an external slab, freeing up valuable internal space for production processes.

Mobility

If the plant is reconfigured or moved, the boiler house moves with it. It is a flexible asset, not a sunk cost in bricks, which reduces investment risk and increases the future adaptability of the project.

6. Conclusion and design recommendations

The cross-analysis of technical, economic and regulatory factors points to a robust conclusion: the electric steam boiler is the superior choice for the design of new dairy processing plants in Europe.

Although the unit cost of electric power may be higher than gas in the short term, the 10-20 year Total Cost of Ownership (TCO) clearly favors electrification, due to:

1. Radical savings in maintenance(-80 % in OPEX maintenance costs).
2. Almost perfect thermal efficiency (>99 % vs. ~80 % actual gas).
3. Elimination of future CO₂ costs (avoiding the impact of ETS2).
4. Savings in initial infrastructure (no gas networks, chimneys or associated systems).

Recommendations for the plant engineer

• Hybrid or 100% electric design
  For new plants, opting for a 100% electric solution is technically feasible and economically prudent in the long term.
• Thermal Storage Integration (TES)
  Incorporate hot water tanks or steam accumulators to take advantage of volatile electricity prices and reduce the average cost of energy.
• PPA contracting model
  Negotiate long-term renewable electricity supply contracts (PPAs) to fix operating costs and ensure compliance with corporate sustainability objectives.
• Evaluation of GICONMES solutions
  Consider modular and containerized solutions to reduce construction execution times and maximize operational flexibility.

The transition from fire to wire is not just an environmental aspiration; it is the smartest engineering strategy to ensure the competitiveness of the dairy industry in the decarbonized economy of the 21st century.

In Giconmes we accompany the companies in this process, offering solutions adapted to their current needs and prepared for the challenges of the future. Contact us and we will help you to design the optimal solution for your installation.

This report has been prepared by analyzing technical data from manufacturers, European regulations and industry case studies. The economic figures are estimates based on the current market and projections to 2030.