Energy prices and renewables redrawing the map for energy-intensive industries
Energy-intensive industries are at a critical turning point as they face a world defined by fragmented access to energy, political friction, and challenges related to sustainability goals. A study from Simon-Kucher shows a major shift in how companies are approaching strategies for investment and relocation.
Energy has quickly become top of agenda for business leaders in the chemicals, energy, and materials industries. Leaders are actively reviewing carbon footprints and looking for ways to turn sustainability compliance into growth. The study, which surveyed 240 top executives across the United States and Europe, highlights how many companies are changing how they approach energy strategies.
While most firms remain anchored to their home regions, one in four chemical companies are now investing abroad. This relocation trend is more pronounced in Western Europe, where 12% of companies are actively shifting or expanding production to other continents, compared to 7% in the United States.
Relocation
Companies in cement and glass, which are both demand-tied industries, build resilience mainly through nearshoring. That means moving operations closer to home in a bid to avoid the crises that can hit complex supply chains, as companies have increasingly had to deal with.
Meanwhile, base chemicals, which are considered trade-exposed commodities, rely more on stockpiling. Steel shows a mixed pattern, reflecting both global trade exposure and local integration needs.
The factors driving these location decisions have shifted significantly, with energy costs and reliability now serving as board-level determinants of competitiveness. Approximately 95% of companies now rank energy prices as the top factor for choosing a new site for expanding operations.
Renewables
To manage these pressures, a vast majority of businesses (88%) have developed strategies to secure renewable energy, with long-term power purchase agreements becoming the industry standard.
But this approach varies by sector. For example, 38% of chemical businesses prefer combining contracts with selective on-site power generation, while the cement and glass industries are more likely to make direct investments in renewable energy assets.
The report notes that Europe’s higher direct investment (nearly twice as much in the US) might point to stronger price pressures, which are forcing firms to secure cost stability by working to generate their own energy supplies.
Barriers to going green
Despite high ambitions for sustainability, many companies struggle to translate these goals into financial success, a phenomenon described as ‘the green paradox’. Although more than 80% of firms place sustainability at the core of their strategy, fewer than 40% have achieved tangible commercial results.
Success is unevenly distributed across sectors. About one-third of glass, cement, and steel companies report commercial traction with their sustainable offerings, but only 19% of base chemical firms and 12% of energy generators have seen similar results. The primary barriers to this growth include regulatory uncertainty, limited customer willingness to pay for green products, and unclear returns on investment.
Hydrogen
Looking ahead, hydrogen fuel is expected to play a major role in industrial competitiveness within the next decade, though regional views differ. While some hydrogen production is already operational, much of it is fed, at least in part, with fossil fuels. Green hydrogen – sometimes thought of as the holy grail of renewable energy sources – is not yet being produced at scale because of the high costs involved.
In Europe, three out of four leaders expect hydrogen to be relevant within 10 years, driven by regulatory mandates and decarbonization plans. There have already been some ambitious moves for building a strong hydrogen infrastructure, like for example a European Union regulatory framework that aims to decarbonize the European gas sector.
In North America, the outlook is more divided, with some expecting adoption within five years and others not anticipating its impact until after 2035. To bridge the gap between sustainability and profit, leaders are increasingly focusing on co-developing products with customers, providing verified environmental impact data, and moving beyond simple compliance to active market shaping.
Turning sustainability into growth
The main takeaway from the report is that energy-intensive industries must make tough choices going forward. Companies will need to quickly find ways to adapt to rising energy prices, regulatory pressures, and the shift to renewables.
“Energy-intensive industries face unprecedented pressures – but also, a unique opportunity,” said Jan Haemer, partner at Simon-Kucher. “Those who revisit site strategies to their industrial realities, secure renewables, and actively shape markets will turn sustainability into profitable growth.”
