Leveraging Demand Response to Electrify Heating in the Textile Industry in Southeast Asia 

Authors: Cecilia Springer and Ali Hasanbeigi

Electrification of industrial heating offers a near-term opportunity to cut emissions using commercially available, clean technologies. However, it also introduces challenges such as increased peak demand and grid congestion. DR helps address these issues by enabling industrial users to shift or reduce electricity use in response to price signals or utility incentives, improving grid stability and reducing costs. This study focuses on price-based DR, particularly time-of-use and critical peak pricing, as a foundation for future participation in VPPs, which can further enhance grid resilience, reduce fossil fuel reliance, and support cost-effective industrial electrification.

The textile industry has strong potential for industrial demand response when paired with electrified heating, due to its relatively low temperature process heating that can be electrified with commercially available technologies, as well as its reliance on batch and bottleneck processes that allow for flexible load management. Batch operations such as dyeing, scouring, and finishing can be scheduled to align with off-peak electricity pricing or paused during DR events if sufficient buffer inventory exists. Similarly, bottleneck steps like stentering or batch dyeing often limit production throughput, allowing upstream processes to be temporarily halted without affecting overall output if intermediate storage is available. With effective coordination between production planning and energy management, textile facilities can leverage this inherent operational flexibility to curtail loads in real time, reduce peak electricity costs, and participate in DR and VPPs.

This study focuses on Thailand, Vietnam, and Indonesia as priority countries for evaluating DR and VPP opportunities due to their large industrial energy footprints, evolving power systems, and increasing importance in regional and global decarbonization efforts. These countries lead Southeast Asia in industrial energy use, particularly in sectors like textiles, cement, and steel, and each faces unique challenges in integrating renewables and managing peak demand. Thailand is the most advanced in terms of DR, with decades of DSM experience, active DR pilots, and a developing load aggregator model. Vietnam has a strong regulatory foundation and rising industrial participation in DR, though programs remain voluntary and without strong financial incentives. Indonesia is in the early stages, with DR identified in national plans but no formal programs beyond basic time-of-use tariffs. All three countries have the regulatory infrastructure and international partnerships to scale DR and VPPs as viable solutions for industrial electrification and grid flexibility.

As a first step to understanding the potential benefits of DR, we first assessed the potential for decarbonizing textile wet-processing in Thailand, Vietnam, and Indonesia by electrifying thermal energy systems and quantifying associated energy use and CO2 emissions. We focus on three commercially available electrification technologies: electric steam boilers, electric thermal oil boilers, and industrial heat pumps. Electric boilers offer high efficiency, low capital costs, and easy integration, but face challenges from high electricity prices. Industrial heat pumps, while more capital-intensive, deliver the greatest energy savings and emissions reductions due to their high efficiency.

Techno-economic modeling of a typical textile facility with wet processing (pre-treatment, dyeing, printing, and finishing) and 8,000 tons/year production in each country shows that full electrification of heating can reduce final energy demand significantly, especially with heat pumps. Emissions outcomes vary by country, with heat pumps and RE procurement delivering reductions even where grid electricity is currently carbon-intensive. Total additional electric load from electrification ranges from 10.4 to 15.4 MW, depending on the selected electrified steam generation technology, indicating substantial potential for DR participation with flexible load (Figure 1).

To assess the financial benefits of DR in electrified textile wet-processing, we modeled cost savings from load shifting under a time-of-use (TOU) pricing structure projected for 2030. The model assumed 2x peak and 0.5x off-peak pricing, with scenarios incorporating both full grid reliance for electricity supply and partial renewable energy (RE) procurement. We created hourly electricity demand profiles for electric steam boilers, thermal oil boilers, and heat pumps, and simulated two DR scenarios leveraging the batch and bottleneck nature of textile production. Scenario 1 curtailed only pretreatment steps, maintaining continuous operation at the dyeing bottleneck, while Scenario 2 paused all processes except dyeing, maximizing DR participation without disrupting throughput. Both strategies reduced energy demand during peak pricing hours and were used to estimate per-kilogram energy cost savings compared to baseline operations without DR.

We find that DR can reduce energy costs for textile facilities by 16–28% (relative to projected energy costs without DR participation) in a typical textile wet-processing facility in the three countries studied, depending on the electric heating technology and DR scenario, largely through avoided capacity costs and peak shifting.

Our analysis shows that pairing DR with electric steam boilers can reduce energy costs compared to electrification without DR, but energy costs still tend to be higher than those of coal-fired boilers in the near term across Thailand, Vietnam, and Indonesia. Among DR strategies, a facility-wide pause excluding dyeing (DR Scenario 2) delivers slightly greater cost savings than more limited curtailment (Scenario 1). In Thailand and Vietnam, combining DR with RE procurement further lowers energy costs, especially where corporate RE is cheaper than grid power. Although in Indonesia RE procurement currently offers limited savings, long-term modeling shows that DR, RE procurement, and carbon pricing together can significantly reduce the levelized cost of heating (LCOH) for electric steam boilers. In Thailand and Vietnam, these combined measures bring electric boiler LCOH below that of coal boilers. Even in Indonesia, most scenarios show LCOH approaching parity with coal, especially when DR and energy subsidies are included. Notably, DR alone can deliver lifetime cost savings equivalent to a 20% energy subsidy, making it a powerful and lower-cost policy lever for encouraging industrial electrification.

Heat pumps offer the greatest energy and cost savings among the electrification options studied due to their high efficiency, and these savings are further enhanced when paired with DR and RE procurement. In Thailand and Vietnam, heat pumps consistently outperform coal-fired steam boilers across all scenarios, with the lowest LCOH achieved when DR is combined with RE procurement. Even in Indonesia, where coal remains relatively cheap, DR participation and long-term RE procurement lower the LCOH of heat pumps below that of coal boilers (Figure 2). While heat pumps have higher upfront capital costs, DR participation can reduce their lifetime costs by an amount comparable to a 50% CAPEX subsidy, demonstrating the potential of DR as a powerful, cost-effective policy lever to accelerate heat pump adoption across Southeast Asia’s textile sector.

Electric boilers typically have a higher LCOH than coal boilers across the studied countries, so we explored cost reduction strategies such as a 20% energy cost subsidy and demand response (DR) participation. In Vietnam, DR offers lifetime savings comparable to the subsidy, suggesting it could deliver similar benefits at lower public cost while supporting the grid. When these factors are considered, electric steam boilers in Thailand have a lower LCOH than coal boilers under all scenarios (Figure 3).

Although heat pumps have favorable lifetime costs compared to conventional steam boilers, we investigated different financial levers for decreasing LCOH in order to encourage adoption and reduce barriers to doing so for textile manufacturers in the studied countries. Across countries, the amount of lifetime savings from DR participation is roughly on par with a 50% CAPEX subsidy, representing a substantial amount of money and the primary barrier to heat pump costs.

For a typical textile wet-processing facility aiming to fully electrify both steam and thermal oil heating, participation in DR programs can yield significant energy cost savings compared to electrification without DR. Given that electricity is more expensive than fuel, lowering the costs of electricity can greatly help with the economic feasibility of electrification. In Thailand, DR Scenario 2 with grid electricity delivers the highest annual energy cost savings, up to $2.5 million for electric boilers and slightly less for heat pumps due to their lower baseline energy costs. Similar trends are seen in Vietnam, with savings reaching $1.8 million per year, while Indonesia shows slightly lower savings due to less favorable electricity price dynamics. Overall, our findings underscore that DR combined with RE procurement is the most cost- and carbon-effective strategy for heating electrification in the region.

The value streams that fund DR incentives come primarily from avoided system costs rather than new subsidies. As discussed in Chapter 5.4, DR delivers measurable grid benefits including avoided capacity costs, deferred transmission and distribution investments, and reduced ancillary service needs. These savings provide the economic basis for utilities or regulators to compensate DR participants without increasing overall system costs. In early stages of DR program development, climate finance or donor-supported pilots, such as those linked to the JETP in Indonesia and Vietnam or development partner initiatives, can help bridge initial funding gaps. Over time, as DR becomes integrated into utility planning and market structures, these incentives could be funded through the system cost savings DR creates, reducing the need for direct government subsidies.

Summary of Recommendations

Government:

Governments in Thailand, Vietnam, and Indonesia should establish clear demand response policy frameworks and integrate demand response into national power development plans. These frameworks must include participation targets, cost recovery mechanisms for utilities, and clear rules for industrial consumers. Governments should also enable third-party aggregators, supported by transparent data-sharing rules, standardized bidding procedures, and licensing requirements. Policy sandboxes should be created to pilot advanced demand response programs, dynamic pricing, and virtual power plants before national rollout. Electricity tariff reform is also needed, including time-of-use pricing and critical peak pricing to encourage load shifting. Financial support such as grants, tax incentives, and concessional financing should be provided to accelerate industrial electrification. Finally, governments should implement clear third-party grid access rules and surplus renewable energy sale mechanisms to link demand response, electrification, and renewable energy adoption.

Industry:

Industrial electricity consumers should assess the financial benefits of demand response by joining pilot programs and collaborating with utilities and policymakers. Early participation can help companies build expertise in load management, reduce costs, and generate new revenue. Facilities should also pilot electrification technologies such as electric boilers, heat pumps, and electric thermal oil boilers while using available incentives and technical support. Industry associations should raise awareness by organizing training programs and coordinating pilot projects. Companies should also advocate for policies that expand corporate renewable energy procurement, including grid access and competitive green tariffs. Additionally, industries should share operational data to improve program design and engage in consultations on pricing and demand response rules to ensure that regulations align with industrial needs.

Utilities:

Utilities should invest in infrastructure to enable large-scale demand response, including advanced metering, smart grids, and automated demand response management systems. They must establish standardized performance metrics, transparent incentive structures, and rigorous pilot program monitoring. Utilities should also prepare joint roadmaps with governments and industry to scale demand response alongside industrial electrification. Improving green tariffs, enabling the sale of surplus renewable energy, and linking demand response with renewable energy integration will be critical. Finally, utilities should lead pilot programs for demand response and virtual power plants to test pricing models, aggregation mechanisms, and technology integration before wider implementation.

To read the full report and see complete results and analyses, download the full report from the link above.

Interested in information and decarbonization studies on the global textile and apparel industry? Check out our list of textile industry publications and tools on the Textile Sustainability Hub.

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