Oatly wants to kick its gas habit. Will other food and…

MILLVILLE, N.J. — Anca Gavris slipped on a blue hairnet and white lab coat, then yanked open a heavy door, revealing a labyrinth of silver pipes and bulky tanks on the production floor. For all its steely, sterile machinery, the room felt warm and cozy — like huddling over a bowl of steaming oatmeal or sinking into an oat-filled bath.

Gavris is the site director for Oatly​’s factory in Millville, New Jersey, where the Swedish company produces a thick liquid base that will later become oat milk. In 2019, she helped open the processing plant — Oatly’s first outside of Europe — to satisfy rising demand for the creamy dairy alternative among coffee-shop baristas and plant-milk lovers across North America.

I met Gavris on a drizzly December morning at the 25,000-square-foot facility, which sits along a winding road near the sandy South Jersey coast. Towering outdoor silos hold oat grains that arrive by train and truck from western Canada. Once funneled inside, the oats move through an intricate, automated process. They’re cracked open, stirred with water, mixed with enzymes, then spun in loudly whirring decanters that separate smooth liquid from gloopy, fibrous residue.

Inside Oatly’s processing facility in Millville, New Jersey. (Matt Peters for Canary Media)

Many of these steps require heat — lots of it. Steam is used to treat the oats and to create hot water for cleaning equipment, for example. Pipes carrying this heat stretched above and around us, connecting like veins to the factory’s beating heart: the boiler room, where giant cylindrical tanks burn large volumes of natural gas every day.

Oatly, which has baked sustainability into its brand identity, recognizes that relying on fossil fuels for heating is a problem for the planet and is at odds with the company’s climate goals. At the Millville facility, Oatly has taken steps to reduce its gas use, including by recycling the plant’s waste heat. Gavris took me to the sauna-like area that houses the heat-recovery system, a tangle of white PVC pipes and water tanks just past the oat-decanting room.

“We’re trying to save energy all the time; we’re trying to save water,” she explained. 

Ditching gas entirely is a far greater challenge.

Oatly is considering installing industrial heat pumps and other electrified technology to replace its gas-fired boilers and reduce carbon emissions. But that promises to be an expensive endeavor, and the gas system in Millville is practically new, with many years of useful life left. In an industry that’s virtually always used fossil fuels to make heat, the company would be charting a new course in its effort to decarbonize.

It’s a dilemma facing food and beverage manufacturers across the country. Giant conglomerates and artisanal shops alike are feeling the pressure from consumers, shareholders, and regulators to minimize their environmental footprint — from how they source ingredients to how they operate the bakeries, breweries, and factories that make our supermarket staples. 

But they are also contending with the logistics and cost of overhauling their operations. As firms like Oatly take the first steps, their real-world experiences could help ease the qualms of more-reluctant manufacturers.

“These are not your everyday operational engineering projects. They’re really focused around technology and energy,” said Jason Bell, managing director for the Americas at Engie Impact. The sustainability consulting company is working with the food and beverage giant Kraft Heinz to develop a clean-heat strategy in several U.S. factories.

“Many companies are sitting and waiting to see how electrification is approached and solved” by early adopters, he added. 

More than 42,700 factories in the United States make the goods that line our refrigerators and pantries, representing over $1 trillion in annual sales. In all of these facilities, heat is essential for turning raw ingredients into tasty products, whether it’s frozen fruit and ice cream, dried noodles and jarred sauces, bagels and tortillas, or even beer and liquor. By and large, the thermal energy needed for this processing, baking, drying, and fermenting comes from combusting gas in boilers and ovens.

(Credits, clockwise from top left: Overcrew, SV Team, Stockcolorist, Stockbusters/​Pond5)

Across the U.S. manufacturing sector, direct heat use contributes a major share of the country’s planet-warming pollution, amounting to roughly 13% of total U.S. greenhouse gas emissions in 2018, according to federal data.

Nearly a quarter of those thermal emissions came from firing up steel mills, cement kilns, and chemical refineries to achieve scorching temperatures. But the remaining emissions were the result of less heat-intensive procedures. Which is why, when it comes to decarbonizing industrial heat, the food and beverage industry occupies something of a sweet spot, experts say.

Processes like mustard-making and cheese pasteurization require relatively low temperatures. That heat could potentially be provided using existing low-carbon solutions like electric boilers and industrial heat pumps, which transfer hot and cold air using a refrigerant. In 2021, over 80% of the heat used in U.S. food and beverage facilities was for processes requiring temperatures at or below 200 degrees Celsius (392 degrees Fahrenheit) — less heat than it takes to roast a pan of vegetables at home.

“The current crop of electrified technologies are really applicable in a very wide array of different food and beverage plants,” said Richard Hart, who leads the industry program at the American Council for an Energy-Efficient Economy, or ACEEE. ​“That’s super helpful, as opposed to other sectors which have very high temperatures, where we’re not quite there with all of the electrification equipment.”

Still, if it was easy to do, more facilities would’ve installed electric systems by now. The reality is that natural gas is cheap and abundant in the U.S., which makes it much harder to justify the expense of switching to electricity, especially for giant factories. And given that U.S. manufacturers have used fossil-fuel boilers for over a century to produce steam, many companies prefer to stick with technologies they already have and that are well understood — especially for things that people consume.

“Food and people safety are paramount,” Erin Augustine, Oatly’s vice president of sustainability for operations and supply chain, told me by phone. She said that as companies work to curb emissions, they’re grappling with how to make sweeping changes to their processes without risking the taste, quality, and consistency of their products.

“Proper implementation, change management, all of that takes time and education,” she added. 

Industrial heat pumps are still relatively rare in manufacturing, accounting for less than 2% of the roughly $68 billion global heat pump market in 2021, according to the think tank Energy Innovation.

Electric boilers fare no better. Only 2% of boilers in U.S. factories use electricity; the rest burn fossil fuels. Given that boilers can last for decades, many industrial facilities are poised to still be using their polluting equipment in 2050, ACEEE found in a recent analysis. Climate scientists say the world will need to all but phase out fossil fuel use by mid-century to avoid the worst effects of global warming.

Nevertheless, recent developments could help pave the way for companies to start transitioning to low-carbon industrial heat.

A handful of existing federal programs and state-level policies encourage or require companies to forgo their fossil fuel–fired equipment. Regulators in Southern California recently adopted air-quality rules that could help spur the region’s commercial bakeries, snack-making factories, and other industrial facilities to shift to using electricity. Colorado and New York have both issued millions of dollars in grants to help manufacturers install heat pumps or waste-heat recovery systems.

Technology solutions that can deliver higher levels of heat are also starting to hit the market. At least two companies, AtmosZero and Skyven Technologies, are producing a new generation of steam-making heat pumps that could dramatically reduce or entirely replace the use of gas-fired boilers. Startups such as Rondo Energy and Brenmiller Energy are designing thermal batteries that store excess wind and solar power from the grid, then use it to produce red-hot heat for industrial processes.

Global spirits maker Diageo plans to use Rondo’s batteries to help eliminate gas-fired heat at its Bulleit whiskey distillery in Kentucky and a canned-cocktail plant in Illinois. Kraft Heinz has said it plans to install a range of clean technologies at 10 U.S. locations, including its ketchup factory in Ohio and a plant in Illinois that makes macaroni and cheese. Both companies were awarded millions of dollars from the U.S. Department of Energy to start their projects and are slated to receive much more — though the Biden-era program backing these efforts is now on pause as the Trump administration reviews all DOE spending.

Other manufacturers have started testing and deploying cutting-edge solutions, as highlighted in recent reports by the Renewable Thermal Collaborative, a global coalition of companies, institutions, and governments. 

A dairy-processing cooperative in California and a malting facility in France are using solar-thermal technology to generate heat with sunlight. A Scotch whisky distillery has deployed an innovative heat pump that recovers thermal energy from the distillation process, while a Finnish food maker has replaced its oil-burning boiler with an electric heat-storage system. Given that the industry makes such a wide variety of products in differing locations, no two facilities look exactly the same — and neither will their approaches to decarbonization.

Before following Gavris along the catwalks and corridors of Oatly’s New Jersey factory, I sat down with Chris Edmonds at the front of the building. Edmonds is Oatly’s senior sustainability program manager for North America, and one of his main priorities is designing a decarbonization plan for the company’s facilities in Millville and Ogden, Utah.

Oatly first entered the U.S. market in 2016, during a period of skyrocketing global sales for dairy-alternative drinks and meat substitutes. But the oat-milk maker has been around for decades, Edmonds explained from a small office overlooking the parking lot.

In the 1980s, food scientists at Lund University in Sweden began developing grain-based milks with lactose-intolerant people in mind. Oats, a common crop in Scandinavia, proved to be a more tasty and nutritious ingredient than barley or rye. The Oatly brand launched in 1994, spreading slowly throughout Europe before moving into global markets, aided by an aggressive marketing campaign that appealed to vegans and climate-conscious consumers.

A barista makes an oat milk latte in Brooklyn, New York. (Matt Peters for Canary Media)

Oatly Original Oatmilk that’s sold in the U.S. has about half the climate impact of U.S. dairy milk on a lifecycle basis, mainly because producing it doesn’t involve any methane-belching and manure-making cattle. (Or, to borrow its ubiquitous slogan: ​“Wow, no cow.”) The lower footprint also reflects the fact that Oatly sources renewable-energy credits for 100% of the electricity used at its six global facilities, including Millville, as well as its partner facilities in the U.S., Europe, and Singapore.

Yet cleaning up industrial heat remains a major sticking point in the company’s sustainability efforts.

In 2023, about 58% of Oatly’s total global energy use came from ​“non-renewable heat energy” — mainly natural gas. Another 16% was ​“renewable heat energy,” which refers to alternative fuels, such as biomethane, that the company either directly consumes or sources through certificates. The remaining quarter of Oatly’s 2023 energy use was renewable electricity.

Seated in the office, Edmonds outlined Oatly’s key strategies for decarbonizing heat in its U.S. facilities, beyond more immediate steps like boosting efficiency and recycling waste heat. Mostly, it has to do with ditching steam.

“Steam is the legacy technology that everyone understands,” Edmonds said. ​“Every plant operator has always worked in steam, and all the textbooks are about steam and food.” 

That history, coupled with low natural gas prices, has made steam the default setting for many facilities. But not every industrial process requires the high temperatures and pressures that steam-driven systems deliver. Often, facilities that need steam for specific purposes — like sterilizing infant formula or treating almonds to kill bacteria — will also use steam for more routine operations, such as washing food and cleaning.

Gas-fired boilers supply heat for Oatly’s New Jersey facility. (Matt Peters for Canary Media)

Until recently, manufacturers didn’t see this as much of a problem. But as companies look to decarbonize, using energy-intensive steam complicates those efforts. Across the industry, one approach that’s gaining traction is to ​“de-steam” factories and instead use high-temperature hot water, below 100°C (212℉), wherever possible. 

Oatly is looking for de-steaming opportunities in Millville because its process already uses temperatures around that level, Edmonds said. Making the change would require redesigning the factory’s systems, but it may be worth the effort. If facilities can use hot water, they could operate more efficiently and cost-effectively. And it’d make it easier for plants to adopt currently available solutions such as electric boilers and industrial heat pumps.

Edmonds stood up, grabbed a dry-erase marker, then sketched out the complex calculations his team is considering for a possible heat-pump installation in New Jersey. 

There’s the ​“spark spread” — the difference between electricity and gas utility costs per unit of energy — and the ​“coefficient of performance,” or how much thermal energy you can get out of a heat pump or boiler for every unit you put in. Engineering work, permitting, and electrical and grid upgrades can add millions of dollars to the equation. On the other hand, government and utility incentives could subtract some of the expenses. 

“That’s all part of the process that I’m starting to work on now,” he said, orange marker in hand.

As it happens, Oatly already uses electric heat pumps at its flagship facility in Landskrona, Sweden, and a factory in the Netherlands. The machines boost the heating potential of hot water used throughout the plants, reducing the use of fossil boilers. The company also is in the process of replacing an aging boiler in Landskrona with a hybrid model that can burn gas or biomass pellets. Still, it’s hard to copy and paste those projects onto other facilities. In Europe, regional climate policies alongside rising gas prices — driven by Russia’s war in Ukraine — make for different market dynamics than in the United States.

Then there’s the fact that, save for the Landskrona plant, Oatly’s other facilities are relatively new. ​“The boilers and other assets have lots of good operating years left, and they don’t need to be replaced for other reasons” besides decarbonization, Augustine said.

The same is true for many of its manufacturing partners. Next door to Oatly’s Millville factory is a larger facility run by Innovation Foods that opened in 2022. Oatly pipes its liquid oat base directly into the second plant, which turns the product into finished oat milk — a step that requires higher temperatures and more steam than Oatly’s in-house operations. The companies are close partners but don’t yet collaborate on low-carbon heat, Edmonds said.

As Oatly weighs what to do with its gleaming new boilers, other food and beverage companies are figuring out how to revamp much older factories. Kraft Heinz, headquartered in both Chicago and Pittsburgh, is one of those manufacturers.

With roots tracing back to the late 1800s, the company operates ​“prehistoric” energy equipment in some of its U.S. facilities, Pavan Katte, who leads the maintenance, utilities, and ESG division in North America, joked during an October panel at the Verge climatetech conference in San Jose, California. He likened an 88-year-old ketchup plant in Fremont, Ohio, to a museum since its original brick chimney still stands as an artifact.

Last year, the Biden administration’s DOE selected Kraft Heinz to receive up to $170.9 million in grants to replace older equipment with a broad array of decarbonized technologies, including heat pumps, electric boilers, thermal batteries, and solar-thermal systems. The DOE recently awarded the manufacturer an initial $5.9 million to begin engineering work at 10 plants. Katte said the funding will help accelerate the company’s existing plans to upgrade its factories over the next 10 to 15 years.

“Our biggest challenge with this [strategy] is natural gas,” he told the audience inside the windowless conference hall. ​“We have to figure out how to get it out of the system.”

Like Oatly, the company is scrutinizing how it uses heat in the first place. Kraft Heinz has started testing different ingredients to see if it can cook various products at lower temperatures while maintaining their classic tastes. Adopting less heat-intensive processes will be key as the manufacturer looks to ease off its gas boilers and shift to using electricity at its massive factories, which make everything from cream cheese, candy, and ground coffee to hot dogs and frozen tater-tots. 

Inside a Heinz ketchup production facility. (Kraft Heinz)

“We have 800-horsepower boilers in our plants, and I don’t think the grid can supply the kind of power to electrify the whole place,” Katte said on stage. He added that installing heat pumps and similar equipment represents more of a ​“stepping stone” for the company — which reported $27 billion in net sales in 2023 — on the road to fully decarbonizing heat and steam. 

Eventually, the manufacturer aims to replicate its efforts across not just its remaining factories in North America but also within the dozens of manufacturing sites it partners with outside the region. ​“We want to make sure that we’re leading the example for the rest of our value chains,” Helen Davis, the senior vice president and head of North America operations at Kraft Heinz, said during a separate event in New York City last fall. 

Kraft Heinz and many other companies can’t solve all of their energy problems through de-steaming alone. But novel technologies are becoming available that could clean up the trickier, higher-temperature processes inside of food and beverage plants.

To learn more about one potential solution, I sat down with Addison Stark, CEO and co-founder of AtmosZero, on the sidelines of the Verge conference. 

The Colorado-based startup is making a heat-pump boiler that’s designed to slot in where a gas boiler would go in a factory’s steam-distribution system. The technology can draw heat from ambient air or water to make steam at the temperatures and pressures needed for industrial applications. It can also simultaneously deliver cooling or refrigeration.

“We do think we are bringing the first disruptive innovation in the boiler room since 1867,” Stark told me over a cup of conference coffee. That’s the year when U.S. manufacturer Babcock & Wilcox designed the world’s first installed utility boiler, a product that continues to be the industry standard a century and a half later.

AtmosZero emerged from stealth mode in June 2023 and has since been working to fabricate its first pilot unit: a 650-kilowatt heat-pump boiler for the Fort Collins, Colorado, headquarters of New Belgium Brewing. Stark said his company plans to deliver the unit to the brewery at the beginning of this year. Brewers need steam to boil wort — the sugary liquid used to ferment beer — and also to sterilize glass bottles prior to filling them with libations.

AtmosZero closed a $21 million Series A funding round last year and recently moved into a new manufacturing facility in Loveland, Colorado. The startup plans to begin building its first commercial-scale units this year at the facility, with the goal of scaling up to producing 100 units per year by the end of 2026. Stark said AtmosZero has more customers in the food and beverage, chemicals, and related industries in its project pipeline but declined to give details.

“They look not dissimilar to a brewery,” he said. ​“We see brewers as being a nice flagship application because, at the end of the day, people like to read about their favorite beer actually decarbonizing.” 

If low-carbon solutions like these are going to scale up and fully commercialize, U.S. manufacturers will need to receive more policy support and government investment to defray the costs and risks of moving to a new kind of heating system, experts say.

That could include enacting federal tax credits that reward companies for investing in or producing non-polluting heat sources, similar to existing tax credits for clean electricity and clean hydrogen. Reforming electricity markets would enable thermal batteries such as Rondo’s to earn money for the role they play in balancing the electricity grid. Expanding federal programs, like the DOE initiative backing Kraft Heinz and the spirit maker Diageo, would allow more manufacturers to overhaul their facilities and drive private investment in the sector.

It’s unlikely that any of these measures will be enacted under the second Trump administration, which spent its first week attempting to unravel many Biden-era climate and clean energy policies. But advocates see investing in U.S. food and beverage facilities as part of the country’s broader goals of making American manufacturing more competitive in the global economy. Hart, the ACEEE program director, noted that processed food products represent one of the country’s biggest exports, totaling nearly $37 billion in 2023.

“We really want to have strong competitiveness as a nation. We want to have good jobs that arise in lots of different locations, and we want to make sure that we have efficient use of all of our energy infrastructure,” Hart said. ​“And the food and beverage sector specifically really hits all three of those spots.”

“Let’s give these companies a chance to show what they can do,” he said.

Back in New Jersey, at the end of my visit to the Oatly factory, Gavris led me from the cozy warmth of the production floor into the gray, damp outdoors. 

We walked around the building to a loading dock, where Oatly pipes the residue left over from its process into a giant tank. A local company hauls the porridge-like sludge away for disposal, turning it into animal feed or pouring it into an anaerobic biodigester to make biogas to power buildings. Across the giant parking lot, we could see the beige exterior of the neighboring facility, where oat milk is made and packed into shelf-stable containers. A semitruck rumbled by us, ready to collect more gray and blue boxes of oat milk.