diff --git a/config/config.default.yaml b/config/config.default.yaml
index 32c073b48..8518dc63e 100644
--- a/config/config.default.yaml
+++ b/config/config.default.yaml
@@ -597,6 +597,28 @@ sector:
   biogas_upgrading_cc: false
   conventional_generation:
     OCGT: gas
+  industry_t:  # heat supply industry
+    endogen: false  # if heat supply for industry should be enodgenously optimised
+    must_run: 0.8 # NB: industrial heat demand is in reality supplied at site by discrete plants
+    # which follow the local demand and therefore cannot be dispatched too much.
+    # Thus, p_min_pu is set to must run to avoid too much dispatch behaviour. Improvements welcome!
+    # share of medium and high temperature for process heat based on EU27 Fig. 5 https://www.agora-industry.org/publications/direct-electrification-of-industrial-process-heat
+    # TODO: should be improved and split up by country and sector
+    share_medium: 0.42
+    share_high: 0.57
+    # Options in case of endogenous industry heat supply
+    low_T:
+      biomass: true
+      heat_pumps: true
+      electric_boiler: true
+      methane: true
+    medium_T:
+      biomass: true
+      methane: true
+      hydrogen: true
+    high_T:
+      hydrogen: true
+      methane: true
   biomass_to_liquid: false
   electrobiofuels: false
   biosng: false
diff --git a/scripts/prepare_sector_network.py b/scripts/prepare_sector_network.py
index 081ada586..942fc357a 100644
--- a/scripts/prepare_sector_network.py
+++ b/scripts/prepare_sector_network.py
@@ -2718,17 +2718,397 @@ def add_biomass(n, costs):
         )
 
 
-def add_industry(n, costs):
-    logger.info("Add industrial demand")
+def add_low_t_industry(n, nodes, industrial_demand, costs, must_run):
+    """
+    Add low temperature heat for industry.
+    """
 
-    nodes = pop_layout.index
-    nhours = n.snapshot_weightings.generators.sum()
-    nyears = nhours / 8760
+    logger.info("Add low temperature industry.")
 
-    # 1e6 to convert TWh to MWh
-    industrial_demand = (
-        pd.read_csv(snakemake.input.industrial_demand, index_col=0) * 1e6
-    ) * nyears
+    n.madd(
+        "Bus",
+        nodes + " lowT industry",
+        location=nodes,
+        carrier="lowT industry",
+        unit="MWh_LHV",
+    )
+
+    n.madd(
+        "Load",
+        nodes,
+        suffix=" lowT industry",
+        bus=nodes + " lowT industry",
+        carrier="lowT industry",
+        p_set=industrial_demand.loc[nodes, "solid biomass"] / 8760.0,
+    )
+
+    if (
+        options["industry_t"]["low_T"]["biomass"]
+        or not options["industry_t"]["endogen"]
+    ):
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" solid biomass for lowT industry",
+            bus0=spatial.biomass.nodes,
+            bus1=nodes + " lowT industry",
+            carrier="lowT industry solid biomass",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=costs.at["solid biomass boiler steam", "efficiency"],
+            capital_cost=costs.at["solid biomass boiler steam", "fixed"]
+            * costs.at["solid biomass boiler steam", "efficiency"],
+            marginal_cost=costs.at["solid biomass boiler steam", "VOM"],
+            lifetime=costs.at["solid biomass boiler steam", "lifetime"],
+        )
+
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" solid biomass for lowT industry CC",
+            bus0=spatial.biomass.nodes,
+            bus1=nodes + " lowT industry",
+            bus2="co2 atmosphere",
+            bus3=spatial.co2,
+            carrier="lowT industry solid biomass CC",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=costs.at["solid biomass boiler steam CC", "efficiency"],
+            capital_cost=costs.at["solid biomass boiler steam CC", "fixed"]
+            * costs.at["solid biomass boiler steam CC", "efficiency"]
+            + costs.at["biomass CHP capture", "fixed"]
+            * costs.at["solid biomass", "CO2 intensity"],
+            marginal_cost=costs.at["solid biomass boiler steam CC", "VOM"],
+            efficiency2=-costs.at["solid biomass", "CO2 intensity"]
+            * costs.at["biomass CHP capture", "capture_rate"],
+            efficiency3=costs.at["solid biomass", "CO2 intensity"]
+            * (1 - costs.at["biomass CHP capture", "capture_rate"])
+            - costs.at["solid biomass", "CO2 intensity"],
+            lifetime=costs.at["solid biomass boiler steam CC", "lifetime"],
+        )
+
+    if options["industry_t"]["low_T"]["methane"]:
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" gas for lowT industry",
+            bus0=spatial.gas.nodes,
+            bus1=nodes + " lowT industry",
+            bus2="co2 atmosphere",
+            carrier="lowT industry methane",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=costs.at["gas boiler steam", "efficiency"],
+            capital_cost=costs.at["gas boiler steam", "fixed"]
+            * costs.at["gas boiler steam", "efficiency"],
+            marginal_cost=costs.at["gas boiler steam", "VOM"],
+            efficiency2=costs.at["gas", "CO2 intensity"],
+            lifetime=costs.at["gas boiler steam", "lifetime"],
+        )
+
+        eta = (
+            costs.at["gas boiler steam", "efficiency"]
+            - costs.at["gas", "CO2 intensity"]
+            * costs.at["biomass CHP capture", "heat-input"]
+        )
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" gas for lowT industry CC",
+            bus0=spatial.gas.nodes,
+            bus1=nodes + " lowT industry",
+            bus2=spatial.co2.nodes,
+            bus3="co2 atmosphere",
+            carrier="lowT industry methane CC",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=eta,
+            capital_cost=costs.at["gas boiler steam", "fixed"]
+            * costs.at["gas boiler steam", "efficiency"]
+            + costs.at["biomass CHP capture", "fixed"]
+            * costs.at["gas", "CO2 intensity"],
+            marginal_cost=costs.at["gas boiler steam", "VOM"],
+            efficiency3=costs.at["gas", "CO2 intensity"]
+            * (1 - costs.at["biomass CHP capture", "capture_rate"]),
+            efficiency2=costs.at["gas", "CO2 intensity"]
+            * costs.at["biomass CHP capture", "capture_rate"],
+            lifetime=costs.at["gas boiler steam", "lifetime"],
+        )
+
+    if options["industry_t"]["low_T"]["heat_pumps"]:
+        # high temperature industrial heat pump can heat up to 150°C
+        eta = costs.at["industrial heat pump high temperature", "efficiency"]
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" industrial heat pump steam for lowT industry",
+            bus0=nodes,
+            bus1=nodes + " lowT industry",
+            carrier="lowT industry heat pump",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=eta,
+            capital_cost=costs.at["industrial heat pump high temperature", "fixed"]
+            * eta,
+            marginal_cost=costs.at["industrial heat pump high temperature", "VOM"],
+            lifetime=costs.at["industrial heat pump high temperature", "lifetime"],
+        )
+
+    if options["industry_t"]["low_T"]["electric_boiler"]:
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" electricity for lowT industry",
+            bus0=nodes,
+            bus1=nodes + " lowT industry",
+            carrier="lowT industry electricity",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=costs.at["electric boiler steam", "efficiency"],
+            capital_cost=costs.at["electric boiler steam", "fixed"]
+            * costs.at["electric boiler steam", "efficiency"],
+            marginal_cost=costs.at["electric boiler steam", "VOM"],
+            lifetime=costs.at["electric boiler steam", "lifetime"],
+        )
+
+
+def add_medium_t_industry(n, nodes, industrial_demand, costs, must_run):
+    """
+    Add medium temperature heat for industry.
+
+    Medium and high temperature heat demands are taken from today's
+    industry methane demand and split according to config setting.
+    """
+
+    logger.info("Add medium temperature industry.")
+
+    n.madd(
+        "Bus",
+        nodes + " mediumT industry",
+        location=nodes,
+        carrier="mediumT industry",
+        unit="MWh_LHV",
+    )
+
+    share_m = options["industry_t"]["share_medium"]
+    n.madd(
+        "Load",
+        nodes,
+        suffix=" mediumT industry",
+        bus=nodes + " mediumT industry",
+        carrier="mediumT industry",
+        p_set=share_m * industrial_demand.loc[nodes, "methane"] / 8760.0,
+    )
+
+    if options["industry_t"]["medium_T"]["biomass"]:
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" solid biomass for mediumT industry",
+            bus0=spatial.biomass.nodes,
+            bus1=nodes + " mediumT industry",
+            carrier="solid biomass for mediumT industry",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=costs.at["direct firing solid fuels", "efficiency"],
+            capital_cost=costs.at["direct firing solid fuels", "fixed"]
+            * costs.at["direct firing solid fuels", "efficiency"],
+            marginal_cost=costs.at["direct firing solid fuels", "VOM"]
+            + costs.at["biomass boiler", "pelletizing cost"],
+            lifetime=costs.at["direct firing solid fuels", "lifetime"],
+        )
+
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" solid biomass for mediumT industry CC",
+            bus0=spatial.biomass.nodes,
+            bus1=nodes + " mediumT industry",
+            bus2=spatial.co2.nodes,
+            bus3="co2 atmosphere",
+            carrier="solid biomass for mediumT industry CC",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=costs.at["direct firing solid fuels CC", "efficiency"],
+            capital_cost=costs.at["direct firing solid fuels CC", "fixed"]
+            * costs.at["direct firing solid fuels CC", "efficiency"]
+            + costs.at["biomass CHP capture", "fixed"]
+            * costs.at["solid biomass", "CO2 intensity"],
+            marginal_cost=costs.at["direct firing solid fuels CC", "VOM"]
+            + costs.at["biomass boiler", "pelletizing cost"],
+            efficiency2=costs.at["solid biomass", "CO2 intensity"]
+            * costs.at["biomass CHP capture", "capture_rate"],
+            efficiency3=-costs.at["solid biomass", "CO2 intensity"]
+            * costs.at["biomass CHP capture", "capture_rate"],
+            lifetime=costs.at["direct firing solid fuels CC", "lifetime"],
+        )
+
+    if options["industry_t"]["medium_T"]["methane"]:
+        # TODO: add electricity input from DEA and adapt VOM to exclude electricity cost!
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" gas for mediumT industry",
+            bus0=spatial.gas.nodes,
+            bus1=nodes + " mediumT industry",
+            bus2="co2 atmosphere",
+            carrier="gas for mediumT industry",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=costs.at["direct firing gas", "efficiency"],
+            efficiency2=costs.at["gas", "CO2 intensity"],
+            capital_cost=costs.at["direct firing gas", "fixed"]
+            * costs.at["direct firing gas", "efficiency"],
+            marginal_cost=costs.at["direct firing gas", "VOM"],
+            lifetime=costs.at["direct firing gas", "lifetime"],
+        )
+
+        eta = (
+            costs.at["direct firing gas", "efficiency"]
+            - costs.at["gas", "CO2 intensity"]
+            * costs.at["biomass CHP capture", "heat-input"]
+        )
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" gas for mediumT industry CC",
+            bus0=spatial.gas.nodes,
+            bus1=nodes + " mediumT industry",
+            bus2=spatial.co2.nodes,
+            bus3="co2 atmosphere",
+            carrier="gas for mediumT industry CC",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=eta,
+            efficiency2=costs.at["gas", "CO2 intensity"]
+            * costs.at["biomass CHP capture", "capture_rate"],
+            efficiency3=costs.at["gas", "CO2 intensity"]
+            * (1 - costs.at["biomass CHP capture", "capture_rate"]),
+            capital_cost=costs.at["direct firing gas CC", "fixed"]
+            * costs.at["direct firing gas CC", "efficiency"]
+            + costs.at["biomass CHP capture", "fixed"]
+            * costs.at["gas", "CO2 intensity"],
+            marginal_cost=costs.at["direct firing gas CC", "VOM"],
+            lifetime=costs.at["direct firing gas", "lifetime"],
+        )
+
+    if options["industry_t"]["medium_T"]["hydrogen"]:
+        # TODO: research cost of industrial H2 combustion, here set to 10x methane combustion
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" hydrogen for mediumT industry",
+            bus0=nodes + " H2",
+            bus1=nodes + " mediumT industry",
+            carrier="hydrogen for mediumT industry",
+            capital_cost=10
+            * costs.at["direct firing gas", "fixed"]
+            * costs.at["direct firing gas", "efficiency"],
+            marginal_cost=10 * costs.at["direct firing gas", "VOM"],
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=costs.at["direct firing gas", "efficiency"],
+        )
+
+
+def add_high_t_industry(n, nodes, industrial_demand, costs, must_run):
+    """
+    Add high temperature heat for industry.
+
+    Medium and high temperature heat demands are taken from today's
+    industry methane demand and split according to config setting.
+    """
+
+    logger.info("Add high temperature industry.")
+
+    n.madd("Bus", nodes + " highT industry", location=nodes, carrier="highT industry")
+
+    share_h = options["industry_t"]["share_high"]
+
+    n.madd(
+        "Load",
+        nodes,
+        suffix=" highT industry",
+        bus=nodes + " highT industry",
+        carrier="highT industry",
+        p_set=share_h * industrial_demand.loc[nodes, "methane"] / 8760.0,
+    )
+
+    if options["industry_t"]["high_T"]["methane"]:
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" gas for highT industry",
+            bus0=spatial.gas.nodes,
+            bus1=nodes + " highT industry",
+            bus2="co2 atmosphere",
+            carrier="gas for highT industry",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=costs.at["direct firing gas", "efficiency"],
+            efficiency2=costs.at["gas", "CO2 intensity"],
+            capital_cost=costs.at["direct firing gas", "fixed"]
+            * costs.at["direct firing gas", "efficiency"],
+            marginal_cost=costs.at["direct firing gas", "VOM"],
+            lifetime=costs.at["direct firing gas", "lifetime"],
+        )
+
+        eta = (
+            costs.at["direct firing gas", "efficiency"]
+            - costs.at["gas", "CO2 intensity"]
+            * costs.at["biomass CHP capture", "heat-input"]
+        )
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" gas for highT industry CC",
+            bus0=spatial.gas.nodes,
+            bus1=nodes + " highT industry",
+            bus2=spatial.co2.nodes,
+            bus3="co2 atmosphere",
+            carrier="gas for highT industry CC",
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=eta,
+            efficiency2=costs.at["gas", "CO2 intensity"]
+            * costs.at["biomass CHP capture", "capture_rate"],
+            efficiency3=costs.at["gas", "CO2 intensity"]
+            * (1 - costs.at["biomass CHP capture", "capture_rate"]),
+            capital_cost=costs.at["direct firing gas CC", "fixed"]
+            * costs.at["direct firing gas CC", "efficiency"]
+            + costs.at["biomass CHP capture", "fixed"]
+            * costs.at["gas", "CO2 intensity"],
+            marginal_cost=costs.at["direct firing gas CC", "VOM"],
+            lifetime=costs.at["direct firing gas", "lifetime"],
+        )
+
+    if options["industry_t"]["high_T"]["hydrogen"]:
+        # TODO: research cost of industrial H2 combustion, here set to 10x methane combustion
+        n.madd(
+            "Link",
+            nodes,
+            suffix=" hydrogen for highT industry",
+            bus0=nodes + " H2",
+            bus1=nodes + " highT industry",
+            carrier="hydrogen for highT industry",
+            capital_cost=10
+            * costs.at["direct firing gas", "fixed"]
+            * costs.at["direct firing gas", "efficiency"],
+            marginal_cost=10 * costs.at["direct firing gas", "VOM"],
+            p_nom_extendable=True,
+            p_min_pu=must_run,
+            efficiency=costs.at["direct firing gas", "efficiency"],
+            lifetime=costs.at["direct firing gas", "lifetime"],
+        )
+
+
+def add_exogen_t_industry(n, nodes, industrial_demand, costs):
+    """
+    Add heat demand for industry with exogenous supply.
+
+    low temperature is supplied by biomass medium and high temperature
+    is supplied by gas
+    """
 
     n.madd(
         "Bus",
@@ -2844,6 +3224,34 @@ def add_industry(n, costs):
         lifetime=costs.at["cement capture", "lifetime"],
     )
 
+
+def add_industry(n, costs):
+    logger.info("Add industrial demand")
+
+    nodes = pop_layout.index
+    nhours = n.snapshot_weightings.generators.sum()
+    nyears = nhours / 8760
+
+    # 1e6 to convert TWh to MWh
+    industrial_demand = (
+        pd.read_csv(snakemake.input.industrial_demand, index_col=0) * 1e6
+    ) * nyears
+
+    # endogenous heat supply for industry
+    if options["industry_t"]["endogen"]:
+        must_run = options["industry_t"]["must_run"]
+        logger.info(
+            f"Endogenise heat supply of industry with must run condition {must_run}"
+        )
+
+        add_low_t_industry(n, nodes, industrial_demand, costs, must_run)
+
+        add_medium_t_industry(n, nodes, industrial_demand, costs, must_run)
+
+        add_high_t_industry(n, nodes, industrial_demand, costs, must_run)
+    else:
+        add_exogen_t_industry(n, nodes, industrial_demand, costs)
+
     n.madd(
         "Load",
         nodes,