Delivering affordable energy and clean growth - what needs to happen next?

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Senior Energy & Environment Policy Adviser

For a few years, some have seen industrial success and delivering a green transition at odds with each other. The Government’s Industrial Strategy Green Paper has shown a critical shift, with one of its 10 key pillars being ‘Delivering affordable energy and clean growth’, to keep costs down for businesses and secure the benefits of the transition to a low-carbon economy.  Why is this a critical shift?  It rightly recognises that delivering a low carbon economy is not just about ‘green’ electricity, but also about ensuring that UK businesses are part of delivering low carbon solutions, and that they are supported to decarbonise themselves, affordably and whilst maintaining international competitiveness.

So what is the Government proposing and what else needs to be done to support UK competitiveness?

We were reassured to see the Government’s recognition that UK industrial electricity prices are much higher than other European countries.  In fact, when you look at European statistics and how UK electricity prices have fared over the past few years the picture is striking, as can be seen below.  This is why the Government’s proposed long-term roadmap to minimise business energy costs is so important.  But minimising costs is not enough, it must be about access to affordable and lowest cost energy supplies for the UK economy, as this is fundamental to achieve UK competitiveness.  

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On decarbonisation, the IS also highlights a review of opportunities to reduce the cost of achieving decarbonisation of power and industry – focusing on energy efficiency, network costs and offshore wind. 

We have seen companies increasingly concerned about ever growing UK network costs over the past few years, which BEIS recognise as high compared to EU competitors.  It is becoming even more critical that Government takes action to ensure that networks are developed and paid for in a sustainable and affordable way for all users.

On energy efficiency, we see a wide range of barriers and opportunities, varying from SME manufacturers to the largest industrials. On the one hand, companies that are highly exposed to international competition have to invest in operational improvements as part of business as usual.  On the other, there are still cost-effective opportunities available for other companies, as found in our Upgrading Power report, but face internal competition for investment in other areas that can allow them to compete more effectively.  Government can play an important role in creating incentives to unlock further opportunities for UK companies.

Remember, the low carbon transition is not just about low carbon energy!

This Green Paper still has a strong focus on how to deliver renewable energy technologies at lowest cost. We must see Government intentions re-focused on how to deliver a decarbonised, resource efficient UK economy and industrial base, in the most sustainable and affordable way.  This shift would support industrial competitiveness, and ensure that the lowest cost opportunities to decrease the UK’s carbon footprint are pursued on a level playing field to the energy sector, particularly where multiple sectors and parts of the economy can benefit from infrastructure and services to lower their footprint. 

This is why funding for Climate, Energy and Environment projects beyond the energy sector needs to be brought forward. But Government must also bear in mind that some industries require breakthrough technologies that are currently not available at affordable cost.  Companies must be able to continue to contribute to the UK’s success until they are available, and supported to transition.

UK manufacturers have a great opportunity to be part of delivering the UK’s low carbon agenda. Government must look beyond just the energy sector to ensure that our industrial base is positioned to deliver the UK’s ambitions, and supported to take on new innovation and commercialization activities in the coming decades in order to continue to be part of the UK’s low carbon future.

Tell us what you think: What do you want to see the Government prioritise to support manufacturers in the low carbon transition?

Contact Dipali Raniga, Senior Energy & Environment Policy Adviser

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