Industrial strategy: government to focus on minimising business energy costs

24th January 2017

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Ronald Chan

The government is to investigate how to reduce the cost of decarbonisation in the power and industrial sectors, it announced yesterday.

The review will consider how best to support improvements in energy efficiency, whether existing measures to support further cost reductions in offshore wind are viable, and how the government and regulator Ofgem can ensure markets and networks are as efficient as possible in a low-carbon system.

Plans for the review were included in the green paper on a new industrial strategy, published yesterday by the Department for Business, Energy and Industrial Strategy (BEIS). The strategy comprises ten ‘pillars’, one of which is to deliver affordable energy and clean growth.

The green paper states that the concept of an energy ‘trilemma’ – cutting carbon emissions, energy affordability and securing industrial opportunities of energy innovation – needs updating.

Acting on climate change is a ‘settled policy position’, the continuation of which will be set out in the forthcoming emissions reduction plan, it says. The paper stresses that the remaining two elements of the trilemma need to be given higher priority, however.

Although the government has recently played a prominent role in introducing subsidies to encourage renewable energy, the paper argues that the private sector ‘will ultimately be the driving force behind the low carbon economy’.

‘While there is a clear role for the government in energy policy, markets also are crucial in investing and spreading new techniques for saving energy, new and more efficient means of energy generation and storage, and new ways to finance clean technologies,’ it says.

On average, energy represents 3% of UK business expenditure. This figure rises to more than 10% in 15 sectors, including steel, chemicals, glassmaking and ceramics.

Increased efficiency of material use across the supply chain could also drive down energy costs, the BEIS said. It plans to explore opportunities to reduce raw material demand and waste in energy and resource systems, and to promote well-functioning markets for secondary materials and new disruptive business models to challenge inefficient practice.

This work will tie in with the government’s 25-year environment plan, the department said. It is also considering the case for a research institution to act as a focal point for work on battery technology, energy storage and grid technology.

Publication of the industrial strategy was generally welcomed by business and industry groups. Nick Molho, executive director of the Aldersgate Group, said: ‘The opportunities arising from the low-carbon economy extend beyond energy innovation into a wide range of highly productive sectors. This part of the economy was already employing 447,500 people in 2014, with a turnover in excess of £83bn.’

The global transition to a decarbonised economy led by countries such as China, India and Brazil offers significant opportunities for the UK in areas such as ultra-low emission vehicles, offshore wind, the built environment and ICT, he added.

The Energy and Climate Intelligence Unit (ECIU) described the strategy’s approach to energy and low-carbon technology as ‘evolution not revolution’. Director Richard Black said the UK was in competition with countries that are also looking to exploit the opportunities in the low-carbon transition.

‘Ministers’ next act should be to respond to the consultation with a firm, unequivocal statement that they are committed to the smart energy revolution, and so restore to investors some of the confidence lost under the previous government,’ he said.

Waste trade body, the Energy Services Association, and waste operator Suez welcomed the focus on resource efficiency. David-Palmer Jones, chief executive of Suez, said: ‘We will work with government to ensure waste is fully treated as a resource for both secondary raw materials and energy.’

The industrial strategy also covers skills. Proposals include building a new system of technical education to benefit the 50% of young people who do not go to university, and aims to improve science, technology, engineering and math skills, as well as digital competence.

IEMA welcomed the focus on skills, but warned that the strategy must long term. Martin Baxter, chief policy advisor, said the strategy presented an opportunity to drive the UK’s skills profile and commitment to sustainability outside the EU.


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