Assessing how decarbonisation is supported by the UK’s new industrial strategy

While many EiD readers are increasingly focusing on the clean energy package from the European Commission, there are other important policy developments happening in member states. This week the UK government published its industrial strategy. Paul Noble, a principle consultant in DNV GL’s Sustainable Energy Use Team, has written his views on the strategy in a post for EiD. Paul led a series of roadmaps on how to Decarbonise UK’s Energy Intensive Industry and also works on DNV GL’s Industrial Energy Efficiency projects in Europe. EiD would like to hear your views.

 

An approach to industrial strategy from the UK: can it deliver low carbon energy-intensive industry?

Since 2013, DNV GL has been working with the UK Government and Industry on how to competitively decarbonise key energy intensive industrial sectors. Since the Brexit vote, the new administration led by Theresa May has been working on a new Industrial Strategy and on Monday a Green Paper (or discussion paper) was published. This gives DNV GL the opportunity to assess how decarbonisation might be supported by the proposed new approach to UK industry.

Our view is that the draft strategy is encouraging but also tentative. Encouraging for its holistic approach with its focus on diverse subjects such as affordable energy, innovation, procurement (including resources and materials), skills, sector deals and regional clusters. Tentative because in some areas, such as improving energy efficiency, the proposals call for further reviews and analysis when funding and action could have been taken now. For other issues, such as carbon capture, the plan is silent and decisions have again been delayed.

With a foreword from Theresa May, the UK Prime Minister, the key priorities go way beyond decarbonising energy intensive industry: for example spreading wealth and opportunity across the country more evenly and improving productivity.

Ten pillars have been identified to drive forward the industrial strategy across the entire economy: (1) science, research and innovation; (2) skills; (3) infrastructure; (4) business growth and investment; (5) procurement; (6) trade and investment; (7) affordable energy; (8) sectoral policies; (9) driving growth across the whole country; and (10) creating the right institutions to bring together sectors and places.

The pillars present a mix of strategy and discussion with plans for further analysis and review, hints of future priority areas and some funding commitments. It aims to ‘provoke’ stakeholders to take action and then if government agrees it might decide to provide support. For example, ‘sector deals’ are on offer as a challenge to industry to transform and upgrade their sectors. The success of such deals will depend upon how much ambition both government and industry are prepared to show and what resources will be committed.

Although it is welcome to see the emergence of a joined-up approach, there is going to need to be significantly more development of the 10 pillars to deliver the strategy. For example, work must be joined up and committed, this will need key players – including government departments – to deliver more joined-up action partly through committing more resources than has been the case to date. Just as crucial, industry needs to engage more effectively, this is a challenge as many companies don’t have the resources or finances to tackle even some of the short-term opportunities for improvement. It is also not clear if government understands how complex supply chains are and how interconnected we are with Europe in business terms.

The Government has maintained its commitment to meeting the legally-binding emissions reduction targets though there is little mention of energy intensive industries and no mention of carbon capture. An Emissions Reduction Plan, has yet to be completed – the extent to which this plan reinforces the industrial strategy will be a key test.

It is welcome to see that science, research and innovation will be a key part of the strategy. Of interest to energy intensive industry are ‘smart and clean energy technologies (such as storage and demand response grid technologies), manufacturing processes and materials of the future and biotechnology’. It is important the manufacturing industry (and not just transport) is given the opportunity to develop and benefit from demand side response and energy storage in conjunction with increasing renewables – industry is well-placed to play its part in addressing UK-side energy network issues but a joined-up approach will be required. Future research areas should also focus on low carbon and resource efficient processes (e.g. low cost, flexible, highly efficient electrolysis) as well as innovative use of waste materials.

 

Improvements in skills are also to be welcomed. For example, much could be achieved if government and industry could work together to deliver basic energy efficiency such as improved maintenance, process controls, equipment, materials and systems. Energy intensive industry needs support to fund these opportunities and the strategy will need to tackle this question.

Procurement, supply chains and materials are key areas for energy intensive industry. With a focus on sustainability, innovative processes and new codes of practice by public and private sector buyers, there are many opportunities that could speed up and catalyse decarbonisation. Within the energy pillar, the strategy states: ‘the Government will work with stakeholders to explore opportunities to reduce raw material demand and waste in our energy and resource systems, and to promote well-functioning markets for secondary materials, and new disruptive business models that challenge inefficient practice’. Although this statement is welcomed, when finalised, the strategy must provide more details on how it will deliver – there is a key link here with procurement and supply chains which has so far been missed.

The strategy talks about business growth noting UK under-investment in fixed capital such as plant and machinery. Why not deliver an energy efficiency fund and utility obligation schemes? This would support UK manufacturing business in becoming more efficient, competitive and reducing carbon emissions.

In some places, it is not entirely clear how the words will deliver improvement action (and if decisions are being delayed). For example, the strategy states that ‘the Government will commission a review of the opportunities to reduce the cost of achieving our decarbonisation goals in the power and industrial sectors… including how best to support greater energy efficiency, … how the Government can best work with Ofgem to ensure markets and networks operate as efficiently as possible in a low carbon system.’

Finally, for the aspiration to ‘drive growth across the whole economy’, opportunities are missed to explain how more ambition on industrial clusters and innovative sharing of materials, waste, processes, energy can deliver multiple benefits to lower emissions, increase productivity and sustainable growth.

So, in conclusion, we welcome this draft strategy but call for more serious and committed focus on action for improved energy efficiency and delivering sustainable industry by harnessing the key links between materials, processes, clean energy, procurement and supply chains. To realise the ambition, everyone needs to up their game: National and Local Government, Industry, Utilities, Universities, Schools, Regulators, Financiers and Innovators.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s