The UK’s Industrial Decarbonisation Strategy is a world-first, and also the first significant announcement to be made by the Government since its 2020 Energy White Paper, which was published in December. It’s a pioneering move, well timed to demonstrate the UK’s climate leadership ambitions in advance of its presidency of COP26 this November and has been generally well accepted by industry stakeholders. The Strategy represents a clear signal that our nation’s policymakers are taking the 2050 net zero goal seriously, but what does it really mean for manufacturing – and what actions can businesses take now to prepare for the changes ahead?
A strong step in the right direction
Decarbonising heavy industry is never going to be a straightforward task. While the results of our recent research1 paint a picture of an industry feeling optimistic about decarbonisation; with 80 percent of manufacturers believing their business will benefit from the changes needed to achieve net zero, it also reveals an underlying uncertainty about where funding will come from, whether the right incentives will be offered, and whether the Government will provide industry with a clear roadmap to follow. Less than half (43 percent) of manufacturers felt confident that the Government will develop a realistic plan to achieve net zero emissions by 2050.
At this point, the Industrial Decarbonisation Strategy doesn’t attempt to provide a complete or comprehensive roadmap to net zero. What it does do is start to define some of the actions needed to turn the net zero ambition into a reality. With a focus on first laying the foundations for delivering net zero, by getting investors and consumers to prioritize low carbon actions, it then sets out some of the ways in which industrial transformation will be supported. Importantly, the Strategy is also explicit about the Government’s intention to work closely with industry sectors and businesses to remove barriers and ensure the industry can continue to ‘flourish’, without pushing emissions or operations abroad. This emphasis on collaboration has been welcomed by industry body Make UK, which responded to the Strategy positively, saying that ‘the manufacturing sector is up to the challenge and keen to get started on the right footing’.
Overall, the Industrial Decarbonisation Strategy is a strong step in the right direction. Many manufacturing businesses are already heeding its messages and considering how to adapt their future plans. We’ll aim to work with them over the coming months to make sure their views are represented as more detailed policy is shaped. It will be interesting to see what the forthcoming Heat and Buildings Strategy, Net Zero Review and Net Zero Strategy bring in terms of additional support and clarity.
A focus on innovation and technology
Measures introduced by the Industrial Decarbonisation Strategy include using carbon pricing to send a clear market signal. This long-anticipated move will help to encourage low-carbon investment and will provide some certainty for the UK market, while also helping to keep manufacturing businesses competitive on the international stage. In addition to this, the Strategy lays out an intention to create a policy framework that encourages fuel switching and promises support for innovation in low-carbon alternatives to fossil fuels, such as biomass and hydrogen.
Interestingly, the Strategy also declares an intention to support deployment of Carbon Capture Usage and Storage (CCUS) and places a significant reliance on this new technology. The ambitious vision set out by the Strategy, of reducing carbon emissions in the sector by at least two-thirds by 2035 and by at least 90 percent by 2050, depends on an ability to capture at least three megatons of CO2 within industry each year by 2030. With annual carbon capture levels currently negligible in the industry, this is a major signal towards the use of CCUS over the coming years.
Steps your business can take now
For now, exactly how industrial decarbonisation will be achieved remains uncertain. However, there are actions manufacturers can take now. In the short to medium term, taking a deeper look at energy consumption or investing in on-site generation projects could provide the key to significant cost and carbon savings. Any action taken now will also put manufacturers in a good position to maximize the opportunities on their ongoing road to net zero.
One of the key actions we recommend all manufacturers to take is to get a really good understanding of their energy data. Insight into exactly how and where energy is used – and wasted – across all sites and assets helps businesses to identify where improvements can be made, and can empower them to take the actions needed to give operational productivity a valuable boost. In fact, investment in energy efficiency is considered to be a ‘no regrets’ step towards decarbonisation, and may even provide a greater return than expected – allowing manufacturers to start planning for larger scale energy projects such as onsite generation.
When it comes to on-site generation, the options are continually expanding and while CCUS and hydrogen technologies are still in the relatively early stages of development, on-site generation through CHP, wind, solar photovoltaic (PV) or biomass technologies can already deliver meaningful cost and carbon savings. On-site generation can also boost operational resilience by reducing reliance on the grid and increasing self-sufficiency.
The benefits of any action or investment will of course vary from one organization to another. Manufacturers need to make sure their planned projects are carefully scoped to ensure they get the results they need. Even the switch to renewable energy, seemingly the simplest step towards decarbonisation, might create different challenges for different businesses. For some, energy requirements might be best met through a supply contract combined with on-site generation, while others would benefit from a power purchase agreement (PPA) with a local renewables generator.
Manufacturing businesses should be able to call on their energy suppliers and solutions providers for help and support when they’re considering their options for lowering energy costs and carbon. The road to net zero will look quite different for every manufacturing organization, but if we want to achieve the Green Industrial Revolution and successfully decarbonise UK industry, it’s a journey we should all take together.
Anthony Ainsworth is Chief Operating Officer (COO), Industrial and Commercial (I&C) Energy Sales and Solutions at E.ON UK and npower Business Solutions (nBS). npower Business Solutions works with many manufacturers to help them meet ambitious carbon reduction targets through implementing comprehensive energy management strategies. By using a management consultancy approach, it can scope, design and deliver a roadmap to net zero through the wide range of products and services it has available including green electricity supply, generation services and Demand Side Response (DSR), data services and energy management systems.