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Government must do more to help heavy industry decarbonise

GridBeyond works with some of the metal industry’s key metal manufacturing businesses

The UK’s Hydrogen Strategy and updated Industrial Strategy do not go far enough in supporting industry to reach net-zero, the Aldersgate Group has warned.

On 9 September, the think tank launched two publications warning that the government is not providing adequate support for large industry to decarbonise.

Accelerating the decarbonisation of industrial clusters and dispersed sites, authored by Frontier Economics, called for clarity on the decarbonisation of industrial sites outside of business parks and clusters. It noted that cement, glass and ceramics facilities are more likely to operate dispersed sites than sectors such as steel and chemicals. As these industries are collectively responsible for some 10% of global annual emissions, a more detailed policy framework is needed to drive low-carbon investment.

The strategy paper urged the government to provide certainty to industry on the future availability of low-carbon hydrogen, biomass, and carbon capture usage and storage, by using contracts for differences and government matchmaking. The government should also provide targeted UK ETS free allowances or support through Carbon Border Adjustment Mechanisms to prevent unintended impacts during the transition to low carbon business models.

The report also said it is crucial that the government works closely with Local Enterprise Partnerships, local authorities and devolved governments to design local infrastructure plans to help connect dispersed industries to the infrastructure being deployed in clusters.

Delivering competitive industrial electricity prices in an era of transition, written by University College London, noted that the UK has significantly higher industrial electricity prices than other European countries. With electrification being the key to industrial decarbonisation, delivering low-cost and low-carbon electricity is essential. Seizing the opportunity provided by the rapidly declining policy costs of renewables must be a priority.

Key recommendations included the government maintaining an efficient framework to accelerate investment in the cheapest forms of mature renewable energy such as onshore wind, accompanied by a predictable, rising carbon price to reduce investor risk.

The report also calls maintaining international interconnector growth post-Brexit, assessing how policy costs can be transferred from electricity to gas over time, and improving scrutiny and transparency of reported electricity price data.

The reports have been welcomed by businesses including Tarmac, Liberty Steel, Cemex and Johnson Matthey.

Mark Davis, GridBeyond’s Managing Director UK & Ireland, said:

“There is strong appetite across heavy industrial sectors to accelerate emission cuts and seize the potential opportunities created by the net zero transition. But it is important to ensure energy-intensive industries are supported in their journey.

“It is critical for the government to ensure a clear, long-term policy architecture is in place to encourage investment in increasingly subsidy-free renewables and grid interconnection, and effective and efficient markets in electricity trade and system balancing.”

The government is expected to publish a Net-Zero Strategy ahead of COP26 in November. This policy package will round up key sector-specific route maps included in other strategy documents.

 

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