What does the Industrial Strategy mean for the UK’s energy managers?

The white paper outlines the Government’s plan for improving the UK’s productivity rates, which are lagging behind other developed economies, such as the US. It focuses on five foundations of productivity, including innovation, people, infrastructure, places and business environment. The Government has committed to spending 2.4% of GDP on research and development by 2027, with investment being made in key areas such as artificial intelligence (AI), batteries and self-driving vehicles.

While the Industrial Strategy didn’t contain many energy commitments that weren’t already detailed in the Clean Growth Strategy, it did provide some further clarity for the energy industry. Here are the Government priorities that will affect energy managers across the UK:

Creating an energy system for the future

As the Industrial Strategy outlines plans for the UK to become world leaders in, “the development, manufacture and use of low carbon technologies, systems and services”, a key focus of the Industrial Strategy is the development of a smart energy system.

The Government are planning to launch a new programme, ‘Prospering from the energy revolution’, to create local smart energy systems that can deliver cheaper, cleaner energy across power, heating and transport. This will appease the 2,000 people that responded to the original green paper, who suggested that they take a whole systems approach to the energy market.

The Strategy also recognises the need to remodel the electricity grid to support increasing levels of renewable generation, and to explore new options to decarbonise heat. The Government commits to implementing its Smart Systems & Flexibility Plan by 2022, which will build on the rollout of smart meters and should enable our energy system to become more flexible.

As we move towards a low carbon economy, businesses of all shapes and sizes will feel the effects – find out what changes your business can expect to see by downloading our Clean Growth Strategy guides.

Minimising business energy costs

Businesses are likely to be happy to hear that the Strategy recognises the rising costs of energy for businesses, and proposes several actions that are aimed at reducing these costs now and in the future.

Eligible energy-intensive industries are already given substantial compensation for the cost of energy and climate policies, which will change from compensation to an exemption system in April 2018, and the Strategy outlines plans to widen the eligibility for the exemption schemes. They also plan to support businesses to become more energy efficient, with a goal to improve energy efficiency within businesses by at least 20 per cent by 2030. They will achieve this through schemes such as a proposed £18m programme that will back investment in the recovery and re-use of heat from industrial processes.

While this may be positive news for many, we’re concerned that the Government’s heavy focus on reducing costs for large energy intensive businesses could be to the detriment of medium-sized, non-energy-intensive businesses. We are also concerned that the uncertainty surrounding the targets and incentives for energy efficiency could have detrimental effects – see our statement for further information.

Developing new energy technologies

In their push to make the UK the world’s “most innovative nation by 2030”, the Government will be investing in new technologies that will transform the way we work.

As part of the Strategy, the Government have set four ‘Grand Challenges’ that are intended to put the UK at the forefront of future industries. One of these Grand Challenges is artificial intelligence (AI) and the data economy, with an industry-led AI Council and a new government Office for AI being set up to champion research and innovation in these areas. The energy sector has been marked as one of the priority areas for the Office of AI, which will encourage the rapid adoption of AI within the energy sector by working with those in the industry to develop innovative uses of AI, funded by the Industrial Strategy Challenge Fund.

The Strategy includes a pledge to invest £162m in innovation for low carbon industry, with battery technology emerging as a key area for investment. The first wave of the Challenge Fund supported the Faraday Battery Challenge, and future backing will include a £45m competition to establish a battery research centre.

Ultimately, the Government aims to ensure that clean technologies are cheaper than high carbon alternatives. This could be a great opportunity for energy managers to invest in increasingly economically viable technologies– find out more about the technologies that could benefit your business.

Decarbonising our transportation

With transportation accounting for around 40% of the UK’s total final energy use, it’s unsurprising that there is a major focus on electrifying our vehicles within the Strategy.

In last week’s Budget, the Government pledged £400m to an electric vehicle (EV) charging infrastructure fund, with a further £100m committed to extending the plug-in car grant. The Strategy contains further details on how they will embrace the EV revolution, including a pledge to ensure 25% of cars in the central government fleets are electric by 2022. EV investment will also be boosted by the additional £31bn that will go to the National Productivity Fund, which backs funding in transport, housing and our digital infrastructure. The zero emission road transport strategy, which is expect to be published in the coming months, will provide us with deeper insight into the future of EVs.

As the EV infrastructure improves and we move closer to the 2040 ban on new petrol and diesel vehicles, there will be increasing pressure on businesses to cater for staff and customers that have EVs and electrify their fleets. Today’s energy managers are likely to find that EVs fall under their remit in the near future, and we’d recommend getting ahead of the curve – find out more about how your role will change over the next decade in our Future Utilities Manager report.

Any questions?

Whether you’re concerned about rising energy costs, or wondering whether you should invest in electric vehicle charging points, you could benefit from talking to industry insiders. At Inenco, our team of experts have the experience and insider knowledge you need to ensure your energy strategy is optimal – give us a call today on 08451 46 36 26 or email enquiries@inenco.com.