How carbon-cutting plans could be a lifeline for industry

4 min read published on September 7, 2022

It’s fair to say that British manufacturers are worried. MakeUK, the body representing the UK manufacturing sector, has warned that soaring energy costs could put 60% of manufacturers out of business. Our new Prime Minister is reportedly working on a £40 billion support package to help businesses with their energy costs. But the existing Industrial Decarbonisation Strategy, published in April 2021, may be the key to helping businesses survive the energy crisis. In five key areas, the strategy not only helps companies to cut carbon but puts them on a stronger footing to survive in today’s challenging environment.

Reducing gas dependence

The UK is one of the heaviest gas consumers in Europe, making us vulnerable to supply issues and soaring prices. It has been reported that possible gas shortages this winter could lead to “power rationing”, where heavy industrial users of gas are ordered to stop using it for certain periods.

Natural gas is also a key contributor to industry emissions. This is why the Industrial Decarbonisation Strategy, drawn up before the current energy crisis, sets out the aim to move away from gas to zero carbon fuels. The two main alternatives set out in the strategy are electrification and hydrogen. As government moves forward with the trials set out in the strategy, it will make a decision on which of the two will dominate.

Electrification

Modelling from the Department of Business, Energy and Industrial Strategy (BEIS) finds that electrification of industry could reduce emissions by between 5 and 13 million tonnes of carbon dioxide equivalent a year by 2050.

One of the biggest barriers to electrifying industry is the long replacement cycles for equipment. The strategy acknowledges that cement kilns can last 25-40 years, glass furnaces 12-20 years and blast furnaces 40-60 years. It is therefore essential that sites do not miss the opportunity to switch when their equipment is due to be replaced.

A business that misses the moment to electrify is locking itself into fossil fuel dependence for decades to come. This means struggling to stay competitive with other businesses that have seized the chance to modernise, as well as vulnerability to price spikes and a failure to act on emissions. The strategy acknowledges that timing of equipment upgrades is a big issue and commits government to working with industry on it.

Supporting low carbon hydrogen

The government is committed to developing a low carbon hydrogen economy. The Hydrogen Strategy, published in August 2021, sets out the details. The original target was to build 5GW of low-carbon hydrogen production capacity by 2030, but this has since been doubled to 10GW.

The Energy Security Strategy, published in April 2022, makes it clear that government views hydrogen as a way to decarbonise the hard-to-abate areas, such as industrial processes that require high-temperature furnace heat. The decarbonisation strategy explains that the government will be testing ways to use hydrogen as a fuel for industrial heating between 2020 and 2030. If this is successful, it is possible that there will be system changes such as repurposing the gas grid to carry green hydrogen.

The expectations are ambitious. According to the decarbonisation strategy, 24TWh of energy consumption could be switched from fossil fuels to hydrogen in the industrial clusters alone by 2050. In a scenario where hydrogen is more widely adopted and the infrastructure is in place, this could be as high as 86TWh. To put this in context, the UK’s entire consumption for 2020 was just under 304TWh, so hydrogen could potentially meet nearly 30% of the country’s energy needs.

Including materials

The focus for industry is often on Scope 1 and Scope 2 emissions: those from combusting fossil fuels on site and from purchased electricity. But energy use isn’t the only driver of industry emissions. The Ellen McArthur Foundation explains that greening energy supply and reducing demand can only address 55% of today’s emissions. The remaining 45% “come from the way we make, use, and dispose of products, materials, and food; they are from industry, agriculture, and land use.”

The Industrial Decarbonisation Strategy recognises the importance of embedded carbon in getting us to net zero. It commits to supporting resource efficiency and eventually moving towards a circular economy model where materials are reused and recycled. Research suggests the cost increase from a move towards lower-carbon materials will be minimal. The aim is for the UK to become a global leader in the production of low carbon goods, and to put mechanisms in place to encourage consumers to choose these goods.

Protecting competitiveness

The Industrial Decarbonisation Strategy acknowledges the need to keep UK businesses competitive while still becoming a climate leader. This means working with the fact that some green technologies are not yet mature enough to be adopted, many businesses are not yet ready to switch and some processes cannot be decarbonised because the emissions are produced from chemical reactions.

This is why the strategy sees carbon capture, utilisation and storage (CCUS) as “crucial to reaching net zero”. CCUS allows industry to capture a large proportion of unavoidable emissions and then store, transport or repurpose them rather than letting them reach the atmosphere. Transitioning to zero-carbon processes will be a long journey, and CCUS will do important work to cut emissions while we get there.

The strategy also acknowledges the risk of “carbon leakage”, whereby policies aimed at reducing emissions have the counterproductive effect of moving industry and investment abroad. It commits government to a policy which “provides the right long-term signals to incentivise abatement” but it is not yet clear what the details of this will be. MakeUK is calling for the abolition of Carbon Price Support, which it says would save medium users almost £90,000 a year. However, the government credits Carbon Price Support with moving the power sector away from coal, and independent research backs this up. So policy interventions are likely to come in another form.

The new Prime Minister faces serious challenges in supporting UK industry over the coming months. But the existing Industrial Decarbonisation Strategy sets out a blueprint that can help with many of the big decisions required.

Our free guide explains how energy-intensive businesses can protect themselves against spiralling energy costs and meet net zero goals. To learn more, download our guide to navigating the energy crisis.

 

Picture of Jaron Reddy - Business Lead UK

Published September 7, 2022

Jaron Reddy - Business Lead UK