Press release: Aldersgate Group launches a new report with UCL researchers on low-cost green energy

Today, the Aldersgate Group launches a new report (1) with University College London (UCL) that outlines the outstanding policy measures required to deliver a decarbonised power system by 2035 and support the electrification of heavy industrial sectors such as steel, cement, glass and chemicals. Coming shortly after the Government’s Green Day announcements, the report’s findings are based on extensive engagement with businesses across the UK’s heavy industrial and power sectors.

Read the report

To decarbonise power and end industry’s reliance on costly fossil fuels, the UK must install around 200GW of low carbon energy infrastructure in the next 12 years (2). At the same time, a number of industrial processes will need to increasingly run on clean and affordable electricity if sectors such as steel are to decarbonise in the near future and remain competitive. However, the current pace of policy delivery is not yet enough to meet the scale of this twin challenge. This report recommends a range of measures to accelerate the decarbonisation of the power sector, facilitate the electrification of heavy industrial sectors and support the competitiveness of these sectors in the transition to net zero.

The report’s recommendations include significant planning reform to accelerate upgrades to the power grid, some adjustments to the Contract for Difference regime to facilitate continued investment in renewables, electricity market reforms to enable heavy industries to have direct access to growing volumes of low-cost renewable power, funding support to accelerate low carbon innovation in industry and a range of measures to grow the demand for low carbon industrial products and support the competitiveness of industry such as through mandatory product standards, green public procurement rules and a carbon border adjustment mechanism. The report was presented at an in-person event on Thursday 27th April, with keynote speeches from Minister of State for Energy Security and Net Zero Graham Stuart MP and Shadow Energy Minister Alan Whitehead MP.

To reach net zero by 2050, UK industrial emissions must fall by 70% by 2030 and 90% by 2040 (3). In many heavy industrial sectors, electrifying manufacturing processes that currently rely on fossil fuels is key to this. For other sectors where direct electrification is not yet feasible, electricity still has an important role to play in helping sectors decarbonise, by for instance supporting the production of green hydrogen or the operation of carbon capture and storage infrastructure. In both cases, access to high volumes of low carbon and economically affordable electricity will be vital to the successful decarbonisation of heavy industries and their ability to be competitive in the global transition to net zero emissions (and this in turn requires the full decarbonisation of the power sector as well market reforms to reduce the cost of electricity for heavy industries). Nick Molho, Executive Director of the Aldersgate Group, said:

To support the decarbonisation of the power sector by 2035, this new report calls for a range of measures including reforms to the grid connection process to cut waiting times of currently up to 13 years, a streamlined planning process to fast track low-carbon and network infrastructure projects, treating the construction of grid infrastructure as a national endeavour to boost domestic supply chains, and  adjustments to the successful Contracts for Difference (CfD) scheme to support greater locational diversity and improve operational signals.

To accelerate the electrification of heavy industries, the report calls for market reforms that will provide heavy industries with direct access to growing volumes of low-cost, low-carbon power. Key measures include creating a Green Power Pool that would provide industries such as steel with direct access to renewable power, supporting the growth of a standardised zero carbon Power Purchase Agreement markets to facilitate contracts between heavy industries and renewable generators, and taking a cautious approach to shifting policy costs away from electricity bills and towards gas bills.   

To ensure that UK producers can remain competitive internationally and shift to low carbon production, the report calls for a bold funding package for industrial decarbonisation to stimulate private co-investment. It also advocates for measures that will grow the demand for low carbon industrial products and provide a level playing field for domestic low carbon industries. These include the introduction of mandatory product standards, green public procurement rules and a carbon border adjustment mechanism (as outlined in previous Aldersgate Group reports (4)).

Taken together, these recommendations offer an opportunity for the UK to lead in the green heavy industries of the future and maximise the investment, job creation and levelling up opportunities that the net zero transition presents for the UK. Laith Whitwham, Senior Policy Officer at the Aldersgate Group, said: 

References

(1) Aldersgate Group and UCL ISR, A zero-carbon power grid and the electrification of heavy industry: how to deliver on a twin challenge (2023)

(20) Aldersgate Group and UCL ISR, Decarbonisation via Electrification of Energy Intensive Industry in the UK (2023)

(3) Climate Change Committee, Sixth Carbon Budget (2020)

(4) Aldersgate Group and Frontier Economics, How Product Standards Can Grow The Market For Low Carbon Industrial Products (2022)