Government’s new Industrial Strategy touches on energy issues

Focused more widely on innovation and competitiveness, the government’s new Industrial Strategy white paper does address several specific energy-related issues, from battery technology and electric vehicles, to clean growth. Business Secretary Greg Clark launched the Industrial Strategy last November, setting out a long-term vision for how Britain can build on its economic strengths, address its productivity performance, embrace technological change and boost the earning power of people across the UK.

The government says it has committed to investing a further £725mn over the next three years in the Industrial Strategy Challenge Fund (ISCF). This will include £170mn to transform the construction sector and help create affordable places to live and work that are safer, healthier and use less energy, as well as up to £210mn for health system improvements.

The government previously committed £1bn to the first wave of Industrial Strategy Challenge Fund projects, including investing £246mn in next generation battery technology. And Prime Minister Theresa May had previously announced an ambition to increase investment in research and development (R&D), rising from 1.7% to 2.4% of GDP by 2027. 

The white paper also confirms that the government will be pressing ahead with a series of Sector Deals, with construction, life sciences, automotive and artificial intelligence (AI) the first to benefit from partnerships with government, backed by private sector co-investment. Work will continue on other transformative sector deals including, perhaps, some from the energy sector.

Prime Minister Theresa May said: ‘Our modern Industrial Strategy will shape a stronger and fairer economy for decades to come. It will help create the conditions where successful businesses can emerge and grow, and support these businesses in seizing the big opportunities of our time, such as artificial intelligence and big data, whilst also making sure our young people have the skills to take on the high-paid, high-skilled jobs this creates. As we leave the European Union and forge a new path for ourselves, we need to focus on building a better future for our country and all the people who live in it.’

Within the strategy, the government identified four ‘Grand Challenges’ – global trends that the UK must embrace: artificial intelligence, clean growth, an ageing society and the future of mobility. 

The new strategy was cautiously welcomed by the Energy Institute as a step forward in helping the UK’s energy systems to be fit for the future. CEO Louise Kingham said: ‘The strategy lays solid, economy-wide foundations and identifies the great challenges of our age. The energy sector has a defining role to play in making a success for the UK of clean growth and the mobility transformation in particular.’

Kingham continued: ‘Sector deals are still needed to up the pace of progress in technologies where the UK has advantage. We look forward to the results of discussions with key sectors such as nuclear, renewables and oil and gas as soon as possible.’ 

Meanwhile, a new report from a coalition of green groups warns that key UK business sectors will have to decarbonise their operations to stay competitive in the post-Brexit low carbon market.

Major UK export sectors, including the automotive and chemicals industries, risk losing out to foreign competition if they don’t adapt in time to fast rising global demand for low carbon goods and services, says the report: UK trade in a decarbonising world, from CAFOD, Christian Aid, RSPB, Green Alliance, Greenpeace and WWF.

The report identifies weaknesses in several sectors, including chemicals, where the UK is a strong exporter but highly energy intensive, contributing 13% of direct greenhouse gas emissions from manufacturing; and the expanding global electric vehicle (EV) market, in which the UK is currently lagging behind and importing more than it exports.

The government’s autumn budget statement disappointed many due to the lack of new initiatives on energy matters, apart from new tax breaks for some North Sea oil companies. In particular, the budget said there will be no new subsidies for low carbon energy until 2025 at the earliest.

The Chief Executive of trade association Energy UK, Lawrence Slade, spoke for many in saying: ‘Given the great advances the industry has made in delivering cleaner energy at the lowest cost to consumers, the lack of ambition from the government to build on this progress is disappointing… Over half of generation now comes from low carbon sources and the recent CfD auction showed how far the cost of offshore wind has fallen… Postponing further support for renewables until 2025 denies the opportunity for other technologies and projects to follow suit and prevents taxpayers from reaping the benefits of the cost reductions their funding has made possible.’