UKERC Response to the BEIS Consultation Designing the Industrial Energy Transformation Fund

13 Jun 2019

Professor Peter Taylor, University of Leeds and Co-Director, UKERC

Professor Jim Watson, Director, UKERC

 

This summary touches on a number of introductory points about the need for industrial decarbonisation and the role of government policy. Download the full submission to read the response to the specific questions posed by the consultation.

A holistic approach

We welcome the announcement of the Industrial Energy Transformation Fund as part of the Government’s plans for boosting the productivity of the UK and maximising the advantages for UK industry of the global shift to clean growth.

We support the mission-oriented approach of the Industrial Strategy and the inclusion of a specific grand challenge on clean growth. Delivering this challenge will require a holistic approach from government that includes the following objectives (Busch et al., 2018)

  • innovation in low carbon technologies, business models and practices;
  • managing energy demand; and
  • enabling systemic change.

The first of these objectives points to the need for industrial innovation to go beyond the purely technical and to encompass new ways of doing business and capturing value. The second includes the need for greater industrial energy efficiency, but goes beyond this to include the much larger opportunities that could be realised by changing the demand for the goods and services produced by industry (Scott et al., 2019). The third necessitates an economy-wide approach to decarbonisation in the UK to maximise synergies between sectors (e.g. increased use by industry of decarbonised electricity), while ensuring that action on climate change does not lead to carbon leakage outside the UK.

 

Realising the transition to a net zero economy

The recent analysis by the Committee for Climate Change of the feasibility of a net-zero emission target (CCC, 2019) finds that the scope for decarbonising industry at reasonable cost is greater than their previous analysis had suggested. The extent of decarbonisation envisaged by the CCC is also much larger than the plans laid out in the Clean Growth Strategy.

The CCC analysis identifies that by 2050 most industrial process and activities could reduce emissions close to zero, but that this would need to be part of a set of wider energy system changes. This includes widespread use of hydrogen and CCS, and substantially increased resource efficiency. The CCC analysis includes a greater role of material efficiency and circular economy approaches to reducing emissions, and builds in assumptions from scenarios developed by the University of Leeds (Scott et al, 2019).

The IETF has the potential to play a significant role in realising this transition to a net zero economy. The focus on support for innovation for industry decarbonisation is particularly important. When developing and implementing the Fund, there are a number of general issues that BEIS could consider. In UKERC’s recent evidence to the House of Commons Science and Technology Committee on innovation for reducing emissions, we highlighted four issues in particular (Watson and Gross, 2018):

Scale of funding

UK government funding for low carbon innovation has increased in recent years. The new Fund, together with complementary initiatives such as the Industrial Clusters Mission, will help to address the under-funding of innovation for industry decarbonisation. However, it is very likely that further public funding will be required to scale up and deploy the innovations required to reach net zero.

Timescales of innovation

A recent UKERC systematic review showed that innovation in the energy sector tends to take a long time. The timescales from early stage R&D to significant commercial deployment typically take 3 – 4 decades for energy sector technologies (Gross et al, 2018). This analysis suggests that it would not be wise to rely on entirely new technology breakthroughs to help meet carbon budgets and targets over the next few decades.

Systems as well as technologies

Much of the discussion on low carbon innovation tends to focus on individual technologies. Whilst this is clearly important, a focus on systems that combines technologies with new business models will also be crucial – particularly in the industrial sector. The design of innovation programmes should therefore include support for such system innovation in their scope.

Taking uncertainty into account

Uncertainty is inherent in the innovation process – and this is part of the rationale for public R&D funding. This means that some low carbon technologies supported by public programmes will be successful, whilst others will fail to realise their potential. It is therefore important that the IETF supports a portfolio of technologies and projects, and includes space for taking risks. This also means that the IETF should have a strong evaluation component.

 

Download the full response here