Demystifying the government’s net zero plans for businesses

Since the UK government announced its commitment to reaching net zero by 2050, businesses have been awaiting a clear plan of how this will be achieved – and more information around the part they will be expected to play.

To help provide more clarity, we asked Arjan Geveke, Assistant Director of Energy Policy at the Department for Business, Energy & Industrial Strategy (BEIS), to expand on some of the areas many businesses are currently keen to understand.

Q: Please can you summarise in brief the key points for businesses from the recent flurry of government announcements?
AG: Certainly. The two main documents of interest to business are:

1. The Energy White Paper
This builds on the Prime Minister’s Ten Point Plan, providing a long-term strategic vision for the energy system consistent with reaching net zero emissions by 2050. We estimate the measures in this white paper could reduce emissions across power, industry and buildings by up to 230-million tonnes in the period to 2032.

2. Industrial Decarbonisation Strategy
This is designed to show how the UK can have a thriving industrial sector aligned with our net zero target, without pushing emissions and business abroad. It sets out how we expect decarbonisation will happen through the sectors, and the role government will take in supporting and enabling this transition. It also sets out policy principles to drive decarbonisation via addressing barriers, mitigating carbon leakage risks and playing a key
role in the delivery of large infrastructure projects.

Q: What’s still to come?
AG: In the run up to the climate change summit COP26, which we are hosting in Glasgow in November, we will publish a number of sectoral strategies, such as a Building and Heat Strategy, and our overarching Net Zero Strategy. These will set out how the government intends to observe UK carbon budgets.

Q: In terms of how this translates into year-by-year activity, can you give businesses more of an idea of actions and timelines?
AG: The following road map to net zero sets out our current thinking.

Q: When it comes to policies to support businesses in getting to net zero, what sort of things might we see?
AG: We are looking at a variety of possible policy approaches, and these may change depending on how things develop. Our current approach in the case of large industries is to demonstrate and deploy carbon capture, use and storage (CCUS) and/or hydrogen technologies in industrial clusters. We will also work on product standards for industrial products. For other businesses, such as the commercial sector, the focus will be on strengthening energy efficiency incentives, smart technology deployment and building standards. These will all continue to be underpinned by carbon pricing.

Alongside this, we need to look at a mechanism that mitigates the risk of carbon leakage, whereby industries or processes might relocate to countries without the same net zero ambitions or policies. To support this, we are currently looking at a mixture of climate diplomacy, improving productivity and how we treat imports, while continuing the various relief schemes for eligible energy intensive industries.

Finally, to facilitate the UK’s net zero transition, we are looking at a wider policy framework to support each sector and address any further barriers. This will look at regulation to improve resource efficiency, provide targeted assistance for innovation and complex sites and also look at ensuring we develop the skills we need to achieve the transition.

Q: In terms of how this translates into actual activity, what might businesses expect to
see?
AG: We are currently looking at a number of steps across three key areas. Obviously, a lot depends on how new technologies develop and also new innovations coming to the fore, so these actions will need to be reviewed. But currently, our thinking is focussing on:

1. Efficiency
• Development of industrial digital technologies (such as automation using artificial intelligence)
• Increased reuse, recycling and substitution of materials within industry
• All sites adopting energy efficiency technologies already available in the market, with low payback times
• The widespread implementation of improved energy management systems
• Smart metering being widely adopted in industry
• Heat recovery maximised in sites operating with high temperatures

2. Carbon Capture, Utilisation &; Storage (CCUS)
• Build a CCUS network infrastructure in two clusters by the mid 2020s
• Expand this to two additional clusters by 2030
• Establish CCUS networks in further clusters and beyond
• Demonstration of carbon capture across a range of industries

3. Fuel switching
• Testing hydrogen as fuel for heating in industrial processes (now to 2030)
• Widespread fuel switching (chosen technology will depend on various factors) across clusters (2025-2035)
• Fuel switching extends to dispersed sites (hydrogen versus electrification depends on systems changes such as repurposing the gas grid)
• Installation of commercially-ready electrification options in low-temperature applications (now)
• Development of high-temperature electrification technologies (now)

Q: When it comes to any other activity, what might we expect to see?
AG: There are a number of things already announced and some additional measures we are looking at introducing. For example, the Treasury is rebalancing Climate Change Levy rates to reflect the UK’s changing energy mix, with electricity rates frozen while those on gas increase in increments until we reach a 1:1 ratio for both fuels by April 2025. Alongside this, Climate Change Agreements, which provide incentives to large consumers committing to energy efficiency measures, have been extended until 2025. Then we have a consultation on the Energy Saving Opportunities Scheme (ESOS) coming up shortly. I also mentioned the Building and Heat Strategy earlier, that will be published later this year. And we are implementing minimum energy efficiency standards for the non-domestic private rented sector. We’ve also recently been consulting on introducing an energy efficiency scheme for SMEs. So lots going on!

You can also see this information presented by Arjan as part of our recent Energy Insight webinar, along with the latest industry charging updates from our panel of experts. If you’d like to find out how energy policy is likely to impact your business, please get in touch via info@npowerbusinesssolutions.com.  Or contact your Client Lead if you’re an existing customer.