The UK is doubling investment in clean energy industries to more than £30bn a year by 2035 under its 10-year industrial strategy that launches today [23 June].
But the initial 22-page document is light on specific details, beyond ‘prioritising investment’ for the so-called IS-8 categories (advanced manufacturing, defence, clean energy, digital and technology, creative, financial services, life sciences, and professional and business services).
The UK government claims the intervention will boosts 7,000 businesses that will see their electricity bills fall 25% from 2027, by up to £40 per megawatt hour.
In particular, electricity-intensive manufacturing businesses will be exempt from paying levies such as the renewables obligation, feed-in tariffs and the capacity market, helping level the playing field and make them more internationally competitive.
Eligibility and further details on the exemptions will be determined following consultation, which will be launched shortly.
The two principal clean energy funding vehicles will be the National Wealth Fund (£27.8bn) and British Business Bank (£25.6bn) with $1bn also allocated to the clean energy supply chain fund under GB Energy.
The export market for UK manufacturers in CCUS-enabled and electrolytic hydrogen production equipment could range from £800m-£2.2bn to 2030, potentially increasing to between £5.8-£9.8bn by 2050, according to an accompanying clean energy industries sector plan document.
Eleven projects from the first Hydrogen Allocation Round are set to commit over £400m of private capital investment upfront between 2024-2026, and 27 are shortlisted under the second allocation round.
Clare Jackson, CEO of Hydrogen UK, said the UK can, and should, lead the world in hydrogen, creating jobs and skills, driving economic growth, and lowering emissions.
“With hydrogen as a key pillar, the Industrial Strategy and Clean Energy Industries Sector Plan are welcome, positive steps forward to achieving that goal, with strong policy signals and funding to match,” she said.
“The Clean Energy Industries Sector Plan in particular acknowledges hydrogen’s economic and export potential, and we look forward to working with the government as it puts these strategies into practice.”
Olivia Powis, CEO of the Carbon Capture & Storage Association, said the industrial strategy builds on the positive momentum from the recent UK-EU Summit – alongside support confirmed in the Spending Review.
“Following these government commitments, a clear timetable for deployment is essential to secure investment, as well as investment in scaling up supply chains and growing the workforce needed to deliver at pace,” she said.
“With continued partnership between government and industry, CCUS can anchor a new era of sustainable industrial growth.”
Aniruddha Sharma, Chair and CEO of Carbon Clean, said the cost of electricity is a threat to the industrial businesses on which UK economic growth depends.
“It is right that today’s industrial strategy has those costs in its sights. Combined with the strengthened carbon pricing aligned with the EU Emissions Trading Scheme (ETS), these policies could significantly improve the investment environment for industrial decarbonisation projects – and help the UK remain a leader in carbon capture and other decarbonisation technologies,” he said.
The government is also increasing support for the most energy-intensive firms, such as steel, chemicals, and glass, by covering more of the electricity network charges they normally have to pay through the British Industry Supercharger.
These businesses currently get a 60% discount on those charges, but from 2026 that will increase to 90%.
Amid rising pressure on delivering Net Zero targets and meeting decarbonisation costs, the UK government clean power is “the only way to bring down bills for good by ending the UK’s dependency on volatile fossil fuel markets”.
Under the strategy, the government will provide a new connections accelerator service to streamline grid access for major investment projects.
Prime Minister Keir Starmer said, “This industrial strategy marks a turning point for Britain’s economy and a clear break from the short-termism and sticking plasters of the past.
Chancellor of the Exchequer Rachel Reeves said today’s industrial strategy would see billions of pounds for investment and cutting-edge tech, ease energy costs, and upskill the nation. “It will ensure the industries that make Britain great can thrive,” she said.
Energy Secretary Ed Miliband said for too long high electricity costs had held back British businesses, as a result of the UK’s reliance on gas sold on volatile international markets.
He said the UK aimed to use additional funds from the strengthening of UK carbon pricing, including as a result of linking with the EU carbon market.
“We have set out an intention to link emissions trading systems, as part of our new agreement with the European Union to support British businesses. Without an agreement to do this, British industry would have to pay the EU’s carbon tax,” he said.
“We intend to link our carbon pricing system with the EU’s, [but] we will ensure that money stays in the UK.”
The strategy aims to funnel more investment into UK regions to plug what it calls is a £90bn gap.
The industrial strategy also places a higher value on digital technologies and artificial intelligence, with £187m allocated to the TechFirst programme.
Rain Newton-Smith, Chief Executive of large-business trade group the CBI, said today’s announcement was a significant leap forward in the partnership between government and business.
“The CBI has long been advocating for a comprehensive industrial strategy, based on the UK’s USP – the sectors and markets where we can compete to win on the global stage,” she said.
“But the global race to attract investment will require a laser-like and unwavering focus on the UK’s overall competitiveness.”
To date, GB Energy has committed £180m to a solar project and £300m for wind turbine development.
Caroline Bragg, CEO at the Association of Decentralised Energy, said the strategy has set out some positive steps towards cutting electricity costs but details on funding remain vague, a concern heightened by the recent Spending Review.
“Only a small number of select businesses will qualify, sidelining thousands of businesses who desperately need support in the face of rising energy bills – particularly those businesses outside the government’s industrial clusters,” she said.
“Ministers need to wake up, we cannot build a secure, affordable, low-carbon energy system while actively discouraging all the businesses that use it from investing in their future.”