Rosa Rotko, Project Director Energy Transformation, Mott MacDonald
Persistent high energy prices and frustration about slow connections in the UK is driving many large organisations to increase energy independence, through on-site generation, energy storage and micro-grids
Economic growth and decarbonising our energy systems are two major priorities of the UK government, and it’s clear that there is a strong link between the two.
High energy prices impact business confidence, contribute to inflation, and act as a brake on growth-producing investment in infrastructure and jobs. Some of the most energy intensive sectors – which are most affected by decarbonisation and energy policy – are also those that are key for growth.
The government is aware of this and wants to unlock more green growth. But what do the organisations with the largest energy bills – such as manufacturers, ports, airports, water companies and transport firms – think about these efforts?
To find out, we commissioned a survey of large energy users (organisations with energy bills of at least £100,000 a year) to explore the measures that they believe are necessary to stimulate growth.
One of the key issues identified by over half of respondents (58%) was the need for faster grid connections, with essential sectors being fast tracked. Connections to the transmission grid are often required for energy-intensive processes such as manufacturing, but companies can wait years to get connected, hindering growth and employment as well as decarbonisation efforts.
From the perspective of attracting foreign investment, this is a major drawback, especially when combined with the comparatively high electricity prices in the UK. If you were a foreign investor deciding where to locate a factory or data centre, why would you choose a country where it can take seven years to connect to the grid, and once you do, you pay the highest electricity prices in the developed world?
It’s a problem that is acknowledged by the Government. The Chancellor said on budget day that accelerating grid connections and building new network infrastructure was “central to unblocking private investment, delivering growth in clean energy industries and other growth sectors like AI, data centres and manufacturing.” Likewise, the Clean Power 2030 Action Plan includes connections reform to accelerate key industries, and the government expect that the reforms will result in faster connections for many demand customers. It remains to be seen what impact the connections reform process led by the new National Energy System Operator will have, but the reform is much needed.
What also shines through from our survey is that many large energy users are thinking about how to become more energy independent. Over six in ten (63%) are looking to invest in their own on-site generation and storage, cutting out the grid and becoming as self-sufficient as possible. They are also taking measures to cut energy use, such as energy efficiency in buildings (82%) and digital energy management solutions (39%).
Despite the challenges they face, an overwhelming 86% in our survey agreed or strongly agreed that the energy transition would benefit their sector, with 82% agreeing that it would benefit their business specifically. However, much more government action is required in certain sectors to realise the benefits of the transition.
64% of survey participants wanted to see more support for the deployment of low carbon fuels, such as hydrogen and sustainable aviation fuel. This reflects that while companies see the benefits of sustainable fuels across the economy, the private sector alone is unable to deliver the infrastructure to make the transition viable.
It is welcome that the Chancellor has recently announced further funding for the development of low carbon fuels in aviation, as well as £350m in support for energy intensive industries to implement energy efficiency, decarbonisation and technological projects.
The Government has also promised a new industrial strategy which should in theory support large businesses, but it is not yet clear how they will consider energy as part of this. It should be a crucial component.
Most of these organisations face a long and technically complicated path to achieve net zero, in a field (energy) that is not their core business. They need to be empowered to take bold investment decisions, with the right expert support, investment funding, regulation and policy backdrop.
The government needs to harness the general positivity of the businesses towards energy transition – and help them overcome many challenges in the current market and policy design. Perhaps this will then unlock the green growth that everybody is looking for.
This article appeared in the Jan/Feb 2025 issue of Energy Manager magazine. Subscribe here.