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The chemical and pharmaceutical industry is fundamental to modern society. With an immense variety of products, from vital medicines and foods, the construction of buildings, to transport and leisure, the industry truly does have an impact on virtually every aspect of our daily lives.
Read moreThe CIA has worked with the Department for Energy Security and Net Zero to help inform and develop one element of the Act, the ‘British Supercharger’ policy support package, to deliver a meaningful and permanent solution to the high electricity prices faced by domestic manufacturers.
At the time of writing, the UK has experienced the toughest week of winter temperatures for a very long time with a succession of hard overnight frosts, crisp blue skies and even snow falling both in the Highlands and as far south as Devon.
Incredibly, the markets and traded wholesale prices appear almost oblivious given the relatively high levels of heat demand, lack of wind, and a succession of days in which hundreds of thousands of homes have responded to the Electricity System Operator’s call to reduce demands in what would previously have been called ‘triad’ windows. £3 per kWh for each unit of deferred or negated demand is not a gamechanger to the average domestic or even industrial bill, but incredibly hundreds of thousands of households seem, at least in the early days of the scheme, to be playing their part and negating the need for marginal, highly polluting coal fired generation being deployed in what is almost certainty their final year of operation.
Recently we have also had one of the most far-reaching pieces of energy legislation enacted for a generation, the UK’s Energy Act. Trumpeted by government as something that will deliver cleaner, more affordable and secure energy for decades to come, it’s a far-reaching piece of legislation that could enable positive changes for our sector in a number of key areas.
CIA has worked with the Department for Energy Security and Net Zero to help inform and develop one element of the Act, the ‘British Supercharger’ policy support package, such that it delivers a meaningful and permanent solution to the high electricity prices faced by domestic manufacturers. The Supercharger is a long overdue and very welcome package of measures, helping us to better compete internationally. Critically, the Act provides the legislative framework to compensate, exempt and deliver a more balanced outcome for electro-intensive businesses. There are inevitably winners and losers, and much work to be done over the coming year or so but this government, and Parliament at large, have finally delivered the first and most critical step.
The Act also enables the business models, funding frameworks, regulation and licensing regimes intended to unlock the development of new largescale fusion, carbon capture use and storage, and a hydrogen production supply chain. Unlocking these sectors effectively means removing the economic barriers that have previously prevented market-based deployment. This is inevitably a good thing for those industries and sites whose future critically depends on these alternative energies. Yet it comes with a greater overall energy cost to be redistributed to consumers, requiring further deployment of the ‘supercharger’ framework to keep energy intensive sectors competitive.
What is abundantly clear, is that the electrification of heat and transport remains at the heart of the UK’s decarbonisation strategy necessitating not just a huge capital injection into renewable generation but critically, the rewiring of our onshore grids which are increasingly outdated. Removing bottlenecks, constraints and reenforcing capacity in both transmission and distribution comes at a huge cost and has a very long lead time under the current regulatory model.
Again, the Act is designed to overcome these barriers by moving the concept of the independent Electricity System Operator a step further. The strategy between now and 2050 is a whole energy and Future System Operator (FSO) who will, in time, absorb the gas system operator function and critically direct and award competitive contracts for network investments. Gone are the days of the incumbent system operator telling its incumbent transmission operator where to spend money, what to spend it on and then asking Ofgem for funding. Instead, the independent, cross-energy, FSO will look to work across the necessary decline of natural gas, take into account the role of hydrogen, and set a clear strategy for electrification. Then, using competitive forces, they will tender to market for solutions not just for network investment, but also the potential role of smart demand side response. Removing the geographic monopolies and opening up onshore competition is a major step forward, but throw in AI, smart appliances and demand side response, and the FSO has huge potential to deliver lower cost solutions while, hopefully, keeping the lights on.
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Alongside the 2024 Autumn Statement, the Department for Energy Security and Net Zero published a consultation on proposals for a new, six-year Climate Change Agreements (CCA) scheme, starting in 2025.
