Chemistry needs energy and the cost of energy is a challenge for UK manufacturers. Our sector competes in the global market but faces disproportionately high and rising energy costs, which are eroding our international competitiveness. Paradoxically, our success in deploying renewable electricity means we now face higher prices than our industrial competitors. This price disparity represents not the wholesale cost of electricity, but the pass-through of cost of: 1) carbon pricing applied to thermal electricity generation; 2) subsidies for renewable power; 3) increases in our network capacity, to balance intermittent and distributed renewables. These pass-through costs are increasing and are disproportionately levied on industrial consumers.
Until now, lower UK gas prices have allowed us to continue to compete internationally despite higher electricity costs. However, looking forward, we are increasingly concerned that the price of gas will rise, if industrial consumers are asked to pay for the decarbonisation of our heat supply as we were with the electricity grid. Given the gas grid’s much greater contribution to total UK energy demand, a far more significant amount of financial support would be needed.
CIA is working with our members, the government and the regulator to insulate industry from the cost of the UK’s energy transition. We must transition to a net zero energy system whilst maintaining access to secure and competitively-priced energy.
The UK’s independent advisor on climate change, the Climate Change Committee, is clear about the emission reduction pathway for our sector. By 2050, the vast majority of our emissions will be abated through the implementation of one or more of the following options: 1) fuel-switching from natural gas to hydrogen; 2) fuel-switching from natural gas to electricity; 3) retrofitting carbon capture equipment on site. Much of our remaining emissions will be mitigated by energy and resource efficiency improvements. CIA is working closely with our members and with the government to ensure policy effectively supports the business case for investment in these technologies, and to make sure that the overall cost of the UK’s net zero transition does not harm our manufacturers.
Our public policy issues that relate to the work of chemicals businesses. We give a description of what each issue is, any legislative agenda, what we as an industry are doing about it and what we want others to do. We aim to examine the ways in which these policies can meet the needs of the UK and help chemical businesses.
Energy and Climate Change
The Hydrogen Climate Solution