Whilst we welcome support through the existing British Industry Supercharger and proposed British Industry Competitiveness Scheme, these only fractionally reduce the electricity price to selected sectors and do not provide the level of reduction required to spur widespread industrial electrification.

 

The chemical sector is a critical enabler of all net zero technologies. Wind turbines blades are made of advanced composite materials. Acids and solvents are used in the manufacture of solar panels. Batteries are chemical energy storage and battery innovation is industrial chemistry. As we rewire Britain to electrify homes, transport and industry, we will insulate interconnectors, transmission lines and the wires in our homes using chemical products. Low carbon fuels for transport - like hydrogen, ammonia, methanol, biofuels and sustainable aviation fuel - are all chemical products, and even carbon capture technologies depend on chemicals to remove CO2 from air.

The UK’s chemical sector has reduced its scope 1 greenhouse gas emissions by over 80% since 1990. Our remaining emissions relate primarily to the use of natural gas to generate heat, which is needed to break molecular bonds and drive chemical reactions. This link between energy and chemistry means that the chemical industry will always need energy, and as demand for its products increases the sector’s need for energy will also grow. Where that energy comes from is of fundamental importance to the fight against climate change.

As it stands, the UK’s chemical sector uses natural gas for heat because it is widely available across the UK, and it is cost and energy efficient. With current prices as they are, switching to an electrical alternative would increase a manufacturer’s costs and leave them at a competitive disadvantage. Yet most heat using processes in our sector require a relatively low temperature heat (less than 250°C) which could be readily electrified if the economics were right. There is no inherent disadvantage to electrifying heat but the cost of electricity in the UK is a significant barrier.

The electricity price that a UK industrial consumer faces is five times higher than the comparative gas price.[1] Part of the high electricity price is linked to regional natural gas markets, because in the UK power market it is often gas-fired generation that sets the marginal power price. Another part of it relates to the policy cost associated with our investment in renewable technologies, together with the development of the grid to manage more intermittent and less centralised generation. The decarbonisation of the UK’s power sector is a success story and should be celebrated. We have significantly reduced air pollution and our contribution to global climate change but action is now required to ensure that UK manufacturers can make use of our growing share of low carbon electricity, to lower their environmental footprint.

The issue is compounded when viewed from the perspective of a global business. The chemical sector is typified by multinational companies that have the opportunity to invest across a global portfolio of assets. A chemical company looking at an investment in the electrification of its heat demand prioritises the locations with the lowest electricity cost and the UK fares poorly in this regard; The UK is ranked last in the IEA for industrial electricity price and last in the G7.1 Whilst we welcome support through the existing British Industry Supercharger and proposed British Industry Competitiveness Scheme, these only fractionally reduce the electricity price to selected sectors and do not provide the level of reduction required to spur widespread industrial electrification.

In 2023 the Government published a call for evidence on Enabling industrial electrification, concluding that targeted intervention is urgently needed to address these barriers and ensure electrification is on a level playing field with other decarbonisation options. We urge the Government to act now, to lower UK industrial electricity prices to create the conditions needed to invest in the electrification of UK industry. This could be through energy market reform, or through a specific policy mechanism that facilitates industrial fuel-switching. The Government’s independent climate advisor, the Climate Change Committee, calls for such action in its latest summer progress report to Parliament and supports both of these options.

There are also existing UK policies that could better incentivise electrification, for example the Climate Change Agreements scheme and the UK Emissions Trading Scheme. Another place where the Government could act is to ensure grid connection processes prioritise industrial demand connection, as well as the connection of new generation. Finally, clarity on the future of the Track 2 cluster projects and the future rules of the Hydrogen Allocation Rounds would give sites more certainty on which decarbonisation technology they should look to pursue.

The chemical industry sits at the root of all manufacturing supply chains; 96% of all manufactured goods depend on chemical sector input. Facilitating the electrification of the UK’s chemical industry would ensure that the clean technologies needed for a low carbon and circular economy are made here, where they can be supported by a secure, low carbon supply chain.

 

[1] DESNZ’ international industrial energy prices, last updated May 2025.