The UK government must increase expenditure to accelerate electrification supply or risk losing out on global net zero economic opportunity, argues Yselkla Farmer, CEO of BEAMA
Government departments and official bodies, like the Climate Change Committee, have long recognised the need for widescale electrification of the UK’s energy supply and buildings to achieve net zero.
While significant progress has been achieved expanding renewable electricity generation capacity and developing policies for flexible energy and low-carbon buildings, many challenges to decarbonising the economy remain unresolved.
To successfully reach net zero will require investment and retrofitting of a broad range of low carbon domestic energy and heating technologies, from heat pumps and electrified heating to smart meters and appliances.
Ensuring a steady supply of these low carbon products at scale is essential to rapidly and cost-effectively decarbonising the UK.
However, manufacturers and suppliers of UK’s electrical products face particular challenges, spotlighted by BEAMA (the trade association representing over 200 companies within the UK’s net zero supply chain) analysis.
Fight for investment
While the UK has led the world in setting ambitious targets, the fight for global investment has become more competitive. Failure to secure investment in electrical products supply chains risks stalling the energy transition and the economic opportunities of decarbonisation.
It would also risk limiting growth in other sectors, such as planning and construction.
BEAMA has quantified the scale of the challenge through a new quarterly data series, the Net Zero Market Pulse report.
This analysis of data and insights from our members – manufacturers of products for electricity networks, flexible energy and low carbon buildings – is combined with key indicators, such as the pace of the rollout of electric heating technologies, EV chargers and smart meters, against deployment targets, and electricity network infrastructure spend.
With key indicators all suggesting the UK is lagging behind on the practical delivery of its decarbonisation targets, the business case for BEAMA members to invest in the necessary manufacturing and supply chain capacity needed to deliver the net zero transition is weakened.
The UK is in a global race for net zero supply chain capacity. Without certainty on targets and accelerating the pace of rollout, the UK risks being unable to access the necessary components and products needed to decarbonise by 2050.
On the other hand, there is increasing evidence of increased optimism and intention to invest among manufacturers, but more is needed to provide confidence and certainty to rapidly scaling up the supply chain for the green energy transition.
Building a new factory for a net zero product takes an average of seven years – like construction, supply chain capacity cannot be ramped up overnight. Stronger investment signals are needed, including:
- Clearer project pipelines.
- Stronger incentives for consumers to choose to decarbonise, such as levelling the tax playing field on electricity against other fuels.
- A robust discussion on an integrated industrial strategy.
The government recognises these issues and has ambitious plans to address them. With the launch of new institutions like Clean Power 2030 Mission Control, rapid tangible headway can be made. Our publicly available Market Pulse report will help the monitor industry’s perceptions and response to policy changes.
For example, if demand for low carbon technologies accelerates, we expect to see increased utilisation of current manufacturing capacity, in contrast with the average under-utilisation.
Accelerating electrification would mean greater demand for products, greater usage of capacity and an increase in likelihood of our member companies investing in new factories, potentially in the UK. That would be good news for UK economic growth, unlocking well paid, high-skilled jobs across the country.
Time for targeted policy intervention to accelerate electrification is now
The costs of manufacturing have recently hit a four-year low, reflecting an easing of the difficulties experienced during Covid and the earlier stages of the Ukraine invasion, giving the UK a golden opportunity to channel investment into an increasingly competitive and productive industry.
However, energy prices, which are higher in the UK than in many other regions, remain a key limiting factor. The government could choose to adjust UK energy pricing structures, making the UK a more attractive place to build new manufacturing capacity.
A faster smart meter rollout would improve the efficiency of the energy system and enable consumer access to a wider range of technologies and tariffs. However, it would take 11 years to complete the rollout at the current rate.
Similarly, the UK needs to increase heat pump uptake by 16 times current delivery to hit 2030 targets. An updated Heat & Buildings Strategy and a lower consumer price of electricity would help significantly.
The government, still in the early stages of policy development, has an opportunity to address these challenges with a focus on both decarbonisation and economic growth.
We stand at a pivotal moment, and with a potential £1tn global market, there are huge opportunities for UK businesses in the net zero transition.
The supply chain is poised for UK investment with the right signals. This does not require high capital spending from government but clear and concise action to kickstart and sustain economic growth.
By working together, we can unlock the full potential of this green revolution, driving innovation, creating jobs, and securing a sustainable future for generations to come.
