Industry reaction: ‘an opportunity missed’
Despite targeted measures to reduce industrial energy costs and strengthen the UK’s technical skills base, failing to name the fuels sector as a “foundational industry” is a disappointing oversight, according to FIUK.
The UK’s Modern Industrial Strategy announced plans to narrow the energy cost gap between UK industry and EU competitors to boost competitiveness, as well as introducing new measures to address skills shortages. New Sector Plans also announce policy measures supporting carbon capture, hydrogen, and Sustainable Aviation Fuels of which, as FIUK points out: “The fuels sector will be essential for delivery.”
Energy cost measures: Who benefits?
Cutting green levies
From 2027, green levies (such as the renewables obligation) will be exempted for energy-intensive industries, reducing bills by up to 25% (~£40/MWh). The measure will benefit around 7,000 businesses, including steel, chemicals, aerospace, aluminium, glass, ceramics, and paper manufacturers.
Supercharger discount boost
The British Industry Supercharger scheme will increase its network‑charge discounts from 60% to 90% by 2026, covering about 500 firms, notably in heavy manufacturing sectors.
Connections accelerator for grid access
A new fast-track “Connections Accelerator” will be launched by year-end to speed up grid connections for major investment projects, targeting industries poised to create significant employment .
Doubling clean energy investment
Annual clean energy investment is set to double to over £30 billion by 2035.
Carbon market and emissions trading alignment
A new commitment to align the UK Emissions Trading Scheme with the EU ETS. This is underway with the aim to unlock additional funding and help finance levy exemptions.
These measures aim to align UK and European energy costs, tackling a longstanding barrier to manufacturing investment. They also steer support to green industries and infrastructure, to deliver clean growth and decarbonisation goals.
While these steps support certain parts of heavy industry, others argue the approach lacks inclusivity and ambition.
Lack of funding detail raises alarm
Energy sector trade body, ADE, also expressed disappointment in the limitations of the measures announced.
Having called for action to significantly reduce electricity costs, ADE described the measures announced as: “sidelining thousands of businesses who desperately need support in the face of rising energy bills” with Caroline Bragg, CEO at ADE, saying: “This strategy has set out some positive steps towards cutting electricity costs. Despite these steps, details on funding remain vague.
“Ministers need to wake up, we cannot build a secure, affordable, low-carbon energy system while actively discouraging all the businesses that use it from investing in their future.”
Refinery exclusion: A competitive disadvantage
UK refineries and other fuel-processing facilities are not currently included in the list of Energy Intensive Industries as recognised by the Industrial Strategy and will not benefit from the additional network‑charge discounts – an exclusion that FIUK has warned will damage their ability to remain competitive.
Elizabeth de Jong, Chief Executive of Fuels Industry UK said “Fuels Industry UK identified both energy costs and skills gaps as barriers to investment and we will work with our members and government to ensure the sector can maximise and build on today’s announcements. The Supercharger scheme, for example, only helps those refineries with particular power generation setups.
“Although there has been acknowledgment by government of the importance of the fuels sector in the context of the Grangemouth refinery closure, we are disappointed not to be named explicitly as a ‘foundational industry’ today, given the vital role of the fuels sector in enabling growth and providing over 40% of total final energy consumption.”
Logistics sector reaction
Another sector disappointed not to be recognised as ‘foundational’ is the UK logistics sector. However, it welcomed recognition of the sector’s role in delivering government growth plans. The group’s Policy Director, Kevin Green, commented: “While it is disappointing that our sector has not been named as “foundational”, we welcome the fact that an efficient logistics system has been identified as critical to boosting UK productivity.”
With the fuels sector critical to current energy demand as well as delivery of future fuels and energy resilience, stakeholders remain hopeful that future revisions to the strategy will reflect this vital role.
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