Industrial strategies for clean energy technology manufacturing require an all-of-government approach, closely coordinating climate and energy security imperatives with economic opportunities, warns the International Energy Agency (IEA).
This will mean:
- Identifying and fostering domestic competitive advantages;
- Carrying out comprehensive risk assessments of supply chains;
- Reducing permitting times, including for large infrastructure projects;
- Mobilising investment and financing for key supply chain elements;
- Developing workforce skills in anticipation of future needs;
- Accelerating innovation in early-stage technologies.
“Every country has a different starting point and different strengths, so every country will need to develop its own specific strategy. And no country can go it alone,” says the agency.
Even as countries build their domestic capabilities and strengthen their places in the new global energy economy, there remain huge gains to be had from international cooperation as part of efforts to build a resilient foundation for the industries of tomorrow.
Several cases of harmful consequences of a failure to set out clear policy goals have already emerged, warns the agency.
“For example, the UK heat pump sector has cited ambiguous government signals about future policy support as a deterrent to investing in worker training, resulting in a shortage of qualified installers as demand increases,” the IEA points out in its latest energy technology perspective.
The IEA hit the nail on the head with this one in, Mission Zero, the independent review commissioned by discredited UK Prime Minister Liz Truss, chaired by former energy minister Chris Skidmore and just published.
Mission Zero warns: “Government must urgently adopt a 10-year mission to make heat pumps a widespread technology in the UK and regulate now for the end of new and replacement gas boilers by 2033 at the latest,” says the review.
“Ensuring we turbocharge our adoption of heat pumps and low carbon heating sources, ending our reliance on fossil fuels in our homes once and for all.”
Mission Zero warns that decisions taken today and not just with heat pumps will be critical for the UK’s ability to decarbonise in a pro-growth and low-cost way in the years leading up to 2050.
This would serve to set the stage for the kind of economy and society that government appears to aspire to post-2050.
“The UK must apply a long-term view to all of the issues raised in this Review,” says the review, which is clearly calling for an end to short-termism and inconsistency.
In particular, it calls for an “over-arching government financing strategy by the end of 2023, giving long-term clarity to business and investors and ensuring we capitalise on our industrial strengths”.
The review indicates three areas that require action today, with a view to the 2040s, 2050s and beyond. Each plays to the IEA future energy strategy recommendations:
- The government, working with sectoral leads by Autumn 2023, must apply whole systems thinking to create an R&D and technology roadmap outlining the key decision points that must be made to ensure priority technologies deliver on the UK’s net zero and growth ambitions.
- BEIS and HMT should review how to incentivise greater R&D for net zero, including considering the role of clarity on research priorities and government support, tax credits, greater ring-fencing of R&D spend, and enabling regulations.
- Government must make regulatory processes agile enough to match that of innovation by establishing up to three new R&D demonstrator projects, out to 2035, aligning with the ten-year missions set out by the review; and including in forthcoming work from the Office for Science and Technology Strategy (OSTS), how regulators can provide more opportunity for demonstrations for net zero technologies
Mission Zero identifies various countries that have made bold and ambitious interventions in response to future energy opportunities and says the UK must similarly respond vigorously.
- The US’s Inflation Reduction Act (IRA) committed around $370 billion in incentives and programmes to accelerate action on climate and energy.
- Germany has proposed a €177 billion Climate and Transformation Fund from the 2023-2026 federal budget to retrofit buildings and support programmes for industry.
- France has committed €30 billion as part of the ‘France 2030’ investment plan, to speed up the ecological transition.
Other parts of the world are also recognising that the market has shifted and are explicitly acting in response.
For example, launching new tax credits for hydrogen, the Canadian government specifically justified the move by saying: “Without new measures to keep pace with the Inflation Reduction Act, Canada risks being left behind.”
It’s not that the UK is a bad performer, far from it, But it has procrastinated on many aspects of future energy and, aside from heat pumps, few more clearly than CCUS, a topic of huge interest to the oil and gas community.
Net Zero is clear, this year it wants the government to act quickly to re-envisage and implement a clear CCUS roadmap, showing the plan beyond 2030.
This should take the form of ten-year investment cycles, be used to inform the overall R&D roadmap and is clearly of massive interest to the North Sea oil and gas community centred on Aberdeen.
