Accelerated change is on the cards for intensive business energy users in 2024

From government plans to unlock access to grid connections, to updates on support for major energy users, the focus on driving efficiency and supporting decarbonisation is set to continue in 2024.

For many major energy users, rising costs and pressing decarbonisation targets mean that energy is already firmly on the board room agenda. Recent research from Shell Energy¹ found that two of the top five strategic priorities for UK businesses are related to decarbonisation – considered more important than other critical issues such as financial stability and retaining employees.

It is now nearly two years since it became mandatory for more than 1,300 of the largest UK-registered businesses to disclose climate-related financial information, aligned with the UK Government’s drive to reach net-zero by 2050.²

The disclosure regime was endorsed by 60% of global businesses and have helped to frame decarbonisation strategies among some of the UK’s largest companies.³

For those looking to diversify their supply and explore onsite generation, government plans to halve power line construction time to accelerate homegrown, renewable energy will help create up to 100GW of capacity – equivalent to around a quarter of the electricity needed to power the UK economy in 2050.⁴

The plans will remove the first come, first served queuing system for connection and, via the Green Industries Growth Accelerator, commit £960m of investment in green industries in a bid to boost energy security.² The Accelerator package, announced by the government in mid-November 2023 as part of a £4.5bn boost for UK manufacturing, is targeted at expanding home-grown, lower carbon supply chains across the UK, including carbon capture, utilisation and storage, electricity networks, hydrogen, nuclear and offshore wind.

Resilience is business critical and in its Statutory Security of Supply Report 2023⁶, the Department for Energy Security and Net Zero (DESNZ) reminds us that we can expect a significant increase in peak electricity demand - 26-51% by 2035, versus 2022. The government’s Net Zero Strategy⁷, British Energy Security Strategy⁸, and the Powering Up Britain: Energy Security Plan⁹ aims to meet this demand with a diversification of energy sources, with a significant emphasis on accelerating the transition to renewable energy sources such as wind, solar, and hydroelectric power. This shift aims to reduce dependence on fossil fuels as well as mitigate the risks associated with volatile global energy markets. The plan cautions that while demand for oil, gas, and other fossil fuels will decline, they will continue to play a role in ensuring secure energy supplies and as an important part of the future economy.

The goals of efficiency, performance, risk management, resilience and cost management are likely to remain, but will continue to be supported by advances in technology and artificial intelligence (AI). Every industry faces unique challenges, but collaboration can accelerate progress towards overcoming them.

The government has already committed to providing more than £500m of energy bill support for energy-intensive industries¹⁰, including £122m waived emissions trading costs under the Energy Intensive Industries Compensation Scheme. In addition, more than £400m of reduced electricity costs were delivered through exemption from green surcharges in 2020. The compensation scheme was extended for another three years in April 2022.¹¹

Another incentive offered by the government is the Industrial Energy Transformation Fund¹², which is set to run until 2028. The initiative helps businesses undertake feasibility studies and introduce technologies that can help to reduce their fossil energy use. Two competition windows will be opened in 2024, with major energy users able to apply for funding. Grants are available for a number of initiatives, including energy efficiency technologies, or more innovative solutions, such as those enabling the use of electricity or hydrogen in industrial heating processes.

The plans for the British Industry Supercharger scheme aim to bring energy costs of the UK’s energy intensive industries in line with those charged across the world’s major economies. Specifically, support will be made available to sectors particularly exposed to the cost of electricity.

The scheme intends to build on the government’s Energy Security Strategy, published in 2022, which aims to deliver decisive action in addressing the UK’s industrial electricity prices, which are higher than those of other comparable countries.

In October 2023, the Government announced more detailed plans¹³ for its British Industry Supercharger Network Charging Compensation (NCC) Scheme, which is designed to benefit eligible¹⁴ businesses from April 2024. The NCC Scheme will offer Energy Intensive Industries (EIIs) 60% compensation on eligible network charging costs. Meanwhile, the final changes to the wholesale market set out in the Review of Electricity Arrangements (REMA) are still subject to consultation.

For businesses, the closure of the Energy Bill Discount Scheme at the end of March 2024¹⁵ is a reminder that short, medium and long-term strategies must be regularly re-examined to ensure that sustainable decarbonisation and energy security goals are met.

Shell Energy is able to draw on its global expertise and capability to support major energy users as they look for effective ways to navigate the changes ahead on their decarbonisation journey and create opportunities. For more information about how Shell Energy can support your business, speak to one of our energy experts: https://uk.shellenergy.com/contact.

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¹ Shell Energy surveyed 100 decision makers in energy-intensive businesses (June 2023)

²UK to enshrine mandatory climate disclosures for largest companies in law - GOV.UK (www.gov.uk)

³https://www2.deloitte.com/uk/en/focus/climate-change/tcfd.html

⁴ Huge boost for UK green industries with £960 million government investment and major reform of power network - GOV.UK (www.gov.uk)

⁵Billions of investment for British manufacturing to boost economic growth - GOV.UK (www.gov.uk)

⁶https://assets.publishing.service.gov.uk/media/6574ae1a33b7f2000db72144/statutory-security-supply-report-2023.pdf

⁷https://www.gov.uk/government/news/uks-path-to-net-zero-set-out-in-landmark-strategy

⁸https://assets.publishing.service.gov.uk/media/626112c0e90e07168e3fdba3/british-energy-security-strategy-web-accessible.pdf

⁹https://www.gov.uk/government/publications/powering-up-britain/powering-up-britain-energy-security-plan

¹⁰Government action to supercharge competitiveness in key British industries and grow economy - GOV.UK (www.gov.uk)

¹¹High energy usage businesses to benefit from further government support - GOV.UK (www.gov.uk)

¹²https://www.gov.uk/government/collections/industrial-energy-transformation-fund

¹³https://www.gov.uk/government/consultations/british-industry-supercharger-network-charging-compensation-scheme/outcome/government-response-british-industry-supercharger-network-charging-compensation-scheme

¹⁴https://assets.publishing.service.gov.uk/media/64492698814c66000c8d0709/cfd-ro-fit-exemption-guidance.pdf

¹⁵https://www.gov.uk/guidance/energy-bill-relief-scheme-help-for-businesses-and-other-non-domestic-customers