Government must prioritise lower energy costs in 2017, say manufacturers
Energy costs and changes to European Union (EU) energy policy are the biggest concerns for British manufacturers, according to new research from npower Business Solutions (nBS).
The latest survey of UK manufacturers undertaken this month reveals that 87% of manufacturing businesses are worried about the impact of European energy policy in 2017, with almost two-thirds highlighting Brexit as the main concern for their companies.
Looking back on the past 12 months, 62% of manufacturing decision-makers identified energy costs as having had the largest business impact, while 57% believed that the UK Government should prioritise decreasing costs in the upcoming year. According to nBS, forthcoming changes to the Capacity Market and Contracts for Differences (CfD) scheme could have a profound effect on the energy market.
These concerns are likely to be mitigated by a shift towards a more flexible energy system, the report states, with nBS urging businesses to apply demand response and storage technologies to drive down their bills.
nBS head David Reed said: “The shape of Brexit remains the great unknown. If there is one thing that is highly clear and unlikely to change however, it is that increased system flexibility is going to continue to be a key objective for the government. It is also going to be a considerable opportunity for businesses to bring down their energy costs.”
The report follows the release of the European Commission’s (EC) winter package, aimed at helping to reduce carbon emissions by 40% by 2030. The document outlined plans to create a level-playing field for clean technologies in the market, allocating more than €2bn for research into energy storage and demand response measures through the Horizon 2020 programme for 2018-20.
On a domestic level, current research suggests that a flexible power system which takes advantage of these technologies could create savings for the UK to the tune of £8bn by 2030. The UK Government recently pledged a commitment to the creation of a smarter, flexible energy system, launching a consultation to establish the opportunity for businesses to actively balance their energy needs.
The nBS report states that a shift towards a more fluid supply and demand system must coincide with replaced generation capacity and further investment in the UK’s renewable industry. The paper welcomes the certainty provided by the recent CfD auction, but notes disappointment that no future auctions have been announced for the onshore wind technology.
The manufacturers’ organisation EEF senior energy & environment policy adviser Richard Warren commented: “The views and findings of this report chime very much with our own. The power system is undergoing a profound transformation, if we are to do this in the most cost effective and efficient manner possible we need to use all the tools in the box.
“As the report rightly points out, the current policy framework will continue to leave much energy efficiency and demand side response potential untapped. 2017 needs to see the Government really get to grips with how it can unlock this, reducing costs for all consumers and for those businesses that choose to take action.”
Earlier this month, EEF called on the the UK Government to introduce reforms which increase the uptake of low-carbon technologies to restore the “tepid” confidence in Britain’s future energy security. Ministers were urged to improve the current policy framework to enable major consumers of electricity, including the manufacturing sector, to benefit from an efficient, flexible grid.
In the fallout of the UK’s decision to leave the EU, a report from the same organisation highlighted that manufacturers want to see EU environmental legislation transposed to a post-Brexit Britain. However, the study also recognised an opportunity to cut ‘red tape’ and explore a simpler, more UK-specific approach to green policy.