Green power gi­ants ready to spark a new era of British in­dus­trial growth

Far from be­ing re­jected by the Gov­ern­ment, low-car­bon sec­tors look set to drive a man­u­fac­tur­ing revo­lu­tion, says Jil­lian Am­brose

The Sunday Telegraph - Money & Business - - Business -

It was over a year ago that the lights went out at the Depart­ment of En­ergy and Cli­mate Change. The em­bat­tled gov­ern­ment depart­ment was buried in the newly formed Depart­ment for Busi­ness, En­ergy and In­dus­trial Strat­egy, rais­ing fears within the low-car­bon econ­omy that green growth would slide off the agenda un­der the Con­ser­va­tive Gov­ern­ment. In­stead, the en­ergy in­dus­try’s po­si­tion at the cen­tre of the depart­ment neatly re­flects its cen­tral role in the Gov­ern­ment’s plans to boost in­dus­trial pro­duc­tiv­ity.

In the com­ing week, the Gov­ern­ment’s clean growth plan will bring to­gether a kalei­do­scope of closely in­ter-re­lated sec­tors through the prism of eco­nomic pro­duc­tiv­ity. And the pat­tern that emerges will be de­cid­edly green. The plan will have its roots in low-car­bon power, but its boughs will ex­tend into the wider econ­omy and the Gov­ern­ment’s in­dus­trial strat­egy.

The far-reach­ing am­bi­tions are im­me­di­ately nec­es­sary to avoid fall­ing short of legally-bind­ing pledges en­shrined in the 2008 Cli­mate Change

Act. But they are also strate­gic in the long term: by keep­ing green growth at the heart of an in­dus­trial strat­egy, min­is­ters be­lieve the ben­e­fit will rip­ple across the econ­omy and clear the way for a sus­tain­able fu­ture.

The aim of the in­dus­trial strat­egy is to re­bal­ance the econ­omy by driv­ing growth in the ar­eas where the UK has po­ten­tial to be­come a world-lead­ing ex­porter of skills and tech­nol­ogy.

Claire Perry, the Cli­mate Change Min­is­ter, was tight-lipped at the Tory party con­fer­ence about what to ex­pect when the strat­egy pa­per is pub­lished in the com­ing weeks. But un­like the in­dus­trial strat­egy of the Seven­ties, it’s not about pick­ing win­ners, she says. In­stead it will align in­dus­tries with the power to boost Bri­tain’s flag­ging earn­ing power. These ar­eas will need to build on gov­ern­ment fund­ing and bring in pri­vate in­vest­ment. They will also need to “out­last the va­garies of the po­lit­i­cal cy­cle”.

She none the less hinted at a po­ten­tial re­turn for car­bon cap­ture and stor­age (CCS) – tech­nol­ogy that fell from favour two years ago as the Gov­ern­ment scrapped its £1bn com­pe­ti­tion for de­vel­op­ers able to trap and store the car­bon emis­sions from coal-fired power plants.

The Gov­ern­ment is reimag­in­ing the tech­nol­ogy in an in­dus­trial con­text with far broader im­pli­ca­tions for in­dus­try and en­ergy. A clean, green British in­dus­try is vi­tal for the UK’S plans to meet its car­bon re­duc­tion ob­jec­tives. By clus­ter­ing CCS projects in ar­eas, such as Teesside in the North

East of Eng­land, fac­to­ries will be able to work to­gether to strip harm­ful car­bon diox­ide from their emis­sions, which can then be piped into per­ma­nent stor­age un­der the seabed.

CCS also presents one of the more af­ford­able means of tack­ling an­other ma­jor area of car­bon emis­sions for the UK: its heat­ing. Switch­ing the gas grid to run on hy­dro­gen rather than car­bon-rich meth­ane could slash emis­sions from heat­ing with min­i­mal in­vest­ment needed to up­grade the coun­try’s ex­ist­ing pipe­line net­work.

It is a process al­ready un­der way at a scheme in Leeds. But the process of con­vert­ing nat­u­ral gas to hy­dro­gen, which re­leases car­bon, will need CCS for a na­tion­wide roll-out.

Those read­ing the runes of early pol­icy moves be­lieve the Fara­day Chal­lenge of­fers a mi­cro­cosm of how the Gov­ern­ment sees the dy­nam­ics of this fu­ture eco­nomic ma­trix.

The plan com­mits £246m over the next four years to fund the de­vel­op­ment of bat­ter­ies for the elec­tric ve­hi­cle mar­ket. It was an­nounced along­side a sur­prise dead­line for the au­to­mo­tive mar­ket: sales of tra­di­tional com­bus­tion en­gine ve­hi­cles must end by 2040. The twin pol­icy moves mean that by 2030

‘The aim of the in­dus­trial strat­egy is to drive growth in ar­eas where the UK could be a world-lead­ing ex­porter’

around 50pc of new ve­hi­cles sold in the UK will be elec­tric. This shift could play a key role in re­duc­ing car­bon emis­sions and air pol­lu­tion from the trans­port sec­tor, but to rel­e­gate it to the canons of en­vi­ron­men­tal pol­icy is to miss the point.

It will also stim­u­late a new mar­ket for the au­to­mo­tive sec­tor and de­velop a tech­nol­ogy that could be used within the en­ergy in­dus­try to store clean power and re­duce costs, which in turn may boost en­ergy-in­ten­sive sec­tors.

If UK plc rises to the Fara­day Chal­lenge it could se­cure a worldlead­ing ad­van­tage in the nascent bat­tery in­dus­try, which might power ex­ports for Bri­tain post Brexit.

Deirdre Fox, the strat­egy boss at Tata Steel, is ea­ger for the steel­maker to avoid miss­ing out. She ad­dressed del­e­gates on the fringe of the Con­ser­va­tive Party con­fer­ence last week, stress­ing the im­por­tance of steel­mak­ing for the en­ergy in­dus­try’s sup­ply chains and its role in the elec­tric ve­hi­cle boom.

Tata pro­vides steel for 98pc of all ve­hi­cles pro­duced in the UK and in­tends to stake its claim to a part of the elec­tric ve­hi­cle revo­lu­tion too. Fox says the steel­maker has been work­ing with new tech­nolo­gies, in­clud­ing elec­tric ve­hi­cles, to en­sure it is able to sup­port emerg­ing sup­ply chains, such as new types of steel for elec­tric cars.

Tata is also play­ing a role in cre­at­ing build­ings that can pro­duce their own power. This sum­mer the group of­fered a project in Swansea its per­fo­rated steel cladding. It has stored so­lar ther­mal en­ergy in a wa­ter-based sys­tem, de­liv­er­ing a self-pow­er­ing build­ing on the Swansea Uni­ver­sity Bay Cam­pus, which could dra­mat­i­cally cut en­ergy costs.

CCS has a role to play here too. Tata is keen to stress that it will be able to help drive down car­bon emis­sions from its steel­mak­ing by 80pc – with car­bon cap­ture tech­nol­ogy.

A sim­i­lar syn­chronic­ity has emerged in the off­shore wind sec­tor, which is hop­ing for a sec­tor deal to drive its progress fur­ther.

Whereas once spin­ning tur­bines were a “po­lit­i­cally toxic” is­sue for the Con­ser­va­tives, the pre­vail­ing prag­ma­tism at the heart of the in­dus­trial strat­egy has re­framed the tech­nol­ogy as a po­ten­tial British in­dus­trial suc­cess story, and could help thaw the at­ti­tude to­wards its on­shore coun­ter­part.

In re­cent weeks a sub­sidy auc­tion re­vealed the cost of off­shore wind power had halved at a faster rate than an­tic­i­pated by the in­dus­try it­self. The rev­e­la­tion was roundly wel­comed as an im­por­tant step in low­er­ing en­ergy costs for homes and busi­nesses, in­clud­ing those that also stand to ben­e­fit more di­rectly from the boom. In Hull and the Isle of Wight, for

ex­am­ple, Siemens’ new £310m man­u­fac­tur­ing plants em­ploy over 1,000 peo­ple to help build the 246ft blades, which have helped cut the cost of off­shore wind. For a pre­vi­ously for­got­ten port city with the coun­try’s high­est lev­els of un­em­ploy­ment it is a so­cioe­co­nomic suc­cess story likely to re­ver­ber­ate across the coun­try.

Off­shore wind de­vel­op­ers source al­most 50pc of their com­po­nent parts from the UK and say this can be in­creased, bring­ing greater eco­nomic ben­e­fit to British man­u­fac­tur­ers.

It is al­ready an in­dus­try that is prov­ing its met­tle in­ter­na­tion­ally. The re­new­ables arm of Scot­tish Power is build­ing up a port­fo­lio of projects off the east coast of the US and ca­ble­maker JDR Cables is also turn­ing to­wards the global mar­ket. The UK’S ex­port po­ten­tial is all the greater af­ter the re­bal­anc­ing of the pound fol­low­ing the Brexit ref­er­en­dum.

In a full-cir­cle chore­og­ra­phy of eco­nomic ben­e­fit, the off­shore wind sec­tor is likely to ben­e­fit from the bat­tery boom too. The myr­iad, in­ter­con­nected eco­nomic ben­e­fits of the strat­egy are enough to push aside scep­ti­cism over the pur­suit of clean power – even within the Con­ser­va­tive Party. Richard Har­ring­ton, the En­ergy Min­is­ter, told Con­ser­va­tive con­fer­ence del­e­gates that he be­lieved a pal­pa­ble shift in at­ti­tude to­wards re­new­able power had oc­curred, as eco­nomic op­por­tu­nity trumped cli­mate change de­nial­ism.

“I think that’s more of an Amer­i­can thing now,” he shrugged.

‘The cost of off­shore wind power has halved at a faster rate than an­tic­i­pated by the in­dus­try it­self’

Fo­cus on sec­tors where de­car­bon­i­sa­tion cre­ates ccom­pet­i­tive busi­nesses and new in­dus­tries What the UK’S in­dus­trial strat­egy might in­clude

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