Designing the Industrial Energy Transformation Fund: consultation response

Published: 31 May 2019

Introduction

Energy Systems Catapult has responded to the Department of Business, Energy and Industrial Strategy consultation into Designing the Industrial Energy Transformation Fund.

The Industrial Energy Transformation Fund (IETF) was announced by the UK Government in the autumn Budget in 2018. The Fund will support businesses with high energy use, such as energy intensive industries, to transition to a low carbon future. It will help companies cut their energy bills and carbon emissions through investing in energy efficiency and low-carbon technologies.

The IETF has a UK-wide budget of £315m over five years to 2024 to support businesses with high energy use to:

  • cut their bills and emissions through increased energy efficiency
  • transition to a low carbon future through the use of lower carbon energy and processes

This informal consultation seeks views and supporting evidence to help us design the fund. Its focus is particularly on the benefits and barriers to industrial decarbonisation as government has a good understanding of these issues for energy efficiency.

Key points

Energy Systems Catapult’s response to the consultation, includes:

  • The IETF should focus on a few large-scale projects, including CCUS, as these stimulate other projects to follow and are transformative to meet decarbonisation targets. For decarbonisation in particular, the IETF should encourage long-term value through creation of infrastructure or demonstration of technology which can be used by many other organisations.
  • Progressing the development and deployment of CCUS remains of high strategic value to UK decarbonisation and can help to fill the ‘nuclear gap’. A renewed strategy, including for deployment in the power sector and possibly hydrogen production, should be developed urgently, drawing on the lessons from cost reduction achieved in offshore wind resulting from sustained policy support.
  • Sustainably grown biomass also has the potential to become a critical resource for the UK energy system. It can be burned directly for heat and power or converted into low carbon gases and liquid fuels to decarbonise hard-to-treat sectors.
  • Bioenergy and CCUS are especially valuable in combination. Together, they offer the potential for negative emissions to counterbalance the continued use of fossil fuels in difficult sectors like aviation.
  • A Local Area Energy Plan that has been agreed by key stakeholders (local and regional government, network operators, local businesses etc) can help to unlock private investment by providing certainty around likely outcomes and, therefore, potential revenues. It will also reduce the risk of stranded assets and lead to lower transition costs than an uncoordinated, piecemeal approach to decarbonisation.
  • Industries should be rewarded for working collaboratively with local stakeholders, community energy projects and investors and for encouraging co-located early adopters of smarter, cleaner technologies and demonstrators.