Government should develop a policy proposal to incentivise on-site generation in Manufacturing by Q2 2024, with options to consult on the funding formula required by the public and private sector to reach the tipping point of adoption. |
557. On-site renewable electricity or heat generation is seen by manufacturers as the second main pathway for decarbonising their businesses, with 39% of manufacturers.
"In the last few months, the demand for it has soared as many see this as a means to insulate themselves from electricity grid prices which are linked with the unsustainable and volatile wholesale price of gas and other fossil fuels."395 - Make UK
558. The need to reduce dependence on grid-supplied energy is growing because of very high prices and the uncertainty about energy supply. Where possible, manufacturers will opt to produce their own energy, which may or not cover all their needs. Moreover, currently selling self-generated power back into the National Grid is very attractive for manufacturers, with the income sometimes surpassing the savings from the generation itself.
559. However, the Review has heard there are a variety of barriers for manufacturers adopting on site generation:
"Easing and accelerating local planning permission and adding local infrastructure to allow feedback into the power grid. In addition, it is more complicated for manufacturers leasing buildings than owning them and this would warrant official recommendations (or obligations) for landlords to respond within a set timeframe to installation requests from their tenants and would warrant streamlined and harmonised agreements/contract templates between landlords and tenants to facilitate the process……For many businesses, finding the upfront cash is difficult (cash is being put aside to pay energy bills). Getting credit is still subject to blanket criteria which will penalise those who already have other (covid-related) loans, without the consideration of the overall low risk and benefits of such projects." - Make UK396
560. The Review recommends Government should develop a policy proposal to incentivise on-site generation in Manufacturing over the next two years, with options to consult on the funding formula required by the public and private sector to reach the tipping point of adoption. This needs to be joined up with policy on the future of the National Grid and on broader planning policy.