A new report from energy infrastructure and systems trade body BEAMA has revealed the UK government must increase expenditure on the supply chain or risk losing out on global net zero economic opportunities.
The body’s first Market Pulse quarterly report aims to kickstart its #AcceleratingElectrification campaign and reveals that while the supply chain is poised to deliver the significant increase in demand for low carbon heating and electric vehicles, investment intensions are still significantly lower than 12 months ago and fall short of the UK’s electrification needs.
The slower uptake of net zero technologies, knocked by repeated policy delays and U-turns, has resulted in the UK attractiveness for investment being called into question, said BEAMA. Despite this, the UK’s net zero supply chain is optimistic and poised to deliver as evidenced by significant UK manufacturing investments by the trade group’s members earlier this year.
#AcceleratingElectrification is an industry wide campaign, backed by BEAMA’s 200-plus members, which seeks to foster sustainable growth and investment within the UK electrical supply chain.
This is a prerequisite to delivering Labour’s Clean Power by 2030 target, providing the essential components for decarbonising the nation’s energy, heat and transport infrastructure, said BEAMA.
Strong and ambitious government targets are welcome, but a more detailed roadmap and decisive action is required today to deliver the supply chain requirements of tomorrow, it added.
“While politicians focus on immediate policy requirements and the networks operate within five-year price controls, supply chains require five to seven-year horizons to plan manufacturing capacity and supply a competitive global market for low carbon technologies,” said BEAMA.
“When a new factory can take seven years to build, or a skills shortage impedes capacity to deploy products, clear policy and regulatory signals that translate into manufacturing orders are needed to address this gap and stimulate this critical £14bn sector.
“BEAMA members are spread across the whole of the UK’s electrification value chain and there is a clear divergence where electricity networks investment has seen a clearer picture for investment. However, this is still considered too short term and there needs to be greater visibility of transmission and distribution network expenditure beyond 2030.”
BEAMA chief executive Yselkla Farmer added: “The UK is clearly back in the global race for Net Zero delivery, and with a series of imminent policies that will accelerate electrification across power, heating and transport there are reasons for optimism.
“However, a gap continues to grow between the projected energy sector investment needed to meet our targets and the current rate of deployment.
“Optimism and confidence are far from where they need to be, and without urgent clarity, UK manufacturing of these vital technologies will struggle to meet future demand.
“The choice is clear, risk becoming reliant on supply chains outside of the UK or capitalise on the huge potential to grow this economic opportunity and build on the current £5bn of exports we currently maintain.”
Key findings of the report indicate the UK is missing its decarbonisation targets and lacking the clear frameworks and detailed roadmaps to increase the pace at scale.
It show modest increase in investment intentions across the sector does not reflect electrification needs for the UK. Far greater certainty of demand is required, either from government-led investment at infrastructure level or from builders and consumers for end-use products.
The study also showed supply chain capacity utilisation edged lower below five-year average, while some parts of the supply chain for electricity networks report operating at full capacity. 91% of members do not reserve capacity for demand fluctuations which means decisions need to be taken now to increase capacity for 2030 infrastructure delivery and beyond.
It found manufacturing unit costs hit a four-year low with energy, shipping and labour costs having a greater impact than materials, underscoring that now is a prime moment to invest in UK manufacturing.
Additionally, 50% of BEAMA members report an intention to hire more employees, but challenges in filling vacancies remain because of ongoing engineering and STEM skills shortages.
The study also shows the UK needs to increase heat pump uptake up by 16 times current delivery rates to hit 2030 targets.
The analysis found the country is 11 years away from having a complete smart metering system to support a smart flexible energy system in the UK and nnovators operating in heat electrification are struggling to commercialise at scale due to slow progress with policy support and uncertainty over the construction sector outlook.