In a fast-changing energy supply landscape, Jodie Eaton, CEO of Shell Energy UK, believes UK manufacturing needs to re-think its power sourcing strategy, while exploring ways to reduce consumption.
The government’s recent Energy Security Strategy does not include any new measures to further support energy efficiency, leaving the market to deliver both productivity and its 2035 decarbonisation goals. This is at time when manufacturers are facing a chronic cost pressures in the form of a lack of materials, skills shortages, wage inflation and a spike in energy costs. The term ‘a perfect storm’ is perhaps overused, but certainly fits here.
Given such a unique set of circumstances, UK industry needs think far more radically about its energy use. We have all been used to turning on the switch and receiving an endless supply of relatively low cost energy. However, huge macro-economic and indeed geo-political forces have changed that model and the time is right to take a fresh approach to energy sourcing. Crucially, that should also include a reduction in overall power consumption.
April 2022 saw the Johnson government unveil its much-anticipated policy paper entitled the Energy Security Strategy. The comprehensive document outlines its approach to securing national energy supply, as we follow ambitious plans to embrace decarbonisation in the long-term and manage shorter-term volatility across global markets.
The recent sanctions brought to bear on Russia by the European Union, UK, US and other nations have already forced individuals, organizations and nations to rethink energy supply in the wake of anticipated constraints and subsequent price pressures on wholesale gas supply.
The strategy sets out ambitious plans to accelerate the expansion of sustainable generation solutions, including nuclear, wind, solar and hydrogen, as well as detailing our national oil and gas roadmap. A key announcement was the government’s commitment to deliver the equivalent of one nuclear reactor per year, as opposed to one per decade, with the aim that 95% of our national electricity supply should be low carbon by 2030.
But while investment in renewable infrastructure should be celebrated, the strategy does not include any new measures to further drive energy efficiency, leaving it to the market to invest in and drive both efficiency and decarbonisation goals. That said, there are plans to roll-out a consultation on increasing rooftop solar and fast-tracking the adoption of green or blue hydrogen as an alternative to fossil fuels.
It is anticipated that the rapidly evolving supply landscape will further increase the motivation for businesses aiming to reduce their use of fossil fuels to reach net-zero carbon dioxide emission targets.
However, companies are already finding that decarbonisation is a complex process that requires a multi-faceted approach and long-term investment to be successful. While switching energy sources and adopting renewable generation solutions are the obvious routes to reducing emissions for industry, reducing overall commercial energy consumption is just as important.
Increasing energy efficiency
Investing in more efficient machinery and embracing smart energy solutions, for example by installing occupation sensors that will automatically switch off lights in empty rooms and adjust heating levels in accordance with building occupation, is a tried and tested approach to better on-site energy management. Another option is to install zero-carbon energy generation technologies. Suitable options are dependent on site size, location and energy demand and include wind power and solar photovoltaic (PV) panels. These should be combined with the installation of battery capacity to store electricity generated at times of low demand, as well as replacing gas boilers for heating with ground or air-source heat pumps and potentially hydrogen for more heat intensive applications.
These options require investment and expertise to optimize their success. They all deliver varying payback periods, but all align with the longer-term vision of decreasing carbon emissions and increasing business resilience against volatile energy prices and any future disruption to supplies.
Other solutions include reducing energy usage in the supply chain, for example by sourcing materials and components from nearby, which helps to reduce dependence on volatile fuel prices. Here, businesses using fleets of large lorries or shipping may be in a good position to consider switching to electric vehicles powered by green hydrogen, which is produced without carbon emissions.
Overall, the new strategy increases the onus on major energy users to continue to develop their own roadmaps in partnership with their suppliers and technology experts to address market volatility and build energy resilience into their own operations. It sets a framework for building a more secure energy future but the challenge to decarbonise remains a priority.
There is a sense of urgency to the energy transition envisioned in this strategy. The Shell Group is already involved in a range of initiatives, diversifying energy sources to reduce reliance on fossil fuels, improving energy productivity, making best use of technology to manage demand, carbon capture and storage, and many other solutions. All of these are underpinned by the principles of ‘avoid, reduce and abate or mitigate’ energy use.
We are aiming to decarbonise our own operations reducing emissions by 40%. By building out our power business and continuing to innovate, we can help our own customers achieve their long-term decarbonisation goals. At the same time, we are investing in the development of low carbon infrastructure including green hydrogen facilities in Europe and China, pioneering approaches that could help fast track the transition not just to lower carbon energy but also helping to secure the resilient supplies on which industry relies.
Our commitment comes from the top. Shell CEO, Ben van Beurden, recently said: “This is a once-in-a-generation opportunity to ensure an orderly transition to net zero while bolstering the UK’s energy security and Shell is ready to play our part. We plan to invest up to £25bn in the UK energy system over the next subject to Board approval, and more than 75% of this decade is for low and zero-carbon technology. Offshore wind, hydrogen and carbon capture and storage will all be critical but we need the right policy frameworks in place. We look forward to working with government on the important detail in order to make this a reality.”
About the author
Jodie Eaton, CEO of Shell has more than 30 years’ experience leading commercial, trading and retail energy businesses. Prior to joining Shell Energy in September 2020 as Chief Operating Officer, she held a board member role at npower, led its Business Solutions division, and has also worked for E.ON UK and TXU Energy.