Energy Bill worries UK chemicals industry

London – The proposals in the UK government’s draft Energy Bill could hit the UK chemicals industry hard and push manufacturers to move production abroad, Steve Elliott, chief executive of the Chemical Industries Association has warned

Calling for a halt in the spiral of “crippling costs”, which the industry faces, Elliot said UK manufacturing needed help and support to deliver the government’s targets for transition to a ‘low-carbon’ economy.

“I am afraid this Bill, which has some attractive parts, will yet again heap more cost on to business,” said the CIA leader. “In a globally competitive market I worry that companies will have further reason to move investment away from the UK.”

Elliot is particularly concerned that proposals to ensure investment in new nuclear facilities will heap further costs onto hard-pressed companies in the chemicals industry and other major energy-using sectors.

The CIA does support some parts of the draft Bill, such as proposals to ensure secure UK supplies of electricity under the low carbon transition. However, it argues that the impact on the competitiveness of sectors, such as chemicals must be minimised.

“While the Bill promises to assist power developers to make early investment decisions, it only reaffirms government’s commitment to explore the options to reduce EMR impacts on energy intensive sectors like chemicals,” said Elliot.

There were no proposals on how to re-incentivise energy-efficient combined heat and power (CHP) generation at chemicals sites, noted Elliot. CHP, he said, offers more cost-effective carbon savings than many of the technologies being pursued under the Electricity Market Reform (EMR), and should be part of the UK’s energy strategy.

“We agree with the government that EMR measures need to be as cost effective as possible and to complement the market, concluded Elliot. “As part of this it’s important that Contracts for Difference and the Capacity Mechanism work together and that due weighting is given to this Autumn’s gas generation strategy. The devil’s in the detail “