by Miles Thomas, Chief Commercial Officer, AMPYR Distributed Energy
As a result of the conflict ongoing in the Gulf, British businesses are facing up to a another spike in energy prices. It goes without saying that those in energy intensive sectors such as heavy industry or chemicals are particularly exposed to this.
The Government’s response to this has been to extend both the British Industrial Competitiveness Scheme (BICS) and the Energy Intensive Industries (EII) Scheme, with this government-funded support intended to help businesses pay their increased energy bills while remaining on a sound economic footing.
At first glance, this looks like an understandable, some might even say encouraging reaction to this challenge. BICS, after all, will provide businesses in energy intensive industries with direct funding to help them pay their energy bills, while the Energy Ell Scheme functions as a form of energy tax relief, allowing eligible companies to reduce their energy bills via an exemption on taxes that fund low-carbon and renewable support schemes.
Both have an important role to play in protecting the competitiveness of UK industry. However, there are also two significant problems with this response as it stands. Firstly, the schemes provide only a short-term fix for a long-term problem that doesn’t actually address the underlying challenge of high energy prices, which the UK remains acutely exposed to. Secondly, a long-term solution that could be provided by the market at no cost to the government is available. That solution is onsite energy.
The advantages of onsite energy are numerous. Large-scale rooftop solar installations, for example, can be deployed by businesses operating in a wide range of different industries, can be installed quickly and with no upfront costs for the businesses if a Power Purchase Agreement (PPA) is used. For energy intensive businesses, ground-mount solar with a private wire connection can be similarly effective.
Onsite energy can bring costs down while ensuring long-term certainty on price as well as making an immediate contribution to reducing carbon emissions. This makes it far easier for businesses to make better long-term decisions when it comes to financial planning by ensuring they are no longer exposed to the vagaries of an energy market where prices are set in response to global events.
Whilst onsite energy may not be the right option for every business, it can make a significant, positive difference for the majority. As a result, it seems a perfectly reasonable request that, as a condition for being given taxpayer-funded support, businesses should be expected to explore the possibility of using onsite energy to reduce their energy bills and improve the sustainability of their operations. After all, these businesses would gain a more significant long-term benefit from onsite energy as it provides them with a sustainable solution to the challenge posed by high energy bills.
This would also free up the Government to focus on addressing the small number of barriers that are frustrating the wider adoption of onsite energy, in particular grid access and planning constraints. Positive progress has already been made in tackling these challenges, and with a concerted effort there is much more that could be done. Equally importantly, it would also ensure that Government funds could be used to support more experimental technology with high upside but not yet a viable business case.
The problem at the moment is that the Government’s policies are effectively trying to correct for a market failure that does not exist. What the Government should be doing instead is providing support for the market to continue to deliver effective solutions whilst providing a backstop in the comparatively few instances where a market solution isn’t feasible.
This will help to ensure that taxpayer money is spent as efficiently and effectively as possible, and that energy-intensive industries in the UK develop long-term resilience so that, in the event of future price shocks, extensive Government support is not needed. After all, surely the most successful outcome for any policy programme is that it does not need to keep being repeated.
