U.K. Industry Backs Green Levies for Gas to Reach Net-Zero Goal

(Bloomberg) -- Big industrial users of energy in the U.K. would support shifting the cost of some government green policies to natural gas and away from power as a way to spur the electrification of the economy.

Some climate policies, such as subsidizing renewables, are currently loaded onto electricity bills. This makes power more expensive relative to fossil fuels and runs counter to a push to electrify more sectors, according to the authors of a University College London report published by the Aldersgate Group, which campaigns for green policies on behalf of industry.

To reach its net-zero emissions target, the U.K. has to find ways to decarbonize industries like steel, cement, glass, and ceramics that rely on fossil fuels. Electrifying furnaces and processes is seen as key to meeting this goal, but the upfront expense of new equipment plus the relative cost of power makes this a high-priced prospect.

“To switch from firing with gas we need to move to hydrogen, bioenergy, or electricity,” said Laura Cohen, Chief Executive Officer of the British Ceramic Confederation. “Most of our members are paying an eye-watering 130 pounds ($179) a megawatt-hour which makes electrification uneconomic.”

U.K. Utilities Looking to a Future Without Gas to Heat Homes

In an effort to make electricity cheaper for charging cars and heating homes, Prime Minister Boris Johnson's government is considering moving some levies away from power to gas bills.

Shifting policy costs could ensure the expense of decarbonization is more evenly spread across different forms of energy, rather than focused on electricity consumers, the report said.

The report comes just as power and gas prices are at record levels, fueling concerns about inflation and the cost of reaching net-zero goals. Sustained high prices could stall the economic recovery as energy-intensive industries may need to curb output.

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Heavy industry contributes 170 billion pounds to the U.K. economy and directly employs nearly 3 million people, according to the government. Making Britain an attractive place for manufacturers is going to get more challenging.

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