Journal article
Clusters in Context: Towards a Typology of Industrial Decarbonisation Initiatives
Mar 2025
By Imogen Rattle and Peter Taylor, University of Leeds
In the UKERC 2024 Review of Energy Policy we asked: Will the Modern Industrial Strategy energise industrial decarbonisation? With the publication of The UK’s Modern Industrial Strategy last week,[1] our answer is broadly positive, though questions remain on delivery timelines, funding, and whether the outlined measures will be sufficient to decarbonise the entire sector.
When compared to the Green Paper, decarbonisation is now more firmly embedded at the heart of the Government’s industrial and economic vision. As it notes:
“There can be no plan for economic stability or sustainable growth that does not include a credible plan for net zero.” (p.35)
The strong emphasis on decarbonisation is welcome. But, as ever, the devil will be in the delivery. Key questions remain around the alignment of a number of still-to-be-published supporting strategies and Sector Plans, eleven of which are referenced,[2] although an updated Industrial Decarbonisation Strategy is not among them.
Still, positive steps have been taken. Last year, we noted an omission in the Green Paper, which we suggested “currently says very little about how the Government sees the future of energy-intensive industrial sectors, such as steel, cement and chemicals, that have underpinned UK manufacturing for decades.” (p.9)
The final strategy places more focus on these sectors. In addition to the original eight high-potential growth sectors, the so-called IS-8 (advanced manufacturing, creative industries, life sciences, clean energy, defence, digital technologies, professional and business services, and financial services), there is now a ninth objective, which aims to “strengthen the resilience of all the IS-8 by supporting the foundational industries and their supply chains which provide vital materials and parts, from steel to chemicals, or manage essential infrastructure, from ports to electricity networks.” (p.14)
Unlike the IS-8, foundational industries will not have a dedicated Sector Plan. However, the strategy does recognise their strategic value, based on analysis of the inputs they provide to the IS-8. A new Supply Chain Centre will take this work forward. It will conduct deeper assessments of these dependencies, consider future demand trends, and identify where further government intervention may be required. This work is expected to be completed by the end of 2025, and we hope it will provide greater clarity on how the Government sees the future of the sector.
The strategy also addresses three cross-cutting issues that are particularly relevant to energy-intensive industries.
UK industry has long argued that it faces higher electricity costs than its European competitors, driven by a combination of higher fossil fuel prices, the cost of grid investment, exchange rate fluctuations, and differences in how policy costs are distributed across consumer groups.[3] In response, the Government has announced new measures aimed at easing this burden, but only for a select group of businesses, and not with immediate effect.
From 2027, a new British Industrial Competitiveness Scheme will offer selected businesses exemptions from key energy levies, including the Renewables Obligation, Feed-in Tariffs, and the Capacity Market, potentially reducing their electricity prices by £35–£40/MWh until 2030. The scheme is expected to apply to around 7,000 firms, with final eligibility to be determined following a forthcoming consultation.
Additional relief will be provided via the expanded British Industry Supercharger, which will increase compensation for network charges from 60% to 90% for approximately 500 of the UK’s most energy-intensive firms, starting in 2026.
These steps are designed to narrow the gap between UK and European electricity prices, supporting the competitiveness of large manufacturers. Funding is expected to come from reductions in energy system levies and revenues generated through strengthened carbon pricing, including potential linkage with the EU carbon market. However, key details are presently unclear, particularly around the operation of the funding mechanisms and the impact on other non-domestic users, particularly SMEs.[4]
Grid connection times are a well-documented barrier to industrial electrification, with upgrades typically taking around five years to resolve.[5] Recent UKERC research highlighted that, without future upgrades to the electricity distribution network, around 65% of large industrial sites could be constrained in terms of electricity capacity by 2050.[6] The strategy proposes a new ‘Connections Accelerator Service’ expected to launch by the end of 2025. This service is intended to prioritise projects that deliver high-quality jobs and significant economic value. Additionally, plans are underway to strengthen electricity network supply chains, including exploring a Market Demand Guarantee to boost domestic production of key electricity network equipment.
Existing commitments are also confirmed: the Planning and Infrastructure Bill, currently before Parliament, will grant powers to designate strategic projects and reserve future grid capacity, reducing wait times for major investments. Ofgem’s end-to-end review of the connection process, due later this year, will set out proposals to strengthen the incentives and obligations on network companies to deliver timely connections, better customer service and more accessible connections data.
There is a recognised need for a public data strategy that links data on emissions, technologies, and related environmental, social, and economic impacts across industry.[7] The strategy makes welcome commitments to enhancing data infrastructure, including clearer valuation frameworks and over £100 million for a National Data Library. Additionally, it allocates £36 million to support new Smart Data schemes, currently focused on energy and financial services, which will enable consumers and businesses to securely share their data with authorised third parties in exchange for improved products, tailored services and financial compensation. This is an important step. As the strategy notes:
“Without direct incentives for businesses to share data, which can include discovering market value for it, guarding data is often seen as the more attractive commercial choice.” (pp.60-61)
However, the current initiatives primarily focus on energy data. Without stronger incentives and wider scope, it seems unlikely these measures will be sufficient to fully address the complex data challenges facing the foundational industries.
The Modern Industrial Strategy represents a clear step forward in embedding net zero and industrial decarbonisation within the UK’s economic vision. It brings renewed focus to foundational industries and introduces important measures on electricity pricing, grid connections and data infrastructure. However, while the strategy provides a promising framework, significant questions remain over funding clarity, implementation timelines, and whether these efforts will be sufficient to meet the diverse needs of firms across the sector. As ever, the real test will be how effectively these commitments translate into tangible support and meaningful change on the ground.
[1] UK Government. 2025. The UK’s Modern Industrial Strategy.
[2] The Trade Strategy; the G2G Strategy; the Resilience Strategy; the Critical Minerals Strategy, the Circular Economy Strategy, the Steel Strategy; the Clean Energy Workforce Strategy; the SME Strategy; the Life Sciences Sector Plan; the Defence Sector Plan and the Financial Services Sector Plan
[3]Aldersgate Group. 2021. Policy briefing delivering competitive industrial electricity prices in an era of transition.
[4] Hampton, S., & Rosenow, J. 2025 UK plan to cut energy bills for industrial firms threatens to leave small businesses out in the cold. The Conversation. https://theconversation.com/uk-plan-to-cut-energy-bills-for-industrial-firms-threatens-to-leave-small-businesses-out-in-the-cold-259707
[5] DESNZ. 2024. Enabling industrial electrification: Call for evidence on fuel-switching to electricity – summary of responses.
[6] Gailani A, Taylor P. 2025. Assessing electricity network capacity requirements for industrial decarbonisation in Great Britain. Energy Policy. 201,114559. https://doi.org/10.1016/j.enpol.2025.114559
[7] Norman, J., Barrett, J., Garvey, A., Taylor, P.G., Goodwin, J., Gibbs, M., German, R. and Garland, L. 2020. A data strategy to promote the clean growth of UK industries. CREDS.