Dear Fuad,

The government has published its Industrial Strategy, including a 10-year sector plan for clean energy industries. 

The plan seeks to strengthen domestic supply chains, scale up key technologies and align policy and infrastructure to support clean energy. The headline ambition is considerable: to double annual investment in ‘frontier’ clean energy technologies to over £30bn by 2035.

To achieve this, Great British Energy (GBE) and its nuclear arm (GBE–N) will invest £8.3bn over this parliament. A new £1bn Clean Energy Supply Chain Fund will be launched to support companies with high growth potential. The National Wealth Fund will be capitalised with £27.8bn, with £5.8bn earmarked for clean energy infrastructure.

At the heart of the plan is a commitment to providing long-term certainty, easing investment barriers and developing a skilled workforce to power the energy transition. There is some mention of a just transition, with explicit call-outs for ex-industrial areas, North Sea oil and gas workers moving into offshore wind, and ‘good jobs’ with strong trade union recognition.

The wider Industrial Strategy sets a clear ambition to “tackle high industrial electricity costs, ensure strategic investment projects receive timely grid connections, invest in clean energy and strengthen our connections to the EU energy market”.

While much of what’s included has already been announced, some interesting insights are pulled out below.

Reducing electricity costs for manufacturing industries

From 2027, the government will introduce a new British Industrial Competitiveness Scheme. This will cut electricity costs by approximately £35-£40/MWh for energy-intensive manufacturing sectors and could benefit 7,000+ businesses. Eligible businesses will be exempt from paying the costs associated with the Renewables Obligation (RO), Feed-in Tariffs (FiTs) and the Capacity Market. Eligibility will be determined following consultation, which will open shortly.

The sector plan states that “these measures will be funded by bearing down on levies and other costs in the energy system”. One possibility seems to be that the contract length of new Contracts for Difference (CfDs) will be extended to reduce strike prices and additional costs for consumers. However, given that the government was presumably already intending to ‘bear down on levies’, it's hard to avoid the conclusion that this is moving costs from high energy users to general energy consumers.

REMA

“The government will conclude the policy development phase of the Review of Electricity Market Arrangements (REMA) shortly. In order to provide investors with sufficient confidence, we have also confirmed that projects allocated to the next auction round will be given the same legacy or transitional arrangements as existing CfD agreements, if we decide to implement zonal pricing.”

We now expect the REMA decision in early July. The Industrial Strategy suggests that anyone with an existing CfD or receiving one in AR7 will be protected. The government has already indicated that the price risks will be addressed by:

• Using the local zonal price as the reference price
• Reducing merchant tail risk by extending the duration of CfDs under zonal pricing.

They have also indicated that volume risk will be addressed via a compensation scheme.

Grid connections

The Industrial Strategy recognises the strategic importance of tackling grid connection delays. The government aims to “accelerate grid connection timelines for major investment projects, using our regulatory levers and convening powers to reduce waiting times”. A new ‘Connections Accelerator Service’ will be created for demand projects in 2025.

During our ‘in conversation with’ event last week with Fintan Slye, chief executive of NESO, developers voiced concern over the transmission operators’ ability to deliver infrastructure and grid connections at pace. The Industrial Strategy highlights Ofgem’s end-to-end review of connections, which includes proposals for new incentives and stronger accountability for transmission operators. These are an essential counterpart to grid connections reform.

EU cooperation, batteries and more

The government aims to deepen energy cooperation with the EU, including participation in EU electricity trading platforms. In Regen’s view, this is a very positive development with the potential to reduce constraint costs. The Strategy also indicates deeper cooperation on regulation for clean energy technologies, and aligning the UK’s Emissions Trading Scheme with the EU.

The ‘Advanced Manufacturing Sector Plan’ outlines measures to support the UK’s battery industry, including £452m of funding towards a Battery Innovation Programme (formerly the Faraday Battery Challenge) to 2030. A forthcoming Circular Economy Strategy will address end-of-life battery management, including recycling.

Other commitments include:

• Publishing an Onshore Wind Strategy in 2025
• Publishing a revised Hydrogen Strategy in 2025
• Publishing a Critical Minerals Strategy in 2025
• Delivering regional communications campaigns on onshore wind
• Launching an industry-led Energy Skills Passport – a digital tool to help oil and gas workers move into offshore wind
• Launching a live tool, the Clean Energy Map, plotting a range of active clean energy projects supported by the government since July 2024 (currently, the link doesn’t appear to be working).

We will keep members informed on consultations and opportunities to input.

With best wishes,

Alex Temple

Policy analyst