Executive Summary

• A new study has noted how electricity has traditionally been more sensitive to changing prices and conditions than gas – which may have an impact on the UK’s clean energy ambitions
• The researchers, from Loughborough and Nottingham Trent universities, examined how different UK industrial sectors changed their gas and electricity consumption in response to levels of economic activity and shifting energy costs between 1990 and 2020
• The study concludes that changing energy pricing alone is unlikely to deliver the required transformation

A new study from researchers at Loughborough University and Nottingham Trent University has noted how electricity is more sensitive to changing prices and business conditions than gas – and the potential impact on the UK’s clean energy ambitions.

Dr Morakinyo Adetutu, of Loughborough Business School, and Dr Akin Sharimakin, of Nottingham Business School, examined how different UK industrial sectors changed their gas and electricity consumption in response to levels of economic activity and shifting energy costs between 1990 and 2020.

When electricity becomes comparatively expensive, companies will elect to reduce their consumption or continue using cheaper fuels rather than invest in electrical machinery and processes. This, the researchers note, does not make for an ideal portent when looking at the changes required for industrial electrification.

Alongside this, companies do not necessarily respond to price rises and falls in symmetrical or proportionate ways. Given responses also varied ‘considerably’ between industries, the researchers emphasised that policies should reflect the needs of individual industries instead of ‘assuming that every part of the economy will react to energy prices in the same way’, in the words of Dr Sharimakin.

With the Clean Power 2030 Action Plan aiming for clean sources to supply at least 95% of Britain’s total electricity generation by the start of the new decade, the researchers note the findings are particularly relevant to government departments developing the UK’s energy and net zero policies.

Energy pricing alone, therefore, is unlikely to deliver the required transformation. “Other measures, potentially including targeted financial support, investment in the electricity network and policies designed for individual industrial sectors, may be needed to help businesses adopt cleaner technology without damaging their competitiveness,” added Dr Adetutu.

The findings appear in the study titled ‘Asymmetric fuel demand in the UK industrial sectors’, published in the Energy Economics journal.

Picture credit: Created with Magnific