Industrial and Commercial

Industrial and Commercial (I&C) sectors typically use large amounts of energy. Due to their heavy reliance on fossil fuels, these industries - which are vital to the UK’s national and regional economies - represent some of the most challenging areas to fully decarbonise by 2050.

 

Key insights

Annual Industrial and Commercial energy demand in 2050
 

Figure 13 for CV I&C key insights.jpg

 

  • The commercial sector is more straightforward to decarbonise than the industrial sector since most emissions come from heating and lighting, which can be reduced by investing in efficient lighting and low carbon heating. In contrast, some industrial sub-sectors are difficult and/or costly to decarbonise, because of their reliance on high grade heat for industrial processes.

  • In the commercial sector, electrification is frequently more cost-effective than hydrogen for decarbonising heating, even in System Transformation. Our updated modelling shows that electric heat pumps do not necessarily need the high levels of thermal efficiency previously assumed, to be cost-effective compared to hydrogen boilers.

  • The industrial sector - which is one of the most polluting, emitting 13% of UK emissions in 2020 - will need to switch to low or zero carbon energy sources like electricity or hydrogen to achieve net zero. This will require a significant transformation of infrastructure.

  • Small amounts of natural gas may be needed to some extent in all net zero scenarios for industrial sub-sectors that are particularly difficult or costly to decarbonise. Emissions from this will need to be abated using carbon capture, usage and storage (CCUS) or offset via negative emissions.

 

Where are we now?

In 2020, the Industrial and Commercial sectors accounted for around 500 TWh of energy demand, equivalent to 83 MtCO2e.
This made up approximately 35% of total energy demand in Great Britain (GB) and 17% of the UK’s greenhouse gas emissions.

 

Scenario Overviews – Industrial and Commercial

Consumer Transformation

The route to 2050

  • During the 2020s, the I&C sector invests in energy efficiency measures such as insulation and LED lighting, as well as more efficient appliances. This reduces overall energy consumption and costs.

  • Strong carbon pricing in the mid-2030s encourages I&C consumers to switch from fossil fuels to electricity, leading to a rise in electricity demand from 2035.

  • A minority of industrial consumers who cannot switch to electricity look to hydrogen and relocate nearer to a reliable source in the 2030s.

  • Fuel switching continues to 2050, with the local and national electricity network infrastructure developing to meet this increased demand.

What does 2050 look like?

  • Total demand for I&C in 2050 is 284 TWh.

  • Most industrial and commercial sub-sectors switch to electricity to decarbonise.

  • There is high participation in Demand Side Response (DSR) to shift industrial electricity use at times of peak supply or demand, in response to a price signal.

  • Industrial sub-sectors unable to decarbonise by switching to electricity have re-located to industrial hubs, converting their processes to hydrogen.

  • When hydrogen isn't feasible, a small number of industrial consumers use natural gas with CCUS.

System Transformation

The route to 2050

  • Uptake of energy efficiency measures increases thanks to government incentives in the 2020s, although consumer awareness and engagement is lowest compared to the other net zero scenarios.

  • Industrial clusters develop in line with Energy White Paper recommendations from the 2030s.

  • Switching to low or zero carbon fuels begins by 2035, due to the high cost of emitting carbon and the introduction of innovative technologies to decarbonise industrial processes.

  • Local and national electricity networks grow into the 2040s, in conjunction with the re-purposing of the gas grid to accommodate higher levels of hydrogen.

What does 2050 look like?

  • Total demand for I&C in 2050 is 330 TWh.

  • Industrial clusters encourage efficiencies in hydrogen and CCUS use, at sites where lots of heavy industry are located.

  • Any industrial sub-sectors located outside of these hubs connect to the national hydrogen network.

  • Whilst most industrial consumers have switched to hydrogen, the commercial sector sees electrification dominate as a more cost-effective route to decarbonise heating.

  • The natural gas used for extremely difficult to decarbonise industrial processes comes from the extremities of the networks, near coastal industrial clusters. It is used with CCUS to remove emissions.

Leading the Way

The route to 2050

  • High electricity prices and strong carbon pricing incentivises far-reaching energy efficiency investments from the mid-2020s.

  • Uptake of electric, hybrid and hydrogen low carbon heating technologies starts to increase from the mid-2020s too.

  • Fuel switching occurs from 2025, with a slightly higher proportion of industrial consumers switching to electricity, rather than hydrogen.

  • Electricity network investment continues to keep pace with fuel switching, alongside the widespread electrification of heat in the commercial sector throughout the 2030s and 2040s.

What does 2050 look like?

  • Total demand for I&C in 2050 is 299 TWh.

  • Thanks to frontloading of building insulation in the mid-2030s, fuel consumption in the commercial sector is lowest in this scenario.

  • Large numbers of I&C consumers have solar photovoltaics (PV) with storage installed, encouraging on-site generation and storage (for heat and electricity).

  • Time of use tariffs (TOUTS) are taken up by most consumers to turn up, down, on or off their demand in response to price signals. These happen automatically via smart-enabled devices.

  • Where hydrogen is not suitable, small amounts of natural gas are used along with CCUS to capture emissions.

Steady Progression

The route to 2050

  • Policy incentives are available to improve thermal or appliance efficiency in the 2020s.

  • Electricity and gas prices are low and carbon pricing has little to no impact on encouraging fuel switching.

  • In the 2030s and 2040s, some consumers buy more efficient replacement appliances

  • Some industrial processes switch to electricity from natural gas, oil, or coal thanks to developments in innovative technologies and economics.

What does 2050 look like?

  • Total demand for I&C in 2050 is 459 TWh. There is a small reduction in demand due to some upfront investments in energy efficiency measures in the earlier decades.

  • Emissions intensity per unit of output has still fallen compared to today’s levels.

  • Some oil is used by I&C consumers, mainly for industrial processes.

  • Hydrogen is blended into the natural gas network by up to 20% by volume.

  • Small numbers of commercial premises use low carbon heating technologies such as heat pumps.