EIC editorial

by Stuart Broadley

CEO, Energy Industries Council

The 8x Cs of energy transition for supply chain success

EIC kicks off 2021 with the 8x Cs of energy transition that, if acted upon by government and industry, ensure energy supply chain success.

The hyper-topic of energy transition is thrown around as the obvious solution to reach net zero carbon targets. The reality though is that most new energy transition technologies are still years away from being proven, safe, scalable and economically affordable. And the clock is ticking. To meet 2050 net zero carbon goals, countries need to rapidly transition from where they are today – some with scaled and affordable renewable electricity, but most without – to a future with fully decarbonised power, industry, transport and heat. This transition needs to happen at pace and will require new technologies, at scale. Excitingly, and foreseeably, this should provide massive opportunities for almost all businesses across the energy sector. EIC analysis highlights 8x Cs of energy transition that, if acted upon by government and industry, will ensure supply chain success. Energy transition remains a complex topic with many unknowns, but the EIC believes that these 8x Cs of energy transition are key.

1 CLN: Clean

• Government o Clean energy, clean growth – focus UK energy policy on authentically green technologies at the start, such as green hydrogen, wind powered electrification and nuclear. o Focus CCUS investments more on decarbonising industry rather than CO2 capture for blue hydrogen.

o Clean conscience – re-establish higher UK aid budget to ensure a just transition. • Industry o Clean sheet – address your own carbon footprint quickly. Your customers will demand it, so start now.

2 CON: Confidence

• Government o Confidently pitch huge UK ambition to the world at COP26. o Aim to be top five globally in key energy transition technologies, confidently picking winning technologies for the long-term. EIC data shows that green hydrogen projects globally outshine blue hydrogen projects by a factor of 10:1 – don’t miss the boat, step up UK investment in this key new and authentically clean technology that the UK is geologically perfect for. • Industry o You have the capability and ability to grow, invest and export.

3 CTL: Control

• Government o Control the outcome, by filling in the supply chain gaps in the detail of the energy white paper, legislating and regulating supply chain investment and success, and communicating and delivering against a supply chain plan, intervening where necessary. o Link energy security to a planned and controlled, rooted and healthy supply chain. o Learn from offshore wind; don’t leave supply chain success to chance. Set clear UK content requirements for strategic UK projects, with both O&M and technology rules for UK-controlled scope.

4 C£$: Cash

• Government o Assist COVID recovery with a green levy on businesses and consumers – direct the money raised towards UK utility-scale clean growth projects. o Supply chain companies cannot live on sporadic opportunities, they need a consistent pipeline of substantial green projects to invest properly themselves. • Industry o Business leaders need to get more involved. Become an expert in how to access and win government contracts, funding and support.

5 COL: Collaboration

• Government o Co-ordinate collaborative Government-Industry-Society communication and working. Excite the sharing of ideas, make decisions at pace, listen to all corners of the UK and its wide range of views, feed new technologies, and root clustered capabilities, build back better, and watch energy exports take off. • Industry o Decarbonisation affects everyone and everything – there is no longer an oil and gas or renewable industry, for instance – all sectors are now part of the clean, green economy and there is a key role for all technologies including transport, nuclear, renewable, gas, homes, grids, interconnectors, fuel cells and so on. o Embrace the concept of being part of a single and integrated UK energy supply chain, active in multiple sectors. Beyond energy, explore entering new sectors.

o The planet and the environment concern all sections of society, so make sure your own business is fully diverse and inclusive, to ensure you can attract and retain the best talent. o Diversify as fast as you can – the days of relying on just oil and gas are fading, although EIC data shows that oil and gas projects will account for more than 50% of energy export opportunities (by value) for at least the next five years.

6 CAP: Capability

• Government o EIC has done the hard work to assess UK energy supply chain capability (3,500+ amazing businesses) – use the data, nurture what we have, make smart ‘seeding and rooting’ capability decisions. o Energy transition is the next industrial revolution, and global competition will be fierce. o The UK’s highest emission zones tend to be in lower economy and high unemployment regions of the UK – take this chance to ‘level up’ and ‘build back better’ with regional, net-zero investment, training and job growth. • Industry o Energy transition is five years from providing supply chain opportunities, so retain your core business focus in the short term while exploring new technologies for the future.

7 CUK: Content (UK)

• Government o Link energy policies to UK content requirements and make the threshold higher. o Link the UK content threshold to key technologies, not just O&M. Accepting that O&M is good for levelling up and jobs, this is not exportable, so we only grab a small % of the global market if we rely on O&M-related UK content. o Drive UK content for core manufacturing of energy transition products, and new areas of research and education. o Charge UK Export Finance ECA funding to drive growth in UK supply chain participation in global energy transition projects.

8 COM: Competitiveness

• Government o Industry will come back from COVID, so set post-COVID policies and funding mechanisms that are catalysts for rapid growth. o There is a correlation between countries that lead with digital adoption and those that lead in decarbonisation technology and ambition – so set policies that drive digital leadership. o Continue to provide funding and support to oil and gas exporters, at least for five more years.

• Industry o Don’t give up on digital adoption with risk-averse energy clients – the key to global competitiveness in energy transition will be whether your business has the highest rate of digital adoption and innovation. o Invest in UK manufacturing for energy transition, not just UK services. o The UK energy supply chain has demonstrated unbelievable resilience during the low oil price years since the 2014 oil crisis and more recently the pandemic. This perfectly positions those businesses to grasp the opportunity to capture market opportunity of energy transition in the months and years to come.

The EIC, as the voice of the integrated supply chain, is working with government and members to drive forward the policy required to ensure that the supply chain is rooted in the UK and has the capability to seed and develop and continue sharing its expertise on a global scale. We will continue to call for action to ensure the 8C’s are heeded and if you would like to learn more, or for more information, please contact the EIC.