Government fires up £50m fuel switching plan for heavy industry

The government has today announced that it has made nearly £50m of funding available to help industrial firms switch to alternative fuels that can help them cut carbon emissions and reduce their reliance on expensive fossil fuels.

The announcement, which came alongside today’s mini-Budget, confirms that £49.4m is to be awarded to pioneering fuel switching projects across the country from a wide range of industries, including steel, ceramics, pharmaceuticals, and food production

Business and Energy Minister Lord Callanan said the government was “investing nearly £50m to back British industry, making sure they’re fit for the future and helping end their dependency on expensive fossil fuels”.

“Developing fuel switching technology will make this possible, accelerating the transition to cleaner fuels across our economy, and driving down costs for businesses,” he said.

The new funding is being made available through phase two of the government’s £55m Industrial Fuel Switching competition, which aims to support the development of new fuel switching technology in the UK and help attract private investment into sector.

Under Phase 2 of the Industrial Fuel Switching competition, fuel switching projects can apply for a share of £49.4m government funding. It follows phase one of the competition, which saw £5.6m awarded in May 2022 to 21 projects to undertake early-stage feasibility studies into their project designs.

Winners under phase one included projects to help the ceramics, food production and steel sectors switch from natural gas to hydrogen; plans to develop large scale heat pumps for the food and pharmaceutical industry; and studies exploring the potential of switching glass making facilities from running on natural gas to gasified waste and biomass.

The funding is likely to be welcomed by growing numbers of industrial businesses that are exploring the use of hydrogen, renewable power, biomass, and biogas in support of the net zero targets.

The economic case for such projects has strengthened over the past year, as wholesale gas prices have soared, leaving many industrial firms facing drastically increased energy costs.

However, the latest funding comes amidst continuing uncertainty over the future of the government’s wider industrial decarbonisation strategy. The new administration has signalled that it sees hydrogen and other clean fuels as a key part of its long-term net zero strategy. But reports have indicated that the planned Energy Security Bill – which includes new measures designed to mobilise investment in hydrogen and carbon capture and storage infrastructure – could be delayed or scrapped altogether.

The news comes on the same day as the government announced its much-anticipated mini-Budget, which revealed plans to relax planning rules for onshore wind farms and deliver a modest increase in funding for energy efficiency programmes, alongside controversial moves to slash taxes and accelerate road building plans.

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