Energy and R&D

Neil Eisberg | Editor

The energy crisis continues to cause global disruption, pushing inflation rates across many countries to levels not seen for many years. Governments are scrambling to raise interest rates to stop the rise, however interest rates are a blunt instrument, with limited impact on the cause of the inflation but substantive knock-on effects.

The energy crisis has exposed fundamental weaknesses due to a lack of any energy security strategy in many countries. These countries are now looking to urgently address this, by seeking new energy suppliers and re-evaluating strategic storage capabilities.

We are witnessing significant diversions in government strategies. Countries, such as Germany and France, are nationalising parts of the energy sector and are providing price caps to cover escalating prices to consumers. Germany has been building gas stocks for the winter, whilst in the UK Centrica has received approvals to reopen Rough, a gas storage capability decommissioned in 2017 after it was deemed by the UK government to be ‘not necessary’. It has been reported that several industrial companies are considering moving manufacturing from Europe to the US to protect their competitiveness.

The war in Ukraine has triggered fundamental changes that will reshape strategic relationships and global supply chains in ways that could not have been predicted two years ago.

Disruptive change has also come to the UK. Three days in early September 2022 saw not just a change in monarch but also a new Prime Minister and cabinet.

The incoming Prime Minister, Liz Truss set about implementing the promises about tackling the current crises made in the run up to her taking over the leadership. For example, she fulfilled her earlier promise to provide support for rocketing domestic energy bills. There was, however, a high degree of vagueness regarding support for businesses, despite a pledge of assistance. A later announcement confirmed a six-month support package for industry but also including schools and other sectors.

Following the Prime Minister’s announcement, Steve Elliott, Chief Executive of the UK Chemical Industries Association, said: ‘I think chemical businesses will be breathing a sigh of relief over what the Prime Minister has said, but we still do not know the detail. I am grateful that her government is acting fast to find solutions, as time is running out.

‘On the surface we welcome the promised six-month cap on the price per unit of gas and power. This will help see the sector through the coming winter, but we obviously need to know as soon as possible what that cost per unit of gas and power will be and whether the rate is the same for business as it would be for domestic consumers.’

Recent announcements by the new Chancellor about significant tax cuts might be a good pledge to the electorate, but they have sent the pound to an all time low against the dollar as the markets wonder how the UK will balance its books into the future.

In this volatile environment many science-based companies continue to push forward with advancing new technologies that will deliver future value whilst underpinning the ‘green growth’ agenda and help deliver net zero.

The chemical sector accounts for around 4% of global GDP and sustains 15m jobs worldwide, but increasingly commentators are calling out this sector – noting the negative impact on climate change of some products and processes and highlighting the areas where the sector could do more to underpin new technologies. One recent report published by Systemiq and the Centre for Global Commons at the University of Tokyo states ‘By embracing a ‘planet positive’ circular and net-zero emissions transition, the chemical system could grow 2.5x by 2050 and enable transitions to net-zero emissions in other sectors, whilst keeping its own Scope 1-3 greenhouse gas emissions in line with the Paris Climate Agreement.’

None of the solutions proposed are simple but perhaps it is time for industrial companies to increasingly work together to pool resources to accelerate the delivery of new sustainable products and supply chains that will address the societal needs of today.