UK manufacturers could unlock billions in clean energy dividends to strengthen competitiveness
UK manufacturers could unlock a clean energy dividend worth more than £2 billion by 2035 by switching away from gas and scaling up proven energy technologies, according to independent economic modelling published by E.ON.
New polling from E.ON reveals four in five (89%) business leaders expect to invest in low-carbon tech within two years but cost and uncertainty remain major barriers.
The analysis is part of E.ON’s new ReIndustrial Revolution report exploring how smarter energy choices help business turn energy from a cost to be managed into a competitive asset that strengthens performance, supports investment and makes the transition to new energy work for everyone.
The report argues energy can be a source of lower costs, resilience and growth – but only if businesses have the confidence and support to invest. While the clean energy opportunity extends across the UK economy, the report focuses on manufacturing as one of the sectors where proven technologies such as onsite generation, smart energy management and waste heat recovery can deliver the biggest gains.
Independent economic impact specialists Development Economics modelled the impact of four proven interventions across UK manufacturing: energy audits, smart monitoring and management systems, on-site renewable generation and storage, and waste heat recovery.
Under the highest adoption scenario, UK manufacturers could cut annual gas consumption by 15.2 terawatt-hours (TWh) and electricity use by 8.8TWh by 2035 – the same gas use as more than 1.2m average UK homes and electricity needs of 3.3m UK homes.
The analysis also sees annual gas cost savings of £406m by 2035 and cumulative gas cost savings of £2.1bn between 2027 and 2035.
E.ON polling of more than 500 UK business leaders shows four in five expect to invest in energy efficiency or low-carbon technologies within two years, but almost half cite upfront costs as the biggest barrier, and more than a third say uncertainty over returns on investment is holding them back. This shows businesses are ready to invest but need clearer policy support to unlock investment:
Make electricity more competitive for business: Shift policy costs such as the Renewable Obligation and Feed-in Tariffs from electricity bills into general taxation, or a dedicated Energy Transition Fund, helping firms electrify without undermining competitiveness.
Provide long-term policy certainty: Create a clear pathway to close the gap between electricity and gas prices to support industrial electrification, strengthen commercial energy efficiency standards and scale up proven low-carbon technologies.
Back investment in proven energy upgrades: Establish a Business Energy Upgrade Scheme that offers advice, grants, low-cost finance and tax incentives for technologies such as heat pumps, solar, batteries, smart controls and waste heat recovery.
Reward flexibility: Reform balancing and network charging so businesses can reduce system costs by shifting demand, using storage and participating in flex markets.
Speed up grid access and local infrastructure: Accelerate grid connections, reinforce local networks and provide clearer local energy plans so businesses to invest with confidence.
Chris Norbury, Chief Executive of E.ON UK said:
“Businesses don’t need to wait for tomorrow’s technology to start seeing the benefits of cleaner, smarter energy. We have the solutions and we have them now. We’re already helping customers to use less, waste less and generate more of their own power – from geothermal heating at Nottingham’s Queen’s Medical Centre, to the UK’s largest roof-mounted solar scheme at the Port of Liverpool, to our Strategic Energy Partnership with Coventry City Council, which is a blueprint to drive the energy transition for communities across the UK.
A £43 million project that forms part of Nottingham University Hospital’s journey towards net zero, has been completed. The scheme has seen around 12,000 windows at the QMC replaced with new double-glazing, and heat pumps resulting in a much more energy efficient building and a better environment for patients, staff and visitors.. Image: E-on
“Energy can be a source of resilience, competitiveness and growth. Removing barriers to investment means more businesses can cut costs, reduce carbon and help build the resilient energy system Britain needs.”
UK manufacturing currently contributes around £197bn to the economy and employs more than 2.1 million people. But the sector remains highly exposed to energy costs, consuming 82TWh of electricity and 193,000GWh of gas each year. With output forecast to grow by 2035, E.ON says action on energy efficiency will be increasingly important to protect margins and support investment.
Hear Chris Norbury talking affordability with Adam Scorer of National Energy Action live on stage at GRID-UK at Excel, London on 1 October. Admission is free. Register here.