Our Energy and Economic Security

There has been much made recently of the UK’s dependence on China for our clean energy transition, principally for the supply of critical materials and components in solar panels, batteries and the like.  It is true that the UK has benefitted from Chinese supply and manufacturing might.  Over half of GB’s electricity is now generated from clean technologies and the price we pay for these has plummeted.  China has played a significant role in this often under-appreciated success story.

But here’s the dilemma.  To get the job done on net zero we need manufacturing capacity that we just don’t have at home, and currently much of that is in China.  But with geopolitical turmoil and protectionist postures now prevalent across superpowers, we should consider the risks associated with such concentrated supply chains.

Let me start by saying that the answer is not to revert to oil and gas expansion in the North Sea as some have suggested.  While fossil fuels will remain part of our energy mix for many years to come, the fossil fuels ship has sailed.  The benefits of clean energy are now irresistible.  Just take the economics, clean energy sources like solar and wind are now cheaper than a new gas plant.  Investors have long seen the writing on the wall and when factoring in the jobs and growth potential of these technologies of the future, it’s a slam dunk.  And that’s without mentioning the vital, perhaps indeterminate, importance that clean energy plays in staving off the climate and nature emergency – the biggest threat to our economic security.

When it comes to energy security, a renewables-based energy system is more robust because it reduces dependency on volatile international energy markets and supplies (we all remember the extreme price hikes following the invasion of Ukraine); it harnesses home-grown and uninterruptable (by State actors) resources such as the sun and wind; and it involves multiple decentralised technologies with fewer single points of failure.  I hear cries of what happens when the sun doesn’t shine, and the wind doesn’t blow?  Well, here’s the thing, over 50% of electricity today is from renewables and the lights haven’t gone out (nor have we bankrupted the economy come to that).  A clean power system involves multiple of sources of energy (interconnectors, nuclear, renewable fuels, etc) and system management techniques (like storage and demand side response).  This ensures we have a continuous source of power whatever the weather.

All that said, back to the risk associated with concentrated supply chains for our clean technology.  We must recognise that Chinese manufacturing heft has dramatically reduced the costs of clean energy and is likely to continue to do so.  As such, it is important we further establish our strategic partnership with China in order to secure these existing supply chains (let’s avoid baby and bathwater).  However, we should also diversify across other international supply chains through our trade policy, cementing relationships with other countries which manufacture and process critical minerals and components.  We should also stimulate more UK manufacturing in this rapidly expanding sector.  A good example is the government’s ‘Sustainable Industry Bonus’ currently used to incentivise wind and solar supply chains in the UK.  This should be extended to other renewable technologies.

Lastly, and here’s the biggie, we should develop a circular economy in batteries, solar panels, switching gear, cabling and other clean tech components.  This means reusing, re-purposing and recycling materials such that we extract more value from them and critically keep their minerals in the UK.  Over time this will greatly reduce our dependence on international supply chains.  Not only is a circular economy good for material security it is also a huge economic opportunity.

We should keep in mind that concentrated supply chains are not the only risk to our energy infrastructure.  We also need to head off cyber and physical attack, build robustness in the face of more severe weather driven by climate change, manage exposure to foreign over-investment, and mitigate the interdependency with other sectors such as telecommunications – to name just a few.  We are already managing these risks, and they exist whether or not we transition to clean energy.  So, let’s not harp back to fossil fuel expansion but double down on the clean energy revolution.  The sooner we get the job done the sooner will we enjoy greater energy and economic security.

Trevor Hutchings – Chief Executive, Renewable Energy Association