Cornwall Insight and CPI publishes analysis into the economic practicality of electrification

17 February 2022

CPI has updated the UK Pulp & Paper Sector Decarbonisation Roadmap, taking into account new policy changes and the latest research into decarbonisation technologies.  

With paper-based materials being based on renewable and recyclable wood fibres, such products are seen as key in the move to a circular and bio-based economy.  However, as with a number of other foundation industries, production is intrinsically energy intensive, with (for papermaking) electricity used to drive the production process and heat to transform a water-based fibre mixture into reeled-up paper product in seconds.  To retain domestic manufacturing, Energy Intensive Industries (EIIs) operating in open markets need access to internationally competitively priced energy.  

Unlike some other products, papermaking has no process carbon emissions; and grid supplied electricity is subject to its own decarbonisation process.  It follows that the decarbonisation challenge for the UK sector revolves around decarbonising heat, currently largely based on natural gas.      

The updated analysis of the sector decarbonisation plan reconsiders the key ideas and methodologies to decarbonise heat use and highlights technical and economic issues that need to be jointly addressed by Government and industry.      

One of the potential ways to decarbonise production is to electrify heat generation by switching to grid supplied power from a decarbonised supply network.  

Alongside the update to the overall Roadmap, CPI has also commissioned independent experts to further consider the practicality and economics of switching from gas to electricity in UK paper mills.  Such a switch would not only require heat boilers to be replaced with electrical boilers, but also progressively decommissioning the sector fleet of gas-fired Combined Heat & Power (CHP) plant and replacing their electricity with grid imports and electrical boilers.   

The report published today draws on the expertise of Cornwall Insight to look at the Operating Cost implications of switching to grid supplied electricity.  

The key conclusions are that making heat from electricity remains substantially more expensive than making heat from natural gas (even during the current energy crisis); and that the way UK industrial electricity is priced is far higher than in other major economies.  To successfully electrify heat use by UK-based Energy Intensive Installations, both of these issues need to be resolved.  The report goes on to suggest a number of strategies that policymakers could deploy.

Steve Freeman (CPI Director of Energy & Environmental Affairs) commented:

“Today’s report highlights that electrification of heat can only work if substantial changes are made to the operation of the national grid to provide competitively priced electricity to UK Energy Intensive Installations.  These changes are not in the hands of industry and need action from Government. 

“In reality, decarbonisation will be delivered by a combination of the ideas discussed in the Sector Roadmap, and not electrification on its own.  However, electrification is identified as the key technology for a number of sites and the current fleet of installed CHP Plant also play an important role in supporting the National Grid.  This analysis is a sobering look at the economic implications of a drive for electrification and a wake-up call to regulators that major changes are needed to the operation of the UK electricity system if electrification is to become a viable decarbonisation technology.”   

Andrew Large (CPI Director General) added:

“The updated sector decarbonisation roadmap shows that we understand how the sector can decarbonise, but we need support both in the short term during the current energy crisis and also through the Transition to a Low Carbon economy.  Simply allowing the costs of energy in the UK to remain higher than elsewhere and to increase even further, is a receipt to move production to places with lower energy costs outside the UK.  

“If the Government is to succeed in growing a decarbonised manufacturing base, then simply expecting high prices to trigger change won’t work because the alternatives are not currently viable.  The failure to support industry through the current energy crisis and not act to address the huge increase in the cost of carbon are not good signs that these fundamental issues are understood at the highest levels of Government.”            

Additional to the economic issues discussed in the report published today, a huge increase in the use of electricity would also add considerable pressures to the national grid, requiring major upgrades to the distribution network and upgrading supply connections into industrial sites, as well as replacing the electricity lost to the grid from sector CHP plant exports.  These issues are further considered in a second piece of analysis due to be published in early March.

Notes for editors:

CPI is the leading trade association representing the UK’s Paper-based Industries, comprising paper and board manufacturers and converters, corrugated packaging producers, makers of soft tissue papers, and collectors of paper for recycling.

CPI represents an industry with an aggregate annual turnover of £12 billion, with 56,000 direct and a further 93,000 indirect employees.


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