Christophe Williams: heat is the sleeping giant of net zero for manufacturers

It’s a tough time to be a manufacturer. Whether it’s Trump’s tariffs, supply chain issues raising costs or falling demand, the recent UK Purchasing Manager’s Index reflects the struggles that our manufacturing industry is facing. With this in mind, it’s hardly surprising that more manufacturers are looking to renewable energy to help lower costs and enhance decarbonisation in manufacturing. They’re quite right to think this way.

Natural gas prices are forecast to increase in 2025 and 2026, and the lack of progress in ceasefire negotiations between Russia and Ukraine means that the price volatility of the past four years will not cease.

The only way for manufacturers to increase their resilience to price rises is to switch to renewables. The main driver of this so far has been electrification, and the pace of its growth has been staggering. In the first half of this year, the UK produced a record 9.91 TWh through solar power, while gas fell to just 21% of electricity in June.

This will continue to drive net zero, especially for domestic usage, but for manufacturers, the situation is a little bit more complicated.

First, the power system is congested, with long connection queues and uncertain timelines. Queues and constraints are now a business risk. If your plant needs a bigger connection, you could be waiting years, and paying for the privilege.

Second, this congestion isn’t going anywhere, as demand for electricity is set to soar. The National Grid estimates it will rise by 50% by 2035, driven by the adoption of AI, EVs and electric heating systems like heat pumps.

Third, electricity prices for manufacturers are skyrocketing. The most recent data shows that Britain has the highest industrial energy prices out of any International Energy Agency member country, with prices 46% higher than the IEA median.

This is not to say that we shouldn’t continue to invest in clean power. We should – it’s delivered numerous benefits so far, and these will only get bigger.

But the current plans by the National Grid to upgrade its network across the country is set to cost up to £35bn from 2026 to 2031.

What is currently missing is a strategic focus on heat decarbonisation.

In British industry, heat makes up around 70% of total energy demand. Across the whole economy, heat accounts for 37% of the UK’s carbon emissions (17% from space heating and 14% from industrial heat). While electrification has been in focus so far, heat really is the sleeping giant of the transition.

Decarbonising heat quickly and at scale has proven to be very hard for the commercial and industrial sector. For decades they experienced a heavy reliance on natural gas and switching to a technology mix often comes with high capital costs.

In the case of electrification they are faced with the known energy infrastructure constraints, and this dilemma has only been enhanced in the past by uncertainty around policy and regulatory issues.

However, businesses can generate heat directly at the point of use with ‘grid-edge’ renewable heat technologies. These are customer-side solutions that deliver energy without the need to pull power from the grid.

Solar thermal is a good example. Rather than traditional solar PV panels, which generate electricity, solar thermal collectors convert sunlight into heat, which can be stored in hot water tanks for easy usage for industrial processes, domestic hot water as well as space heating.

This has numerous benefits. First, there is significantly less red tape involved with their installation, because they don’t need to join the queue to connect to the grid. In theory, there’s nothing to stop commercial & industrial companies installing solar thermal on their roofs to start decarbonising their heat demand tomorrow.

Second, they are complementary to the existing electrification push, as they make existing electrification efforts more efficient. A large-scale deployment of solar thermal would free up the grid significantly and ensure that precious green electricity is used in the most efficient and responsible way for example to charge EVs and meet the almost unsatisfiable demand of AI data centres.

One key strength of this technology is that it is compatible with a range of other heating technologies and makes these more efficient. For example, when used alongside a heat pump, solar thermal provides the ‘preheat’ for the heat pump. This means it improves the Coefficient of Performance of it, as the heat pump only needs to top up the pre heat to get to the target temperature, which translates to less pressures on the electricity grid.

Finally, these technologies also provide cheaper and more predictable costs. Rather than relying on volatile gas or electricity prices, there are numerous finance vehicles for grid-edge heat technology, such as Heat-as-a-Service agreements, that lock in the operational costs of heat for 10 years or longer. This frees up capital which can be invested into other areas of the business.

Electrification will still be the main way of achieving net zero, but it’s becoming clear that it can’t do it alone. Manufacturers do not need to wait for grid upgrades or electricity prices to fall to decarbonise.

Heat is the sleeping giant of the energy transition that gives manufacturers more on-site control and financial certainty. The technologies are proven, the contracts exist, and the payoff is cost, carbon and competitiveness – there’s no need to wait anymore.