Time to focus on digital clean tech? New report calls for UK government to support the sector

The tech sector can help the UK to reach its target of net zero carbon emissions by 2050, according to a new report from Deloitte and TechUK. To do so, however, the UK government must support the emerging digital clean tech (or ‘climatetech’) sector.

What is “digital clean tech”?

“Digital clean tech” is the new and growing sector deploying digital devices and software to help optimise existing assets and systems, support energy efficiency, and support and accelerate the discovery of new solutions to climate challenges. For example, a smart, connected home can reduce energy consumption with smart temperature and lighting systems and, in the future, could connect to local energy grids, buying energy when it’s cheapest to do so, and selling energy back.

Despite it being a relatively new sector, it is already making a difference. TechUK and Deloitte say that “digital clean tech already in the field can enable 15% of the emission reductions needed in the UK between now and 2030: reducing 2030 emissions by 7.2 million tonnes and in turn delivering £13.7bn Gross Value Added (GVA).”

Can the UK lead the way?

The report makes the case that the UK, given its strong ecosystem of tech talent, is well placed to capitalise on this new market and associated export opportunities. By setting the right policy, regulatory and market framework, it can also help reach net zero carbon emissions, and tap into the economic potential of this growing sector.

However, policy intervention is needed. The report recommends a number of actions for the government to implement, spanning across four key areas: (i) innovation; (ii) policy and regulation; (iii) data; and (iv) finance, markets and growth. For example:

• While data will be a key enabler for net zero carbon emissions (because smart systems rely on its open provision), to unlock the data needed the UK will need to build trust in how it is accessed, managed, used and shared. The report therefore calls for a focus on ‘data for decarbonisation’ in the UK’s National Data Strategy and for the Regulatory Horizon Council to review regulations that are keeping businesses from sharing and using data. The National Data Strategy was published for consultation two days after the report, on 9 September 2020. While it does not focus on ‘data for decarbonisation’ in detail, it does set out plans to help unlock the “potential of data” and recognises that better use of data has the potential to help the UK meet its net zero 2050 target, including by driving new scientific developments. The consultation period closes on 2 December 2020 and TechUK has indicated (see here) that it will work with its members to develop written input on the proposals.
  
  
• In the area of finance, markets and growth, the report calls for the government to consider VAT reductions and tax measures to make energy reducing technologies more investable. Action is also needed to overcome access to finance barriers (grants, green mortgages etc.) and a call for evidence should be launched to explore incentive schemes to stimulate low-carbon investment.
  
  
• Unsurprisingly, AI is noted as having the potential to be a key enabling technology in supporting a more affordable transition to a low carbon economy. Some estimates suggest that AI can cut global emissions by 4% by 2030 with a corresponding uplift to global GDP of 4.4%. However, rapid deployment is required to achieve this, and a coalition of TechUK, tech firms, industry leaders, civil society and academics have therefore signaled their support for a UK-based International Centre for AI, Climate and Energy to encourage collaboration, address technical barriers and support rapid deployment of the most promising solutions.

Headline messages to government

While the reports contains a variety of recommendations, it sets out five headline messages to the UK government:

• Seize the economic and carbon prize. Digital clean tech solutions can draw from the UK’s tech strength, deliver £13.7bn GVA for the UK (an amount equivalent to the current GVA of the UK’s pharmaceutical manufacturing industry) and enable 15% of the emission reductions needed by 2030 (7.2 million tonnes).
  
  
• Innovation needs to be pivoted towards net zero. The UK Research and Development Roadmap is a positive step, but the UK urgently needs to rethink how it can accelerate and adapt its innovation system to meet the challenge of net zero.
  
  
• Create a regulatory environment that embraces digital. The UK has some world-leading approaches to regulation. The report stresses the need for it to build on this expertise to create a flexible, agile regulatory system that can deal with the transformation needed to meet its net zero goals.
  
  
• Unlock the value of data. New sectors, businesses and services can develop from open data, whilst also helping to achieve net zero. The UK government must work with industry, citizens and trusted third parties to create an environment where data is shared with trust and confidence.
  
  
• Support the development of the markets of the future. Moving from invention to widespread deployment can take many decades, yet only three decades remain to meet the net zero emissions goal. The UK urgently needs to agree new market mechanisms to unlock private sector capital.

Will the government take notice? 

The UK government has previously recognised the role of clean technologies in reducing carbon emissions, and the importance of supporting the development of new clean technologies. For example, its 2017 Clean Growth Strategy set up a fund of up to £20 million to support new clean technology early stage investment and set out its intention to invest over £2.5 billion in low carbon innovation. However this report calls for renewed action in light of the developments in the digital clean tech sector and the UK’s net zero target (which was legislated for in June 2019). TechUK has set out both headline messages, and more detailed recommendations, for how the Government can support this growing sector and help achieve its net zero goal. We await publication of the UK’s energy white paper and infrastructure strategy, and the consultation results from the new data strategy to see whether the government is willing to respond to this call for policy intervention to support digital clean tech.

Many thanks to Michael Maquieira for his help in researching this post.