The study, involving researchers from Loughborough University and Nottingham Trent University, examined how different UK industrial sectors changed their gas and electricity consumption in response to shifting energy costs and levels of economic activity between 1990 and 2020.
It found that industrial demand for electricity was generally more sensitive to changing prices and business conditions than demand for gas.
Dr Morakinyo Adetutu, of Loughborough Business School, said: “When electricity becomes comparatively expensive, companies may reduce their electricity consumption or continue using cheaper fuels, including fossil fuels, rather than investing in electrical machinery and processes.
“This could hinder ‘industrial electrification’… the process of replacing equipment powered by fossil fuels with electrical alternatives that can increasingly run on renewable energy.
Dr Akin Sharimakin, of Nottingham Business School, added: “This is important because industry is a major consumer of energy and source of greenhouse-gas emissions.
“Cutting these emissions will be essential if the UK is to achieve its target of reaching net zero by 2050.”
The study found that increasing energy prices might not on its own persuade businesses to make the major reductions in energy use needed to meet the UK’s environmental targets.
“This is because companies still need energy to operate, regardless of its cost,” said Dr Adetutu.
“Even when prices changed substantially, businesses generally made proportionally smaller changes to the amount of energy they used.
“For example, a 10% rise in energy costs might lead to a reduction in consumption of less than 10%.”
The research also found that companies do not necessarily respond to price rises and falls in symmetrical or proportionate ways.
A period of high prices might encourage a manufacturer to buy more efficient machinery or permanently change how it operates, for example, but the company would not automatically reverse those changes if prices later fell.
Responses also varied considerably between industries, reflecting differences in the machinery they use, what they produce and how energy-intensive their operations are.
Dr Sharimakin said: “This shows why policies should reflect the needs of individual industries instead of assuming that every part of the economy will react to energy prices in the same way.”
The findings are particularly relevant to government departments developing the UK’s energy and net-zero policies, as well as manufacturers, energy-intensive businesses, regulators and electricity suppliers planning for future demand.
They also have wider implications for the public. If industry moves away from fossil fuels more slowly than expected, meeting national climate targets may become more difficult and could require greater emissions reductions elsewhere in the economy.
The researchers suggest that energy pricing alone is unlikely to deliver the required transformation.
Dr Adetutu added: “Other measures, potentially including targeted financial support, investment in the electricity network and policies designed for individual industrial sectors, may be needed to help businesses adopt cleaner technology without damaging their competitiveness.”
The study, Asymmetric fuel demand in the UK industrial sectors, has been published in the academic journal Energy Economics.
ENDS