Energy-Intensive Industries

Debate between Lord Evans of Rainow and Kevin Hollinrake

Thursday 10th March 2016 Westminster Hall

[Graham Evans]

I welcome the announcement in the autumn statement last year that energy-intensive industries will be exempt from the policy costs of the renewables obligation and feed-in tariffs, which will ensure that they have long-term certainty and remain competitive. Energy-intensives whose electricity costs exceed 20% or more of their gross value added are eligible for renewables compensation, capped at 85% of the impact by the EU state aid rules. However, I am concerned that energy-intensives that fail to meet the 20% criterion and therefore do not receive the compensation are often in direct competition with others that meet the criterion and do receive it. That puts some companies at a profound competitive disadvantage. Officials at the Department for Business, Innovation and Skills are exploring the feasibility of alternative options to support those companies, which is a welcome development. I look forward to the results of that.

I represent a constituency in Cheshire, where the energy-intensive chemical industries are of historical significance. INEOS Chlor and Tata Chemicals, among others, are significant employers of people in Runcorn and Northwich, and in the wider M56 corridor throughout Cheshire. Chemistry is the bedrock of manufacturing, and strong, competitive chemical industries underpin all great manufacturing nations in the developed world. The UK chemical and pharmaceutical industries have a strong record of manufacturing.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Is my hon. Friend aware that the shale gas industry has revolutionised the fortunes of the chemicals industry in the US? According to PricewaterhouseCoopers 1 million jobs will be created in manufacturing by 2025 as a direct result of shale gas energy and associated chemical feedstocks.

[Graham Evans]

I am grateful to my hon. Friend, who has certainly made his mark on this place since he was elected. He is right; the east coast of America is an example of how countries can reinvent themselves as manufacturing nations.

The chemical industry is manufacturing’s No. 1 export earner, adding almost £9 billion to the UK’s GDP each year. More widely, the Royal Society of Chemistry claims that £222 billion of GDP and 5.1 million jobs are partially reliant on UK chemical research and the UK chemical industry. The industry faces the additional challenge of using energy supplies both as fuel and as feedstock. Supplies of North sea gas for use as feedstock and fuel are diminishing, meaning that there is increased reliance on less secure supplies of imported gas. The political realities in Russia and Ukraine, as well as in parts of the middle east, show in no uncertain terms the increasing importance of energy security in the coming years. We have only to look across the Atlantic to the east coast of America to see the impact on the chemical industry of lower energy prices and booming supply. Cheaper energy combined with cheaper feedstock and Government investment has kick-started the US chemicals industry, which has since attracted more than $100 billion in investment.

As my hon. Friend the Member for Warrington South (David Mowat) pointed out in January, that success is a direct result of a cheaper economic model and a business case, and as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) said in his excellent intervention, more than a million jobs have been created along the eastern seaboard of the US.

I want to talk about bricks—I am not talking about Brazil, Russia, India and China; I am referring to bricks and mortar. At the general election, almost every Member stood on a manifesto commitment to increase house building and home ownership. The English housing survey suggests that home ownership is increasing for the first time in a decade, which I am sure we all agree is fantastic news, but the inescapable fact is that if we want to build, we need bricks. The owner of Michelmersh, Britain’s fourth largest brick producer, estimates that Britain requires 2.2 billion bricks a year. The country is at full capacity, making 2 billion, with the rest made up of imports, largely from Germany.

The Federation of Master Builders’ state of trade survey highlighted the scale of the challenge. Two thirds of small and medium-sized enterprises face a two-month wait for new brick orders, almost a quarter are waiting for up to four months and 16% face a wait of between six and eight months. Arrangements for compensating energy-intensives such as brick makers are significantly more generous in countries such as Germany. Although the brick industry is starting to recover and reinvest in some of the kilns mothballed during the recession, that will place British firms at a distinct competitive disadvantage as the demand for bricks soars. An opportunity exists to address that and to help truly kick-start the brick making industry, to complement the burgeoning construction industry and get Britain building.

It is important to keep energy-intensive industries competitive in a global market, not just to safeguard them but to maintain a far wider range of UK industrial sectors. Our foundation industries make the raw materials that go into everything from clothing and medicine to buildings, vehicles and computers. Energy-intensive industries and the jobs associated with them are almost exclusively located outside of London, and they form a vital part of the northern powerhouse and regional growth and development.

By 2030, the world population will be 8.3 billion and 60% of the population will live in urban areas. There will be 2 billion cars on the road, and 50% more primary energy will be needed. Such huge challenges cannot be met without embracing energy-intensive industries. They are the building blocks on which manufacturing rests, and on which our future prosperity will be built.

Onshore Oil and Gas

Debate between Lord Evans of Rainow and Kevin Hollinrake

Tuesday 26th January 2016 Westminster Hall

[Graham Evans (Weaver Vale) (Con)]

It is a pleasure, as always, to serve under your chairmanship, Mr Howarth. I congratulate my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) on securing this important debate. It is a pleasure to follow the hon. Member for Penistone and Stocksbridge (Angela Smith), who, in a campaigning speech, made some powerful points on behalf of her constituency and in favour of well-paid jobs and the future of the steel industry in south Yorkshire.

I am the chair of the chemical industry all-party group and co-chair of the energy-intensive industries all-party group. The UK chemical and pharmaceutical industries have a strong record as manufacturing’s No. 1 export earner. However, the fact that they are energy-intensive industries that compete globally means that their export success is critically dependent on secure and competitively priced energy supplies.

The chemical industry uses energy supplies both as fuel and as a raw material to make the basic chemicals that provide key building blocks for almost every sector of manufacturing and the wider economy. UK energy supplies are becoming uncompetitive and less secure. Supplies of North sea gas for use as raw materials and fuel are diminishing, and there is increased reliance on less secure supplies of imported gas. Our onshore oil and gas reserves offer an unrivalled opportunity to secure our energy supply for the future, crucially lessening our dependence on foreign energy markets while also creating tens of thousands of high-skill, high-wage jobs and generating billions in tax revenues.

The political realities in Russia and Ukraine, as well as parts of the middle east, show in no uncertain terms the increasing importance of energy security in the coming years. We cannot afford to be complacent. It is estimated that fracking has offered the US and Canada approximately 100 years of gas security, and it has presented an opportunity to generate electricity with half the carbon dioxide emissions of coal. Our shale reserves offer a stepping stone in our transition to a low-carbon future, especially the move from coal. Fracking can undoubtedly provide us with a legitimate, cleaner means of gradually bridging the gap between fossil fuels and renewable energy. Our energy security and the reduction of CO₂ emissions are critical considerations when we think about fracking as part of a broad energy mix, but I firmly believe that scientific and engineering evidence should be front and centre.

The safety and security of people, their homes and their businesses are paramount to any discussion. As I have said in the past, I cannot and will not support anything that may pose a risk to the health, safety and wellbeing of local residents, the natural environment, homes or businesses. Perhaps that is an area in which the Government need to do more to convince the great British public. I recently held two public meetings, in Frodsham and Helsby, where there is currently fracking exploration. I invited representatives of the Environment Agency, Public Health England and the Health and Safety Executive, together with a local property surveyor, representatives of Ineos with more than 50 years’ experience in the industry, and a rather sceptical professor.

The meetings were particularly well attended. It is interesting that the public bodies are relatively poor at getting points across. They are there to reassure the public, but they are reluctant public speakers. They are reluctant to engage face to face with members of the public, who have legitimate reasons to be concerned. People may have been told that their property will not be worth as much, that it may be susceptible to subsidence, or that their health may be at risk. There are many such stories—I regard them as scare stories, but they are based on what is said by powerful lobby groups such as Frack Free Dee, which point to what has happened in Australia and America in the past.

[Kevin Hollinrake]

I had a similar experience at a public meeting in my constituency. All the regulators were on a panel there, and it was clear that some questions and answers fell between the cracks. Does my hon. Friend accept that a single regulator with overall responsibility for the industry would improve public confidence?

[Graham Evans]

My hon. Friend makes a powerful point, and I agree. The three agencies involved are the Environment Agency, Public Health England and the Health and Safety Executive, and they go together as a threesome. If the Environment Agency says it cannot or will not attend, Public Health England and the HSE do not turn up. They go as a triple act. The people involved must of course be skilled in what their agency does, but I point out to the Minister that that should include being skilled in public speaking. That means speaking to the public in plain language, not jargon. People’s concerns are legitimate, but I also believe that there is evidence available to reassure the public. I am sorry to say that it is a struggle. We politicians are used to knocking on doors and being eye to eye, face to face, with the public, so we can argue and explain complicated issues to our constituents. However, the public agencies need to raise their game and stop using jargon.