Energy-intensive Industries

Alan Brown Excerpts

Wednesday 24th November 2021 Westminster Hall

[Jack Brereton (Stoke-on-Trent South) (Con)]

I beg to move,

That this House has considered energy intensive industries.

It is a pleasure to serve with you in the Chair, Ms Nokes. I am grateful to have secured this timely debate. As we continue to emerge from the economic hit of the covid crisis and as financial activity builds and grows, energy prices are noticeably higher and our constituents are feeling the pinch. We have seen domestic suppliers go bust, and jobs and product affordability have been threatened by the cost of energy to businesses. The short-term issue of price volatility is exacerbated by longer-term issues of energy production and energy efficiency.

Today, I will set out the issues facing industries that rely on the intensive use of energy, not least the ceramics industry, for which the Potteries are internationally famous. It is worth remembering that to be the world capital of ceramics, Stoke-on-Trent needed to be not just a city of pots and clay, but a city of pits. The energy requirements to fire ceramics at extreme temperatures are intense, and it was local coal—as well as clay—that fired kilns historically.

Times change and coal firing is now, thankfully, a thing of the past. The last such firing was literally a museum piece, organised by the fantastic Gladstone Pottery Museum in my constituency at the Sutherland works of Hudson & Middleton in 1978. It is a good thing that coal firing is a long-lost practice. We should not over-romanticise the scenes of smoke billowing from hundreds of bottle kilns, which came at the human cost of debilitating industrial illnesses such as miner’s lung and potter’s rot, but neither should we look to close the industry down or leave it to wither on the vine, as the last Labour Government did, when massive household names, including Spode, Tams and Royal Doulton, were lost during their time in office.

The ceramics industry was born out of the innovation of Josiah Wedgwood and, while some processes from that time survive, the industry has continuously been one of innovation, with producers often competing to deliver even greater efficiencies. Just as the ceramics industry has had to adapt and adjust from the use of coal to the use of gas and electricity, it is currently adapting and innovating to the ongoing shift from gas. We should support it and other energy-intensive industries in doing so.

As a whole, the energy-intensive industries of steel, chemicals, paper, glass, cement and lime, industrial gases and ceramics contribute £38 billion annually to UK GDP, according to figures from the Energy Intensive Users Group. The group notes that the industries provide 200,000 jobs directly and support 800,000 indirectly. Those are not jobs that we should lose to international competitors with lower environmental standards than our own, lower ambitions for carbon reduction or higher interventionism.

There is an urgency to ensuring that energy-intensive industries survive in the UK, due to the real and present danger of the volatility in world energy markets. It would be a tragedy if short-term price pressures were allowed to undermine British industry just at a time when order books are recovering strongly from covid and firms are looking to take on more skilled staff. Just as there is a need to keep industrial jobs in Britain, we need to make sure that the existing orders for goods stay on the books of British firms.

Competitor countries are providing support and are ready to seize the market share. Worryingly, that includes competitors with less exposure to world energy markets and scant regard for enforcing environmental protections. In ceramics, it is worth being clear what that risk is.

The renaissance of the ceramics industry since 2010 is a great British success story, with the sector’s gross value added doubling in real terms from 2009 to 2019, according to the House of Commons Library. Ceramics is particularly important in the midlands economy. Some 60% of direct employment in the sector is within the midlands engine, and most is concentrated in the Staffordshire Potteries, focused on Stoke-on-Trent. The sector’s products encompass everything from crockery to electrical components, bricks to agricultural filters, sanitaryware to armoured plating, tiles to prosthetic joints, and pipes to works of fine art.

I have previously visited Ross Ceramics in Newstead in my constituency, which has expertise in the manufacture of complex geometry ceramic cores, which are used in the casting process of jet engine components for aerospace and other industrial uses. It is world-leading engineering. Far from being an industry of the past, modern manufacturing in advanced ceramic technologies is securing the future of skilled employment on good wages in and around north Staffordshire, but firms that usually face one third of their total production costs from energy are suddenly finding that two thirds of costs are from energy.

The industry has long militated against price shocks by buying energy in advance, but many were stung by the pandemic, finding that they had excess energy at a time of restricted demand for ceramic production, and taking a loss on selling back that energy. Things have now boomeranged completely. Firms that had held off from buying energy early for this winter—for fear of further lockdowns hitting demand—now face severe financial difficulties. Firms with full order books operating at 100% capacity have none the less had to contemplate shutting down early in December, out of fear that it will be cheaper to pay employees not to work than to incur the costs of the necessary amount of gas and electricity to fire products at 1,000°C or more.

I note that Portugal, a direct competitor for tile manufacturers, has recently introduced a 30% reduction in the network access tariff for the ceramics sector. That is just one example. Many countries around the world have taken such steps to support energy-intensive industries that have high costs. The industry’s electricity prices in the UK are some of the highest in Europe and are becoming uncompetitive. Additionally, although many of our manufacturers use electricity to generate heat, others who could switch to decarbonise are deterred from doing so by the high cost of commercial electricity on top of the capital investment that would be needed.

I am encouraged that the Government’s industrial decarbonisation strategy of April this year recognises the dangers and undesirability of simply offshoring production, or ceding it to competitors, as a route to getting the UK’s overall emissions down. Of course, the Government have devised the energy-intensive industries exemption scheme, which is great for businesses that qualify for it. Unfortunately, many of the industries in Staffordshire are excluded at the first hurdle from what the Department for Business, Energy and Industrial Strategy has dubbed the “sector-level test”. Specifically, that means businesses within NACE codes 23.41, 23.42 and 23.43, which cover household ceramics and ornaments, sanitaryware and insulators. Those codes need to join other NACE codes in the ceramics sector that, thankfully, are within the eligibility criteria—namely 23.20, which covers refractory products; 23.31, which is ceramic tiles and flags; 23.32, which is bricks and so on in baked clay; 23.44, which is other technical ceramic products; and 23.49, which is other ceramic products.

If we see the industrial decarbonisation strategy as a herald of the Government’s intention for a serious investigation of the longer-term measures needed to support industry as it transitions to lower-carbon energy, we need to look at how the parallel doubling of public research and development investment can benefit energy intensive industries. That will be necessary to improve efficiency, to encourage a move towards more electric firing and to develop hydrogen as the solution for the larger high-powered kilns where electricity is not an option.

There is a pressing need for an investment strategy for R&D in the energy transition for the midlands engine ceramics cluster, which is just as important as those in London and the Oxford-Cambridge arc who have for far too long received disproportionately high public R&D funding. Public R&D funding is particularly needed in a sector such as ceramics, given the high number of small and medium-sized enterprises—as much as 97% of the sector, according to the British Ceramic Confederation. Even firms that do pass the sector-level test for the energy-intensive industry scheme have difficulty passing the business-level test, due to the smaller-sized enterprises typical of the sector—even firms with worldwide brand recognition.

When certain qualification thresholds for energy-related assistance are set at tens of millions of pounds per work site, the ceramics industry loses out. A sum of £1 million per site would be more realistic. The use of NACE codes could, as has already been demonstrated, target lower thresholds at the ceramics industry for its particular characteristics and configuration.

I know that the Government recognise their responsibility to step up to the plate. Only this Monday, the Government announced £9.4 million to back a trailblazing hydrogen-storage project near Glasgow, helping to create high-skilled jobs. Last week, the Royal Navy issued a market exploration notice to seek hybridisation of the fleet, seeking private sector expertise for a public sector commission to reduce emissions by 20% to 40% by 2030.

The week before that, the RAF announced that it had secured a Guinness world record, no less, for the world’s first successful flight using only synthetic fuel, in partnership with Zero Petroleum Ltd. There was also confirmation this month of the highly significant £200 million Government investment in the Rolls-Royce small modular reactor—an exciting development that could create 40,000 jobs and secure many more in the supply chain, including at Goodwin International in Stoke-on-Trent, which leads the way in British precision engineering.

Sources of intense energy with low to zero carbon emissions are one clear way forward for heavy industries. Another is carbon capture and heat capture. The Minister will know that Stoke-on-Trent leads the way with a district heat network to use deep geothermal energy to heat our city and save thousands of tonnes of carbon dioxide annually, benefiting residents, education providers and businesses alike.

We can go further; I know that our local industries want to go further, but they need support to do so. Keele University, in our neighbouring borough of Newcastle-under-Lyme, has not only worked with EQUANS, part of the ENGIE Group, to generate and store energy from wind and solar on campus; it has also worked with Cadent Gas to demonstrate that hydrogen can be blended at up to 20% into the natural gas network, with no adverse effects for users. The consequent reduction in carbon emissions is obvious, but with hydrogen being six times as combustible as natural gas, public reassurance on safety will be paramount.

Fortunately, Keele and Cadent found in their year-long trial that it is safe to use a 20% hydrogen mix, saving 27 tonnes of CO₂ emissions in the process. Rolling that out to the domestic market nationally could remove from the atmosphere the equivalent emissions of taking 2.5 million cars off the road, all without changes to current gas heating and cooking appliances. For any new fuel source tested in private homes and campus buildings, as happened with the Keele-Cadent trial, there is a need to research the effects on ceramic and other industrial production, not least because glazes can respond very sensitively.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The hon. Member is making a good speech. Does he agree that it is high time the Government changed the regulations on hydrogen blending to allow that to happen in the gas network? At the moment, the gas management safety regulations do not allow any blending above 2%, which is contrary to the Government’s own hydrogen strategy.

[Jack Brereton]

I thank the hon. Gentleman for that point. I know that the Government are looking at that. Further trials at scale are being looked at—in Newcastle, I believe—to be undertaken by Cadent. I am sure that that will lead to further changes and to developments of hydrogen mix within the industry.

As I was saying, it is important to do that testing for energy-intensive industries, not least because glazes can respond sensitively to firing conditions, such as temperature and humidity. For that reason, I am glad to say that certain offshore production lines have looked to return to Stoke-on-Trent from locations with different climatic conditions that simply do not create the pristine quality of ceramic goods one gets from Stoke-on-Trent. I have been pleased to discuss with Cadent the importance of fully scientifically trialling and testing the impact of hydrogen mix, and I know that Cadent has been looking into this further with Lucideon, which leads the industry in ceramics research and material science.

I have argued for several years that we need an international research institute—a ceramic park—based in Stoke-on-Trent to institutionalise the myriad projects and advances, not least the work of Lucideon, to develop hydrogen kilns, which I am pleased to say recently secured UK Research and Innovation funding. What we need now is a dedicated research facility as a base for those projects for the industry, with Lucideon as the anchor. Glass Futures in St Helens is one example of what might be achievable by learning from another energy-intensive industry.

I am sure that the British Ceramic Confederation will have engaged with the Minister about its ambition for a similar world-leading centre of excellence for the world capital of ceramics. Indeed, as the BCC will point out, the sector has been working on recycling waste heat for decades, such as by pre-heating spray dryers with exhaust gases or heating spaces via heat exchangers on tunnel kilns. This is not a sector that wants to waste anything, and where it is economically viable, energy and carbon efficiency has been invested in for decades.

I should note that one such improvement comes from switching from intermittent to continuous kilns. One of the dangers of today’s very high energy prices is that kilns may need to be shut down completely and then restarted, which is far more complicated and dangerous than it sounds, with wide-ranging consequences. However, innovation must continue. That means supporting the development of new technologies, providing incentives for large-scale investment in proven technologies, and creating a regulatory framework that supports decarbonisation alongside the international competitiveness of UK industry. Some of the new technologies are almost there, but there are issues to overcome. For example, we have to overcome tar build-up or moisture content, depending on the fuel innovation; resist corrosion for acidic kiln exhaust gases; and avoid emissions of nitrogen oxides.

The need to produce and distribute hydrogen on a large scale must be fully researched, not least because hydrogen is also being touted as a fuel of the future for everything from JCBs to trains, including the freight trains that will bring the fine white china clay into the Potteries and will hopefully take more products out in the future. The Government want demand for hydrogen to be high, so they must ensure that the market conditions are right for a ready fuel supply. Interestingly, I note that as part of the Government’s industrial fuel-switching competition, BEIS funded a £3.2-million project led by the Mineral Products Association and Hanson UK to trial a mix of 100% net zero fuels, including hydrogen, meat and bone meal and glycerine, for commercial-scale cement in Lancashire for the very first time this September. Let us see more of those sorts of trials covering more of our energy-intensive industries.

In conclusion, I am happy that we have a Government who have enabled manufacturing to resurge in the UK, particularly the British ceramics sector. Modern and advanced manufacturing is a key provider of high-skilled, well-paid employment across Stoke-on-Trent—not just in ceramics, but emblematically so, as it is the world capital of that industry. We are on the cusp of very big advances in low-emission energy, and we need to seize the opportunities without taking our eye off the ball of the short-term dangers of price volatility in traditional fuel markets. Energy-intensive industries are spread right across the country, and are crucial to realising the higher-skill, higher-wage economy that will level up opportunities. I look forward to the Minister’s response detailing how the Government will meet the challenges ahead.

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Efford. I congratulate the hon. Member for Stoke-on-Trent South (Jack Brereton) on bringing forward the debate. At the outset, he rightly highlighted the energy supplier crisis. I am sure he agrees that the Government need to do more about this crisis. He highlighted coal and the bygone days of coal, and certainly that should be a reminder to Government in terms of the lack of support that was given when the coalmines were shut down. It still has a legacy, and it is a legacy that lives on in my constituency. It is something that cannot be repeated, and that is why we need a just transition commission for the UK Government, like the Scottish Government have. We need that support as we move from a reliance on fossil fuel towards renewable energy.

The hon. Member for Stoke-on-Trent South is a vocal advocate for the ceramics industry, and he should be commended for that. I hope the ceramics industry has a strong future because we need to retain all the manufacturing that we can. Support like that is welcome, and hopefully the Government will listen. The key thing is that there needs to be support for decarbonisation. Other Members spoke about tariff reductions and reducing energy costs. Energy is too high at the moment, but the Government really need to be helping industry decarbonise, and proper investment and support from Government is required. That should put some of these industries ahead compared to those elsewhere. That is where, for me, the investment needs to come from Government to help them decarbonise.

We heard from the hon. Member for Newport East (Jessica Morden), who is clearly a big advocate for the steel industry. I was pleased to visit the works in her constituency, and I repeat: investment is needed to help the steel industry decarbonise. That is the future. We talk about clean green steel, and that is where Government investment is needed.

The hon. Member for Bridgend (Dr Wallis), who is not in his place, also spoke about the steel industry and highlighted the fact that there is not enough money in the UK Government’s hydrogen strategy by comparison with members of the EU. I agree with him that more needs to come from the UK Government in terms of the hydrogen strategy.

We heard from the hon. Member for Aberavon (Stephen Kinnock), who has also always been a strong supporter of the steel industry and a strong advocate in this House. His key message to the UK Government seemed to be that it is not a sunset industry, and I agree. In fact, that message was so strong that he said it twice—in an intervention and in his speech—and I agree: the UK Government need to support the steel industry.

The hon. Member for Scunthorpe (Holly Mumby-Croft) is another advocate for the steel industry—I am kind of repeating myself here, but investment in clean green steel and decarbonisation is important. I commend her for being the only one who got something out of the Prime Minister’s speech on Monday other than Peppa Pig, so congratulations on that.

We heard from the hon. Member for Strangford (Jim Shannon), who always turns up at these debates and always makes a useful contribution. Again, he highlighted the importance of manufacturing and Government support for decarbonisation.

What I took out of the speech by the hon. Member for Bolton West (Chris Green) was that nuclear energy is indeed more expensive. He is an advocate of nuclear energy, but it is more expensive. We are talking about taking away tariffs for renewable energy, but nobody is talking about taking away tariffs for nuclear energy or addressing the eye-watering costs.

[Chris Green]

Energy costs are clearly important, but reliability and stability of supply is also a key feature, which nuclear power would provide. Does the hon. Gentleman think that that is an important feature that we should have?

[Alan Brown]

That inflexible reliability that comes from nuclear energy means that, while we talk about the wind not blowing, the amount of base-load it pumps on to the grid means having to curtail other, renewable energy sources, because nuclear is so inflexible. So no, I do not agree. That is the problem: nuclear is the wrong energy to mix with renewables, and it really is not the future.

I was talking about tariffs and the cost of nuclear energy. There is £1.7 billion in the Red Book just to develop Sizewell C, before we get to the final investment decision. Think what that £1.7 billion could do for the steel industry, the ceramics industry or decarbonisation—and that is only to get to the final investment decision, before the Government then rush to spend £20 billion on the capital investment for Sizewell C. Then that will be added to our electricity bills under the RAB—regulated asset base—model, for the 10 to 15 years of construction of the nuclear power station, and then a 60-year contract thereafter. So do not let us talk about taking away levies for renewable energy; let us look at what nuclear energy will cost us. I urge the Government to spend that money more wisely, rather than on nuclear energy.

Finally, the hon. Member for Stoke-on-Trent North (Jonathan Gullis), who is obviously another advocate for the ceramics industry, made an interesting point about the lack of ceramics from Stoke-on-Trent in this place. I suggest to him that he make an investment: buy a lot of mugs and pottery and donate it to this place. That will help the industry and promote it here.

I am coming to the end of my remarks, and I do not want to be too flippant, because this is a very important debate. We need to see support for ceramics and manufacturing, and we need to look at how we decarbonise. Carbon capture has been mentioned. I urge the Minister to reconsider the disgraceful decision to make the Scottish carbon capture cluster a reserved cluster. That should have been given the go-ahead and it should have been one of the track 1 clusters. It incorporates carbon capture, hydrogen production, which has been mentioned as part of the future of decarbonisation, and direct carbon capture from air. It is a really important, innovative cluster and it should have been given the go-ahead. Why was it not selected? I want the Minister to answer that. Equally, I would like to hear what proper investment will be made available to help and support the manufacturing sector to decarbonise.

--- Later in debate ---

[Lee Rowley]

I am grateful for the hon. Gentleman’s intervention. He anticipates some of my speech. To pick that up now, there is an incredible amount of work going on across the four nations of the United Kingdom. I am looking forward to coming to Northern Ireland as soon as I am able. We are currently trying to organise a visit, and I am keen to talk to him further about the example that he highlights.

[Alan Brown]

The Minister mentioned the chemical industry. Does he understand that INEOS at Grangemouth is part of the Scottish carbon capture cluster, and at the moment INEOS is one of the biggest emitters of carbon dioxide in Scotland? The Scottish CCS would obviously alleviate that problem. Will the Minister look into that, promote the Scottish carbon capture cluster and take it away from being reserved, as it is classed at the moment?

[Lee Rowley]

I am grateful for the hon. Gentleman’s intervention. I do acknowledge the challenge of the Grangemouth plant and the excellent work that goes on there. I have spoken to INEOS on several occasions since taking up my post. He and his colleagues have contributed to the carbon capture and storage debate actively and noisily over the past few weeks. He knows that an initial two sites have been announced and the intention is to have four by 2030. The Minister of State, Department for Business, Energy and Industrial Strategy, my right hon. Friend the Member for Chelsea and Fulham (Greg Hands) has articulated that we want to continue to work with the Scottish cluster to see what is possible there.

I want to touch on a number of points that individual Members made. My hon. Friend the Member for Stoke-on-Trent South rightly highlighted—along with many Members—the challenge of energy prices. We acknowledge and accept there are challenges with energy prices. My hon. Friend the Member for Scunthorpe highlighted price spikes noted in just the past few days. From conversations I have had, this debate and wider discussion within industry, we know that there are challenges. I thank colleagues, unions, industries and trade bodies for articulating that in recent months.

There is significant price volatility, which it is important to acknowledge. Prices have spiked and started to float down over recent weeks. I hope all Members would accept that in the past two years alone we have had very low prices and very high prices. We are at a particular place in the market at the moment.