Energy-intensive Industries

Caroline Nokes Excerpts
Wednesday 24th November 2021

(2 years, 4 months ago)

Westminster Hall
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Caroline Nokes Portrait Caroline Nokes (in the Chair)
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I remind hon. Members that they are expected to wear face coverings when they are not speaking in the debate, in line with current Government guidance and that of the House of Commons Commission. I also remind hon. Members that they are asked by the House to have a covid lateral flow test twice a week if coming on to the estate, which can be done either at the testing centre in the House or at home. Please give each other and members of staff space when seated and when entering and leaving the Chamber.

Jack Brereton Portrait Jack Brereton (Stoke-on-Trent South) (Con)
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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.

Jack Brereton Portrait Jack Brereton
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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.

Caroline Nokes Portrait Caroline Nokes (in the Chair)
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It looks like we have in the region of seven Back Benchers wanting to contribute, so if Members could do the maths and work out how many minutes they have, that would be much appreciated.

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Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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First of all, I thank the hon. Member for Stoke-on-Trent South (Jack Brereton) for securing this debate and I commend him on his frequent contributions on energy-intensive industries. We are very fortunate that we now have a formidable group of Stoke MPs who work as a team and bring forward issues, and get results as well, which I have noticed in the main Chamber. I commend them for that.

Sustainable energy and greener energy debates are becoming more regular and I believe that it is important that we move with the times, which can start with ensuring that energy-intensive industries have the correct means to progress. Just this morning, probably coincidentally, but none the less importantly, I had the opportunity to meet the independent networks association. Its chief executive is Nicola Pitts and it is one of the UK’s leading independent utility network owners and operators, driving industry collaboration and innovation to shape the future of the UK’s energy and water sectors. It is in the business of ensuring that we can be more energy-efficient with electricity and the use of water, both for the industrial sector and for healthy homes—I chair the all-party parliamentary group on healthy homes and buildings. I commend that organisation.

I had a quick look through the early-day motions before the debate progressed and I noticed that three particularly promote the issue of heat pumps. I commend early-day motion 675, which the hon. Member for Bath (Wera Hobhouse) has put forward; early-day motion 677 on Home Energy Scotland; and early-day motion 681 on Invinity Energy Systems. That tells me that there is a great interest in the issue, not just from the hon. Member for Stoke-on-Trent South but from everybody else here in Westminster Hall today and perhaps even among those who were unable to attend the debate.

The UK should take great pride in our energy-intensive industries. Our main businesses of that kind are dedicated to food, pulp and paper, iron and steel, and basic chemicals. The UK’s manufacturing and industrial sector accounted for 60% of total consumption, along with another 16% for chemical manufacturing. The UK industrial sector is made up of some 35% electricity and 39% natural gas, according to Gazprom Energy.

I will give an example not from my own constituency, but of a company that many of my constituents work in. I refer to the recent work done by Bombardier Spirit AeroSystems in east Belfast. It received approval to develop a new £85 million project to develop energy from waste through an EFW gasification plant in the constituency of my Democratic Unionist party colleague, my hon. Friend the Member for Belfast East (Gavin Robinson). It is a tremendous idea and I am sure that it is one that the Minister is well aware of. If he is not, perhaps he can get more information on it. It gives an example not only of what we will do in Northern Ireland, in my neighbouring constituency, but of what can be done elsewhere.

That £139 million plant can process 120,000 tonnes of refuse-derived fuel, comprised of non-recyclable fractions of commercial and industrial waste per annum, to generate electricity and heat. Although I appreciate the extreme finance that firms will need to advance to this level, the benefits are much more energy efficient in the long term. When it comes to the net zero carbon targets, this is one that we should be aiming for. It is crucial that we take the future into consideration when discussing greener energy for our industrial firms. The Full Circle Generation facility in Belfast has aimed to process 140,000 tonnes of waste per annum, but it takes an initial 400,000 tonnes of rubbish for the facility to operate at full capacity. It is particularly exciting, innovative and futuristic; it is something we should be looking at.

The cost aspect is giving large firms little incentive to switch to cleaner energy strategies, but there must be more discussion between the BEIS Minister and the firms so that they can meet in the middle, because there needs to be a compromise sometimes. Perhaps the Minister could give us his thoughts on how that could be achieved. Additional funding must be allocated to help energy-intensive industries decarbonise. That is essential in ensuring that we meet our 2050 carbon zero promise set at COP26. As stated earlier, energy-intensive industries make a great contribution.

We must support our energy-intensive industries within the UK if we want to encourage global firms to come here. We want to see that happening, too. Perhaps the Minister, in his response, could give us some idea of whether we have attracted many firms to come here and invest. I think we have, but it is always good to put it on the record and say what we have done. I have recently been made aware that an industrial firm that set up in China is considering coming back to the United Kingdom because of the price of containers. That is a step forward, although we all know of small businesses in our constituencies—I have many—that are threatened with difficulties because of that price structure. However, we must do more to entice other firms to come back to the UK. One way we could do this would be by taking a lead role in green firms, giving them the funds they require to make this happen. That would also improve local job opportunities for those who aspire to work in the manufacturing industry.

I call on the Secretary of State to ensure that priority finance is given to large industrial firms to give them that jump start in creating greener energy-intensive industries. The cost is a crucial aspect, and I would argue that it puts firms off improving their energy efficiency. There are small but useful steps that the BEIS Minister can take and, given our recent promises at COP26, I do believe these should be taken accordingly.

Caroline Nokes Portrait Caroline Nokes (in the Chair)
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We have 11 minutes left, so that gives the remaining Members just over five minutes each.