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.