Energy-intensive Industries

Jamie Wallis Excerpts

Wednesday 24th November 2021 Westminster Hall

[Dr Jamie Wallis (Bridgend) (Con)]

It is a pleasure to serve under your chairmanship for the first time, Ms Nokes. I pay tribute to my hon. Friend the Member for Stoke-on-Trent South (Jack Brereton) for opening this very important debate.

On top of fierce international competition, the recent volatility of energy prices means that energy-intensive industries are facing significant challenges to remain competitive in the global market. That is putting thousands of jobs and livelihoods at risk. That is why we need to take action now.

UK electricity prices for extra large industrial consumers in the second half of 2020 were higher than for any European Union member state. My hon. Friend will be aware that the steel industry, much like ceramics, is heavily reliant on vast amounts of heat to produce high-quality consumer goods and materials. With China now dominating the market, accounting for 53% of production, more needs to be done to protect the quality British steel we make here from crippling high costs, which will potentially exclude us from the very industry that we created.

The British steel market needs the Government to remain committed to it. The hon. Member for Aberavon (Stephen Kinnock) is absolutely correct to say it is a future-facing industry. We need the Government to remain committed to this future industry to protect the generations of families who have worked in and around it. Sadly, the number of people working in steel has already declined by half since 1990. We need to buck that trend if we are to deliver on our 2020 mandate. Sectors such as steel are vital to the Government’s levelling-up agenda, with modern technology and infrastructure increasingly dependent on steel for components for everything from wind turbines to electric cars. Consequently, it is essential that we support these industries as they struggle to respond to higher energy prices.

The Port Talbot steelworks is located in the constituency of the hon. Member for Aberavon, just on the doorstep of Bridgend and Porthcawl, and hundreds of my constituents are employed there, much like their families before them. The jobs, and the people, need to be safeguarded.

The Government currently provide compensation to energy-intensive industries for higher electricity costs associated with low-carbon energy emission reduction policies. Between 2013 and September 2020, that provided the steel sector with £480 million. Nevertheless, the steel sector is calling loudly for further support from the Government. The hon. Member for Newport East (Jessica Morden) highlighted the UK Steel electricity price report of February 2021, which estimated that electricity prices would cost UK steelmakers an additional £54 million, compared with production costs in Germany. For the past five years, the cost is £254 million. These are clear danger signals. We are teetering on the edge and we need urgent action.

I would strongly welcome more targeted Government support for hydrogen technology within the steel sector, to help our green transition to cleaner and more affordable energy. I was delighted to see the Chancellor’s announcement in the autumn Budget of £140 million to establish the industrial decarbonisation and hydrogen revenue support scheme, and the £240 million in the net zero hydrogen fund—but more needs to be done, working in conjunction with the steel industry.

I would welcome a commitment to work with international partners that are world leaders in exploring hydrogen technology, such as Sweden and the United States, to explore potential areas of co-operation. Investment in the green hydrogen-based steel demonstrator project via the clean steel fund requires more clarity, which I hope can be provided today. We ought to prioritise green hydrogen in the net zero hydrogen fund, with the goal of commercialisation.

Looking ahead, I firmly believe hydrogen is key to achieving the Government’s ambitious net zero strategy and to building a green economy, and that such technologies will be crucial for the future development and protection of our steel sector. Now that we have taken back control of our own laws, including those on state aid, we can and we should go further. Finally, more support for transition to a hydrogen-steel economy should be considered as vital in how we respond to the current major challenges to the steel sector.