Mario Laghos: More support, less regulation – how Government can help British industry thrive

23 Jan

Mario Laghos is a political analyst and the editor of Just Debate.

So many of our countryside towns, which are home to historic churches, school buildings and libraries, are increasingly blighted by the emergence of fresh-faced red brick town houses.

They buffet the existing architecture in the most jarring way, even though not too dissimilar in aesthetic quality to the sort of brown Soviet-style flats that were built in the 1970’s and 1980’s to facilitate those same town’s growing populations. Iconic villages are being swamped by the apathetic copy and pasting of dwellings whose one and only reason for existing is the cheapness involved in their construction.

In most if not all cases, however, these villages are sited next to quarries, from whence the original buildings’ constituent stone is derived. Yet those quarries sit dormant, even while so many of our youth suffer the indignity of precarious employment, or flee to cities for opportunity.

These sites could give meaningful work to the young whilst ensuring our historic towns are conserved by using local resources, local labour and local style. Why not honour our past, and capture its spirit for our future, by re-opening them?

Well, primarily because of cost, of course. It isn’t economical, prima facie. The steel we use for construction, and the coal required to forge it, are imported in such huge volumes – and from China no less – despite the fact that we sit atop a mountain of coal and are a nation home to some of the best steel workers in the world.

Our steel industry is essential to the defence of the realm. Much of our coal wealth sits beneath some of our most destitute regions. Yet we refuse to extract it for fear of emitting carbon. Far easier to have a freight ship carry it across the world, so as to keep the CO2 off of our books. After all, the cost of having to beautify the mine after it has been exhausted, erecting solar farms to offset emissions, and cutting all the red tape would no doubt be a costly and time-consuming affair.

Thus towns which were once the engines of the nation are resigned to destitution and sink into terminal decline, buoyed only by call centres, coffee houses, and betting shops.

In 1998, we imported 20 per cent of our energy. Today that figure stands at 40 per cent. We rely on Russia for the bulk of our solid fuel and much of our petroleum. Yet while many could be given high-skilled work and boundless opportunity by extracting energy via fracking, a technique which has made the US a net exporter of energy, we have placed a moratorium on it.

Worse, we are an island nation who continually fail to make good on our geographic gift; that we are surrounded by water. We are constantly told that we are set to become the Saudi Arabia of wind, but why not of tidal power, too?

We have become so infatuated with financial services and the City of London, we have lost sight of our nation’s traditions and its strengths. Thanks to the market economy we have become acutely aware of the price of everything: we know goods and materials from poor countries with inadequate labour laws are cheaper than those produced onshore. The start-up costs associated with brickmaking factories or quarries can be prohibitive – far better to buy them in then, and let balance of payments deficit grow further still.

The list goes on. We have found it convenient to be energy-dependent, particularly as self-sufficiency often necessitates government subsidies, a most unattractive proposition. And there is little profit in being readily prepared around the clock for a once-in-a-century medical crisis, as the state of our PPE warehouses attests.

But we must become more attuned to the virtue of value, rather than the seductive mistress of price. Rather than sending young people into the doldrum of recruitment agencies which recruit for recruitment agencies like Russian dolls, meaningful employment and national value can be found in traditional industry, and the kickstart costs incurred by the helping hand of governance will be paid back. High-wage taxpaying workers, the value added of energy self-sufficiency, the control of our destiny, and the improved social relations and reduced crime wrought by stable work and increased home ownership will pay back and more that which would be required to jumpstart dormant industries.

Of course, such work is not limited to simple labour, but will require the efforts of highly skilled engineers, architects and technicians, and administrators.

This rediscovery of the virtue of industry and meaningful work does not mean abandoning Conservative values. It should go hand-in-hand with a ferocious effort to cut the pointless regulation which holds back investment and development. Rishi Sunak’s task force should be just the start.

The UK is a leader in the global race to administer vaccines. But we could improve our lead, and once we finish in poll position could turn our resources over to benefit of the world.

But our programme, excellent though it is, was late off the blocks, its momentum partially scuppered by (now-scrapped) regulation which required vaccine givers to have completed 21 documents, including courses to combat terrorism and have adequate knowledge of human rights. It failed to move into fifth gear fast enough due to an evident reticence to involve the military. And it is set to be dealt a further blow still by our lack of onshore manufacturing capability, as Pfizer’s Belgium plant is having to ration its output.

Much like our dithering on extracting British coal, which has held up approval of a singular Cumbrian coal mine for years, and as with the moratorium on fracking, despite our willingness to import natural gas, it is another instance of tedious regulations which serve only to straightjacket Britain from fulfilling its potential – all while exacerbating the harms they are designed to mitigate.

It is time to throw a one-two punch. Market forces must no longer be allowed to hollow out towns, cities and villages with race-to-the-bottom-on-cost housing. Nor should they relegate to a footnote of history proud and noble industries with strategic value in favour of financial services and the City of London. And to achieve these ends the government must become adept in knowing when to step up and offer needed support, and when to step stand back by consigning counterproductive regulation to the dustbin.

Ed Birkett and Benedict McAleenan: Hydrogen holds huge potential for British industry – here’s how to achieve it

28 Oct

Ed Birkett is Research Fellow in the Energy & Environment Unit at Policy Exchange and Benedict McAleenan is Senior Adviser at Policy Exchange.

In the fight against climate change, there are no silver bullets. We won’t solve it through technology alone, nor by telling people to mend their sinful ways. But there are some potential game changers, and among those is hydrogen.

The Prime Minister is reportedly a convert to the potential of hydrogen as a pioneering fuel that could kick-start a green recovery. As well as helping a recovery from the Covid-19 crisis, for some regions it would reinvigorate industry after decades of decline, delivering on the “levelling up” agenda.

In 2018, Policy Exchange explored the potential for hydrogen as a fuel of the future and highlighted the opportunities in northern industrial hubs. However, there’s a risk that our politicians will get carried away. It has huge potential but also very real limits, and there’s a danger of government investments going wrong.

Hydrogen isn’t the right answer everywhere

Hydrogen has huge potential as a low-carbon fuel and in revitalising industrial areas of the UK, making it a natural focus for the Government’s net zero and levelling up agendas. Our report, Fuelling the Future, described how hydrogen is widely used in industrial processes, including removing sulphur from fuels, manufacturing fertiliser, and even producing margarine. But most of this is hydrogen produced from natural gas, which releases carbon, leading to the nickname “grey hydrogen”.

There are already pilots underway to trial “green” hydrogen supply and Britain is a global leader in the technology needed for electrolysis (producing hydrogen from water using electricity). In the future, with lots of cheap, clean electricity from offshore wind farms, there is huge potential to scale up hydrogen in the UK, benefitting British manufacturing companies whilst decarbonising refineries and chemical plants.

Once the costs of hydrogen fall, it could be used in the blast furnaces of Port Talbot to replace coal and to secure jobs in our nationally strategic steel industry. It could then be expanded to other industries including glassmaking and manufacturing electronics.

But it is heavy transport that perhaps offers the biggest long-term potential for low-carbon hydrogen. Batteries look likely to dominate the market for passenger cars, with manufacturers like Nissan and Tesla offering vehicles with increasingly longer ranges and shorter charge times.

However, for heavy transport, including lorries, planes, buses and ships, the weight of batteries could be prohibitive. In these applications, hydrogen offers a solution. Once the right infrastructure is in place, hydrogen vehicles will offer fast refuelling whilst minimising weight. Several British manufacturers are champing at the bit to deliver hydrogen-powered public transport.

Despite this potential, hydrogen is not a silver bullet. When compared to petrol, diesel or natural gas, it is much less energy dense, which means it needs to be stored under high pressure, increasing costs and complexity. For many use cases, hydrogen’s Achilles’ Heel is that it is inefficient when compared to using electricity because there are many more conversion steps in the chain. This means that a hydrogen-powered car will use twice as much energy as a battery-powered car to travel the same distance.

Some have touted hydrogen as key to the UK’s energy security, ending our reliance on foreign fuels. The UK is a leading manufacturer of electrolysers, for instance, which produce hydrogen from electricity and water, which means that we could use UK wind farms to power electrolysers, generating hydrogen.

However, based on current forecasts, the bulk of the UK’s low-carbon hydrogen is expected to come from natural gas. The UK’s declining gas reserves means that we increasingly rely on imported gas, so a rapid expansion of hydrogen risks tying us into a fuel that we will increasingly import from countries such as Qatar.

Hydrogen hubs are the right place to start

None of this means that hydrogen doesn’t have an instrumental role to play in a Net Zero UK, but we need to be careful and to consider these challenges.

First, as we argued in 2018, we should create “hydrogen hubs”. This will support innovation in the areas that already use high-carbon hydrogen such as refineries and heavy industry.

Helpfully, demand for hydrogen is concentrated in areas that the Government wants to “level up”, such as Humberside, Teesside and Falkirk. These industrial centres can also deliver economies of scale and therefore cost savings, assuming that government carries some of the development risk in return for regional growth.

Second, these areas should pioneer wider uses of hydrogen, exploiting their engineering skills base to innovate and learn. The Government has already announced that the first “hydrogen transport hub” will be based in Teesside. The Teesside hub will be a testbed for hydrogen vehicles, including boats, trains and planes, following Policy Exchange’s 2018 recommendations.

Finally, the Government should engage the market wherever possible. The success of offshore wind in the UK is a combination of private sector innovation and Government support to push costs down. The same principles should apply to hydrogen. Efficient markets also keep options open if hydrogen remains too costly and other technologies emerge that are better and cheaper.

None of this is bad news. Acknowledging hydrogen’s limits allows us to design the best approach that puts British industrial towns back in the vanguard of an industrial revolution. It may not be the single answer to our future fuel needs, but it has huge potential.

At our Conservative Party Conference fringe event a few weeks ago, Tees Valley Mayor Ben Houchen called for the Government to “put hydrogen on the same footing and on the same platform as other technologies like electrification and batteries”. The Teesside hydrogen transport hub is the first step to achieving this, but there’s lots more still to do.

Mark Jenkinson: The case for coal

21 Sep

Mark Jenkinson is the Member of Parliament for Workington.

Earlier this week saw the publication of a decision by the Secretary of State to reject the application by Banks Mining for an opencast coal mine on the Northumberland coast, to which environmental campaigners have reacted with glee – with Friends of the Earth saying “Coal mines must be consigned to the history books if we are going to avoid climate breakdown”. It is this statement that I think is particularly damaging to our shared aim on net-zero by 2050.

It is worth remembering that the Highthorn development was a huge opencast on a site without previous activity, and that the planning inspector that gave the original permission made the point that the proposal would have an adverse impact on landscape character of substantial significance. Slight changes to the weight given to other elements by the Secretary of State tipped the sensitive planning balance. This decision should not be lead us to assumptions on other proposals, such as West Cumbria Mining’s Woodhouse Colliery in Copeland next door to my Workington constituency.

While we have rightly committed to eliminating thermal coal from our electricity production, coking (or metallurgical) coal is an entirely different matter. It is important that we understand the difference. The UK and Europe import 16.4Mt of coking coal every year, with the CO₂ emissions from its transport five to seven times higher than if it was produced closer to the point of use.

Economic growth and demand in growth for steel are undeniably linked. Our plan for growth will necessarily bring a demand for steel, and we should place much heavier weight on the use of UK produced steel. The low-carbon energy technologies that we will rely on in the future – without exception – are underpinned by steel. That steel production requires coking coal for the foreseeable future. Any increase in UK steel consumption without domestic production of that steel and its process components will result in increases in our offshored and domestic carbon footprints.

Electric Arc Furnaces (EAF) are often portrayed as the green saviour of steel production, but aside from the obvious questions around the high energy requirements and where that electricity will come from, EAFs are still not fossil-free – requiring the addition of coking coal, albeit in much reduced quantities.

The primary feedstock for EAF is recycled steel, and while crude figures suggest that the UK is almost self-sufficient in scrap steel, the EU and World markets are not. This fails to take account of the fact that the scrap steel has be of exactly the right composition to make the requisite end product, so most EAF produced steels are a mixture of scrap steel and Direct Reduced Iron (DRI). Nitrogen produced in the EAF process remains a significant problem, as it makes for brittle steel.

The DRI process itself is still heavily reliant on thermal coal or natural gas, while trials such as those in Sweden to use hydrogen continue. Some point to the intention of HYBRIT to have a commercial plant running by 2026 as the way forward, but again without even touching on feasibility in the short to near term of replacing plants with such energy intensive replacements, they fail to realise that the HYBRIT process is for production of DRI – the problems in the EAF process, and the necessary use of coking coal remain.

It is absolutely right that we scale up our investment into hydrogen production, storage and usage as a fossil fuel replacement. But we have to be honest with ourselves that it is unlikely to be the panacea for the road to net-zero by 2050. In the same way that wind, solar and marine energy production will feasibly replace our fossil fuel production but not our reliance on nuclear for baseload, hydrogen will replace some of our fossil fuel reliance but not all. These two subjects – electricity availability and hydrogen production – are intrinsically linked by the energy intensive nature of the latter.

We must seize the narrative around net-zero, and be honest about what that means for the people in our constituencies. Counter-intuitively, part of the route to net-zero is to bring back some of our carbon footprint that we’ve offshored by importing from countries that often have dubious environmental protections. Growing our economy, and revitalising our UK manufacturing base will necessarily bring carbon emissions. But we must work harder and smarter here in the UK to reduce our reliance and to reduce the impact.

The recent Measuring up for levelling up report from Onward, which led to the creation of a Levelling-Up Taskforce of which I’m a member, shows the stark reality that average GVA per capita has grown faster in London than anywhere else post-deindustrialisation, while in constituencies like mine in Workington it has slipped back or remained stagnant.

We have a significant opportunity to level up across our constituencies if we can rejuvenate our UK manufacturing base, but we won’t do that by looking at policy-making through a lens that appears more focused on absolute zero, than it does net-zero