We need to tread carefully in our mission to go green
IN the battle between the Chancellor and the Business Secretary, Prime Minister Boris Johnson is right to back Kwasi Kwarteng in giving help to UK industries hit by huge gas price hikes. With gas prices rising fourfold in recent months, British factories are teetering on the edge of closure if their products cannot be made at a competitive cost to sell on the international market.
UK steel makers are already paying 50 to 80 per cent more for electricity than German makers and claim they need a £55million bailout just to stay open. Scunthorpe-based British Steel is adding surcharges of up to £30 a tonne to its products to cover higher energy costs. As new coal-fired power stations open every month, Chinese steel makers are laughing all the way to the bank.
With the UK jobs market surging to a 20-year record high of 1.1 million vacancies between July and September this year, according to figures from the ONS out this week, it would be a pity to put all that bounce-back positivity at risk as Britain’s manufacturers are forced to shut because of skyhigh energy costs.
This would hit worst in Northern and Midlands constituencies at the heart of Boris’s “levelling up” agenda, losing thousands of voters back to Labour. The glass industry is another sector particularly vulnerable to high energy costs. “We have about 6,000 people directly employed and then maybe 100,000 to 120,000 downstream involved in glass installation,” says Dave Dalton, head of British Glass.
HE FEARS that a quarter of them could now be lost to factory closures. Chemicals, paper and cement makers are also heavily affected. Government help will most likely come in the form of state loans, but industry doesn’t want to pile up yet more debt and taxpayers shouldn’t have to cough up extra money to support private firms during another crisis.
Some of the high cost of energy in the UK is made up of green taxes to subsidise renewables – as much as 25 per cent of domestic bills – and the Government could mitigate the current crisis by slashing artificial costs distorting the market.
Energy intensive industries using gas or coking coal are hit especially hard with financial penalties for not being lowcarbon enough. Removing such environmental levies would be a more efficient use of taxpayers’ money than incurring yet more borrowing.
It is also a fact that this industrial crisis has been made worse by government decisions driven by their net-zero ideology.
Cutting back on gas storage facilities to just over one per cent, in order to export our carbon footprint abroad, has meant that industries are forced to buy gas at higher prices on the volatile international market than other European countries with larger storage.
Sacrificing energy security for environmental targets has meant that we’ve not made the most of the energy beneath our feet.
The Government’s moratorium on shale gas in 2019 not only denied us a boom of jobs in that sector but also exposed us to the international power games played by Russian leader Vladimir Putin. Even though we get most of our foreign gas from Norway and Qatar, his restriction of gas to Europe has pushed up the price we all pay.
In the USA, which has successfully exploited shale gas, the industrial cost of energy has been as much as half of that in the UK.
THAT we should be heading towards less dependency on fossil fuels is no doubt sensible but the speed at which the Government is forcing this through without really considering the side-effects of ditching traditional technologies means we are vulnerable to the sort of emergencies we are now facing.
“Nobody in Westminster seems aware of just how much we depend on fossil fuels,” says senior engineer Professor Gautam Kalghatgi. “Do they think we can switch the entire economy to wind power, simply because they say so? Without any means of storing electricity in bulk? This utopian plan is almost certain to fail.”
There is too much wishful thinking in Boris Johnson’s COP26 net-zero agenda and that is leaving us all exposed to price hikes that are fuelling inflation. It would be a tremendous shame if having navigated us through Covid-19 with a successful vaccination campaign, we all end up poorer because of a misguided energy policy that penalises industry and reduces the amount of jobs in all parts of the UK.
After the misery of lockdown we deserve a break from more calamities that could have been avoided with better planning.
‘We’ve not made the most of the energy beneath our feet’