UK’s energy system is ‘broken’, warns industrial group

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The UK’s energy system is “broken” and climate change targets without detailed policies threaten to drive industry overseas, the head of one of the country’s most advanced glass manufacturers has warned.

British heavy industries from steel to chemicals have been severely affected by the energy crisis in recent months with glass producers, whose goods tend to be lower-margin, among the worst hit. Earlier in November power prices were rising again, renewing pressure on industrial groups.

Steve Keeton, managing director of the UK subsidiary of Nippon Electric Glass, a large Japanese special glass manufacturer, said that the surge in energy prices would almost wipe out its operating profit this year.

The UK government’s ambition to race ahead in cutting emissions to net zero by 2050 without the required investment and policies to overhaul the power system threatens to create a bleak outlook for industry, he added.

“If the rules or regulations are such that you have to be carbon neutral first and you can’t see how you do it with the infrastructure supplied here then [production] might be done elsewhere,” Keeton said.

The Wigan-based site employs more than 300 people and makes glass fibres, which reinforce plastic to make composites used in wind turbine blades and lightweight cars — key for electric vehicles with heavy batteries. Last year it made an operating loss of £1.5m on turnover of £44m, according to Companies House accounts.

Brian Stewart, Keeton’s predecessor who now runs VitriTech, a developer of speciality glass products, echoed the warning that the future of manufacturing sites would be at risk because of high energy costs. “Non-UK owned glass manufacturers are putting pen to paper,” he said.

Saint-Gobain, Nippon Sheet Glass, Guardian Glass and Ardagh Group are other large foreign glass manufacturers with a presence in the UK.

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Keeton said his company was paying a premium for “100 per cent renewable energy” but also having to fork out for higher electricity prices largely driven by a rise in gas prices. “The current system is broken,” he said.

He added that the government had been failing to create an environment for businesses to succeed in a fair and competitive manner.

As an example, he said the £30m-£40m cost of renewing a glass furnace would rise by about 50 per cent to add enough electrical capacity to decarbonise operations, while facing significant uncertainty about the future price of that electricity.

“I would argue that’s not the environment we can be successful in,” he said.

He urged the government — which has floated loans that industry says it does not want or need — to update the grid, bolster gas storage and form a long-term energy strategy.

The UK government said it was supporting energy-intensive businesses to cut their bills and reduce carbon emissions, including through a £315m fund, as well as planning to create a secure supply of energy via its Energy White Paper.

The government said: “Ministers and officials continue to engage constructively and regularly with industry to understand and to help mitigate the impacts of high global gas prices. Our priority is to ensure costs are managed and supplies of energy are maintained.”

Glass industry executives say that profits have been depressed by Chinese dumping over the past decade. The EU decided last year to impose tariffs between 20 and 100 per cent on glass fibre imports from China and Egypt.

The UK has not adopted similar duties post-Brexit, said Keeton, while developers of the country’s wind power projects buy cheap glass fibre from China since procurement requirements do not sufficiently encourage local or environmentally friendly sourcing, he said.