British Ceramic Confederation Comment on Current Energy Situation

Update: 13.30 March 29, 2022: The British Ceramic Confederation (BCC) wishes to express its support for the people of Ukraine and recognises the desperate situation facing Ukrainian citizens.The Russian war on Ukraine, with the current and possible future sanctions, is having a major impact on the energy costs and potentially on supply for UK manufacturing. This exacerbates the existing problems of an internationally uncompetitive industrial energy cost framework in the UK.BCC continues to liaise with its members and feed in the sector’s views and concerns to Government. We aim to update this page as new information becomes available.The BCC needs the UK Government to take action to reduce the high, volatile, and internationally uncompetitive energy and carbon prices on our members.Chief Executive Rob Flello said: “We appreciate that the Chancellor is in a difficult position balancing the country’s finances, but energy intensive industries, and UK ceramics manufacturers in particular, need urgent support to get through this energy crisis.“British manufacturers have struggled with internationally uncompetitive high energy prices for some time but recent record increases to up to 20 times last year’s levels are not sustainable.“We want to continue a constructive dialogue with the Government and find new and creative ways they can help the UK ceramics industry through the current situation.“The push for decarbonisation also means we have short and long term asks, and we look forward to learning more about the Government’s energy supply strategy when it is announced.“Whilst assurances have been given regarding energy security, this does still remain a concern. In the event of national supply shortfall, our members are near the front of the queue to be forced off the gas network, while households are last. This can happen at very short notice and a forced, quick shutdown runs a very high risk of irreparable damage to kilns.”On net zero: Chief Executive Rob Flello said: "As well as addressing the current energy crisis, the sector continues to look to the future and net zero targets that have been set for 2050. To meet these targets, the whole ceramics sector needs a radical, accelerated step-change in operations."Multiple deep decarbonisation technology solutions needs to be developed, demonstrated and deployed quickly. Collective working will be essential. The ceramics sector has shown it is up for this challenge and has the will to work and invest collectively."Jon Flitney, Energy & Innovation Manager, added: "As more member companies become increasingly exposed to the high and volatile energy prices, it will have a direct impact on future UK investment, including decarbonisation, The sector is committed to net zero and we have asked Government to work with us in partnership to replace gas with hydrogen, bioenergy or electricity." In summary, the ceramics sector needs Government to take urgent action:

• Immediate cessation of uncompetitive policy costs, such as ‘Carbon Price Support’
• Full relief from indirect carbon prices (UK Emissions Trading System)
• Full relief for historic legacy costs for renewables: a 100% exemption from Renewables Obligation, Feed in Tariffs and Contracts for Difference costs
• Reduce the priority consumer qualification threshold from £50 million per site to £1 million per site to ensure ceramic kilns have the time to be safely shut down without the risk of sustaining serious damage
• Immediate action by Ofgem to reduce Energy Intensive Industry network costs: Ofgem must replicate the network tariff discounts offered to competitor industries in the EU
• Protection must be given to industrial fixed or hedged contracts. The potential loss of such contracts, and the lack of a cap on industrial energy costs, mean a Supplier of Last Resort approach would very suddenly expose businesses to the full market price of energy

Background Information:Energy is normally a third of production costs for many of our members, so higher energy prices will affect their international competitiveness.BCC members have options about how to buy energy, but these are more complex than for households. Many ceramic companies have already purchased much of their energy, but the current oil and gas situation worldwide is presenting a new crisis.A small, but growing number of member companies were already facing higher gas, electricity and carbon prices which were already higher than those paid by their international competitors. As the high prices continue more members will begin to be affected. They cannot absorb these costs, yet some customers will not pay higher prices, so sales are being lost to overseas competitors.If their energy supplier fails, or is not allowed to trade, UK manufacturers will need to get a new contract. This will almost certainly cost anything up to 20 times more than with their previous supplier. If this happens, we will need Government to provide immediate support to those member companies.Increased uncertainties about demand for some ceramic goods, caused by the lingering impacts of COVID-19, mean some manufacturers are more exposed than they might otherwise have been. This puts many supply chains at risk, such as house building, food and drink, and defence.