Fourth Industrial Revolution

James Heappey Excerpts

Thursday 8th September 2016 Commons Chamber

[Ronnie Cowan (Inverclyde) (SNP)]

It is impossible to be from Inverclyde and not to reference the lessons of history when talking about how we can best implement new technologies in our economy. I hope other Members will forgive me for indulging in a short history lesson, but without Greenock-born James Watt we would not be talking about a first industrial revolution, never mind a fourth.

Many Members will be aware that Inverclyde was once a world leader in technological innovation. For hundreds of years we led the way in shipbuilding innovation, with ships such as the Port Glasgow-built PS Comet, which operated the first commercially successful steamboat service in Europe. That technological innovation created thousands of jobs and led to a massive increase in manufacturing production.

Throughout the 19th and 20th centuries Inverclyde’s shipyards remained world-leading innovators, building the advanced warships of the day and the most cost-effective merchant vessels, which expanded our influence in the world. It was an imperfect industry, but people could take pride in their work, and we can declare without hesitation that this was an integral part of Scotland’s story as a nation.

In the 1980s the UK Government withdrew public funding for shipbuilding. The subsequent collapse of the industry meant that, by 1986, Greenock and Port Glasgow’s male unemployment rate had risen to 26%. The UK Government told us the private sector would create jobs where publicly supported industries had failed. I will concede they were partially correct about that—a McDonald’s restaurant is now situated where the walls of the Scott Lithgow shipyard once stood.

In 1988 Margaret Thatcher visited Greenock’s IBM plant to highlight how we would transition to new industries and lead the way in an electronics revolution. However, the revolution has been short-lived, and IBM will permanently end its involvement with the Spango Valley site in Greenock later this month. The first three industrial revolutions brought success to Inverclyde, yet they ultimately ended with periods of rapid decline. These eras created wealth for factory owners and multinational technology companies, but too often the workers were left to pick up the pieces when these industries ended. As a result, Inverclyde now suffers from a high rate of depopulation, and the remaining local businesses and public services are struggling to survive under the long shadow of those historical failures.

The point of that history lesson is this: Inverclyde shows us that technological innovation will never reach its full potential if it lacks a social conscience. The motion before us states that

“the UK is a in a strong economic position to take advantage of the Fourth Industrial Revolution”.

In my constituency, we have not yet resolved the issues arising from the decline of the previous technological ages. Undoubtedly the fourth industrial revolution can be part of the solution, as long as constituencies such as mine receive adequate levels of support; otherwise, this innovation will only reinforce inequality as the more developed parts of the economy continue to benefit the most from rapid technological advances. The UK Government have an obligation to offer more assistance to Inverclyde, given their catastrophic failures of the past. The Government took extraordinary measures to destroy industry in Inverclyde; I would now like them to take extraordinary measures to help us take advantage of the fourth industrial revolution.

Renewable energy will be a major component of Scotland’s future technological innovation. Inverclyde would be well placed to take advantage of these developments. Inverclyde is one of the few areas with the geography to utilise nearly all forms of renewable energy. We have a coastline and can therefore contribute to tidal power, and we have enough rural space and hills to facilitate wind farms. The burns that run off those hills can power hydro schemes, as they did in the past, and while solar will never fulfil all our requirements, it could be a valuable contributor. Further, we are already a producer of biomass fuels, and wood chips produced in Inverclyde are being used all over Scotland. Inverclyde has a large amount of unused industrial land, and these sites could be centres of manufacturing once again, while our port facilities mean that we are able easily to export the completed products to their required destinations. Every renewables business that we establish would result in associated benefits for suppliers and other local businesses.

While I welcome the UK Government’s decision to bring industry strategy back on to the policy-making agenda, I fear they will not prioritise the needs of constituencies such as Inverclyde. Where the UK Government do have power, we are witnessing a lack of vision. Renewables could transform Inverclyde, yet policy decisions made here in London are stifling the industry’s potential. The UK Government have shown a complete lack of foresight in withdrawing much of the financial support that was available for the renewables sector, so not only are the UK Government the chief architect of a social and economic disaster in the west of Scotland, but they are actively damaging industries that could make the area vibrant once again. The fourth industrial revolution promises us so much—“smart” manufacturing, increasingly integrated technologies, and even white goods and household appliances that connect to the internet—but what my constituents are really asking for is employment: not low-level, poorly paid jobs, but skilled, high-value employment that will boost other businesses and educational institutions in the area.

The industrial revolution failed to lift the landed poor out of poverty. It created vast amounts of wealth, but increasingly that wealth is being accumulated in a smaller and smaller section of society. I want the UK Government to demonstrate two things: first, how they plan on driving forward the fourth industrial revolution; and secondly, how this technology will be used to benefit the social and economic situation of everyone in society. With an astute eye for the future, the fourth industrial revolution could lead to a period of unrivalled prosperity for this country, but without the Government’s stewardship, these new technologies will only reinforce social, gender and regional inequalities.

[James Heappey (Wells) (Con)]

The hon. Gentleman was not in the Chamber yesterday afternoon when I spoke in the climate change debate, so I thought I would inform him that through employing some of these new technologies, Guy’s and St Thomas’ NHS Foundation Trust in London has been able to install in a hospital a combined heat and power system that saves it £2 million a year on its operating costs. It has done that not through Government promotion but because the technology is there and it has sought to adopt it, and it is doing immediate good for that public service.

[Ronnie Cowan]

I have wonderful examples of the same thing in my own constituency. Biomass fuel heating is a fantastic innovation if used properly. At the same time, the Government are reducing tariffs on various sorts of wind energy and solar power. It is part of the whole mix if we are going to get this right.

I want to see a fairer and more prosperous society that has employment and opportunities for our young people. Without this sense of progress and social justice, technological advancement will only work against those that need the most assistance. It is time for the UK Government to show how their industrial strategy will benefit working people—and if they are unwilling to do so, transfer the powers to Scotland and let us get on with the job.

[James Heappey (Wells) (Con)]

Speaking twice in 25 hours is a record for me, and I am grateful for the opportunity. I congratulate my hon. Friend the Member for Havant (Mr Mak), who has secured a worthwhile debate and opened it brilliantly. I apologise for being late, but I was working on the Energy and Climate Change Committee’s paper on renewable heat and transport targets, which will be released this evening. I commend it to the House: it is probably one of the most insightful Select Committee reports that Members will read all year. Indeed, all of our Committee’s reports are insightful.

In summing up yesterday’s debate, the Minister used some fantastic theatrical references, which I hope will become a tradition of his summing-up speeches. He has an encyclopaedic knowledge of the theatre, so we look forward to that. Today, I present, to use my own theatrical reference, the second part of my play in two parts, in which I will talk about the energy opportunities provided by the collision of emerging technologies and our existing energy infrastructure.

There is some dispute over whether this is the third or fourth industrial revolution. A book by Professor Jeremy Rifkin has become a bit of a bible for me, as I have sought to develop my thinking on how energy policy might evolve. He thinks that this is the third industrial revolution, but none the less it is an excellent read that very much pulls in the same direction as those who are advocating the fourth industrial revolution.

Ministers will already have looked in great detail at the National Infrastructure Commission’s “Smart Power” report, which is a fantastic publication setting out how we can harness all these wonderful technologies as we digitise the energy system. The reality, as the report observes, is that we could save £8 billion a year for the UK economy if we digitise our energy system and harness those technologies. That figure represents not just immediate savings on our energy bills, but gains in productivity.

Nicola Shaw, the head of National Grid, told the BBC “Today” programme last week that we are seeing

“a smart energy revolution across the country with consumption adjustments reflecting when energy is cheapest”.

The idea that we have to change our consumption habits to meet a changing energy market sounds like a nightmare to most people, but the reality is that we already have many of the technologies in our homes. Most major white goods manufacturers are producing smart appliances already: they are in our shops and, probably unknowingly, we already have them in our homes. Through the internet of things, they will all start to speak to one another to make sure that they operate at the most efficient and cost-effective time. They also report faults, so people will not have to carry on for years with a fridge that uses more power than it should, because it will already have flagged up its fault to whoever manufactured it. These are exciting times and the technologies already exist. It is not, in my view, going to be a case of opting into them, because manufacturers are building them as standard and they will increasingly do so.

The Government face a challenge in preparing our homes, businesses and society for the internet of things from an energy perspective, so I will give my thoughts on our system preparedness before moving on to examples of where we are already seeing the huge economic advantages.

As Ministers know only too well, the smart meter programme is the keystone in achieving the digitisation of our energy system, and I know that they will be keen to push on with that roll-out at best speed. Everything that we seek to do in bringing technological innovation into the energy space depends on those smart meters being in place to digitise the system. Similarly, on the way in which our grid is put together, we want all our generational capacity—from the smallest to the largest—to be able to speak in real time about what it is producing, so that we can have a more dynamic generation system. We also need to sort out the regulatory framework for storage, because at the moment people have, in effect, to pay for their energy twice: first when it is generated, and secondly when it is released from storage. Surely, that cannot continue for much longer.

We also have to make sure that our distribution networks—the substations in our communities—are capable of dealing with more dynamic demand and clustered demand, particularly overnight, when people might be taking advantage of cheap energy to charge cars, run the washing machine and tumble dryer, and heat immersion tanks. None of that will happen automatically without the Government paving the way. Thereafter, however, I am sure that these technologies will find their place in the market by themselves. They will make life better, and people will buy them as a result. The Government do not need to encourage people every year or so to change their mobile phone, because people just want to have the latest technology at their disposal. I am sure that that will be the case in this area if the Government create the right regulatory framework with energy policy.

I turn to storage. The price of storage has already come down from $3,000 per kWh to about $200 today, and it will come down even more quickly still. We saw over the summer reports about the Tesla Panasonic factory in Colorado, the construction of which is being accelerated quite rapidly given the increase in demand. These are exciting times, because storage is the key to flattening the energy supply curve and unlocking the real potential of renewables.

The real technological wizardry, however, is demand-side response. That may be a combination of words that many in the Chamber have not heard before, but it needs to be at the forefront of the way in which we discuss energy. Flattening the supply curve through the availability of storage deals with only half the problem; flattening the demand curve through demand-side management is equally important.

I have been hugely impressed as I have become enthused about DSR, and as I have gone around various companies that are delivering it, by the scale of the savings that it is bringing to businesses. Marriott hotels have signed up to a DSR contract that saves them hundreds of thousands of dollars a year. Workers at Aggregate Industries’ bitumen plants used to just turn up in the morning and fire up the boilers to get the bitumen tanks up to heat. They would operate over the course of the day, and then they would be switched off. Aggregate Industries now employs technologies that allow it to say, “Our tolerance is that we need to keep these tanks at a certain temperature, and provided that they are at that temperature, we can release energy back to the grid.” It does so, and it gets money for nothing as a result. By employing those technologies, it can sell back energy that it does not need, which it would otherwise just have paid for and wasted. That creates a huge saving.

Similarly, refrigeration is a massive cost for supermarkets and the food industry in general. Sainsbury’s has employed demand-side response, and the store in my constituency in Street, Somerset has released 20 kW of capacity back to the grid simply from DSR. That is extraordinary.

The other area that I want to touch on was the electrification of the transport system. I had to check very carefully with the Clerk of the Energy and Climate Change Committee about when I would find myself in contempt of Parliament, but I understand that if I draw on the evidence rather than on the report itself, it is fine. This is a hugely exciting opportunity for us to employ electric cars and electric haulage systems in the UK. The problem is that I am not sure that we yet have the infrastructure in place to support them, and I am not sure that we have the right fiscal structure to support them either.

I tried to buy an electric car over the summer, and sadly I found that their range was probably not quite enough to allow me to do my duties around my rural Somerset constituency. They are getting there, however, and we just need to incentivise the acceleration of the technology, so that we get beyond the 100-mile range to a range of 200 or 300 miles. If that happens, I think that people will, all of a sudden, go for electric cars quite quickly. All the incentives that the Government have in place—the £4,500 that they contribute towards the car and the contribution they make towards a charging point at the buyer’s home—are fantastic. The Government’s emphasis on establishing a charging infrastructure at motorway service stations and on main roads is also fantastic, but we really need to grow the infrastructure much more if people are to buy the cars and make the saving that we hope they will. The argument is that electric cars will make us more productive as well, particularly when we go beyond merely electric cars to electric autonomous cars, and we find that we can move around our towns and cities much more freely.

Interestingly, in the United States, Coca-Cola has employed hydrogen-electric hybrid vehicles for its entire fleet, and it has made a 20% reduction on its fuel costs. It made that huge saving by employing those technologies and electrifying its transport fleet, which is very exciting. We should look across at that and realise that this is not just something that people do if they are green and they want to be environmentally sensitive. It is something that an individual or a business can do if they want to reduce their operating costs—technology colliding with energy generation and energy consumption to make us more efficient and more cost-effective, and to make all our operating costs that bit cheaper.

Mr Deputy Speaker, you encouraged us to keep within 10 minutes, so I will summarise, rather than go into the many more examples that I am itching to provide. The bottom line is that, while we will focus very much on our digital infrastructure with broadband and 5G mobile phones and we will worry very much about the preparedness of our airports and air routes, as well as of our roads and rail, the energy infrastructure is just as important. In my view, alongside the broadband and mobile phone networks, the three sets of infrastructure of telecoms, broadband and energy will drive the fourth—or third—industrial revolution and allow us to harness all these fantastic technologies. We should seek to do so not just because we are seeking to arrest climate change, but because it is cost-effective, makes business sense, will increase productivity and, ultimately, will be great for our economy.

--- Later in debate ---

[Kevin Hollinrake]

There are huge challenges ahead.

The situation is similar with Amazon, of course. Small businesses used to engage on the Amazon platform. A small business driver would pick up goods and take them to their destination; in future that will be done by autonomous vehicles and drones. Amazon will completely dominate the supply chain, so where is a small business opportunity there?

In previous industrial revolutions, opportunities were created for small businesses—people repaired the looms and sold clothes to the people who had new well-paid jobs. I must disagree with the hon. Member for Inverclyde (Ronnie Cowan), who said that people had not benefited from the industrial revolution. Clearly living standards today are much higher than before the industrial revolution. Nevertheless, future opportunities for small businesses are a concern.

[James Heappey]

My hon. Friend is making an excellent speech. Does he agree that both for private residents and for businesses, if one of the characteristics of this industrial revolution is the pursuit of a zero marginal cost for energy, communications and transport, the reduction of those costs could give small businesses, large businesses and private citizens alike a great opportunity to enter a marketplace without those barriers to entry?

[Kevin Hollinrake]

My hon. Friend makes a good case. In California, people are experimenting with something called a digital dividend. The money that is being made is paid back to people in the form of a dividend for which they do not have to work, but work is important. We want the opportunities; we want the work. We do not want to be redundant, sitting at home while machines do all the work for us. We must make sure that we make the most of the opportunities.

These advantages are locked in, as are tax advantages. The businesses that dominate these technologies are multinational companies that know how to work their way through the system. They circumvent corporation tax and also, arguably, circumvent employment laws. They also circumvent existing businesses and supply chains.

I am not King Canute trying to hold back the tide—this is an inevitability. We cannot resist this change, but the House must develop policies that create a level playing field and also opportunities. We must ensure that our tax system is fit for purpose for the challenges ahead and as we deal with multinational corporations. We must also support the growth of other industries that may spring up on the back of new opportunities that will inevitably be created. We must make sure that we use the opportunities available to us to keep opportunities open for small business.