UK-based trade association UK Steel has announced a new report that shows the significant electricity price disparity the UK steel sector faces compared to its European counterparts. According to the report, this year the average electricity price UK steel producers typically face in the 2020-21 period has reached £47 per megawatt-hour compared to the estimated German price of £25 per megawatt-hour and the French price of £28 per megawatt-hour. Therefore, the UK production plants are paying 86 percent and 62 percent more, respectively, than their main competitors. Over the past five years, the industry has paid £256 million more for its electricity than their competitors in Germany and £227 million more than steelmakers in France.
The additional costs represent funds that should have been directed towards critical capital investment, including decarbonization efforts. “The UK’s energy intensive industries face some of the highest industrial electricity prices in the world. This severely damages the steel sector’s competitiveness, as it is both electro-intensive and highly exposed to international competition, meaning it cannot pass on additional costs to customers,” the report said.
The report focuses on the immediate steps that the government can take to lower electricity prices and support employment and investment in the UK steel sector’s transition to the net zero carbon economy. The recommendations include; implementing German/French style network cost reductions, increasing the level of renewable levy exemptions, providing an exemption from Capacity Market costs, and tracking industrial energy price disparities between countries. Implementing these recommendations for the UK steel sector would come to a total annual cost of £45-54 million and reduce the electricity price disparity by £20 megawatt-hour.