UK-based trade association UK Steel has warned that, despite recent government interventions, domestic steel producers continue to face uncompetitive electricity prices compared with European rivals. The association’s latest report shows UK steelmakers will pay up to 25 percent more for electricity in the fiscal year 2025-26, adding around £26 million in annual costs.
UK versus European Union electricity prices
According to the report, average power prices for steelmakers are projected as follows:
- UK: £59.48/MWh
- Germany: £52.04/MWh
- France: £47.76/MWh
Even after increased compensation for network charges, the disparity remains due to wholesale costs, driven largely by the UK’s reliance on natural gas.
Impact on steel sector
Electricity is one of the largest input costs for steel production. The report highlights that the sector’s electricity consumption matches 800,000 households today and that demand will double as more electric arc furnaces (EAFs) replace blast furnaces and power costs account for up to 180 percent of gross value added (GVA) for UK producers.
This places the UK steel industry at a competitive disadvantage just as it invests heavily in electrification to meet net zero targets.
Recommended solutions
The report sets out two key measures to close the competitiveness gap:
- Two-way contracts for difference (CfDs) for wholesale electricity to align UK industrial prices with France and Germany.
- Backdating of 90 percent network charge compensation to April 2025 to prevent another year of excess costs.
“The UK steel industry has a hand tied behind its back as it faces electricity prices up to 25 percent higher than its European competitors. Uncompetitive power prices pose a threat to jobs, future investment, and our Net Zero ambitions. With a two-way CfD mechanism and swift backdating of network charge relief, the government can finally eliminate the disparity in industrial electricity prices,” Gareth Stace, director-general of UK Steel, said.
