UK steelmakers pay more for electricity than French and Germans

The government must take action to close a significant disparity in electricity costs for British steelmakers compared with their European rivals, an industry body has warned.

Steel producers in Britain are paying an average of £66 per megawatt-hour for wholesale electricity this year, while the cost in France is £43/MWh and in Germany is £50/MWh, according to an analysis by UK Steel. The lobby group said that such high prices would hamper the industry’s green transition. The much higher prices mean that British producers incur additional costs of about £37 million a year compared with their German rivals, it said.

While the previous government had taken steps to bring down industrial energy costs, including a scheme that provides a 60 per cent reduction in network charges — paid for being connected to the power grid — UK Steel still believes that the gap in prices “justifies targeted action to address these issues”.

The trade body is urging the government to increase the exemptions from network charges to 90 per cent to match what is provided by the French and German governments.

It is also calling for the government to reform the wholesale electricity market, so that volatile gas prices no longer are set at the price of cheaper renewable energy, as well as tracking the gap in industrial energy prices between Britain and its competitors to “enable more informed policymaking”.

Gareth Stace, director-general at UK Steel, said that lower electricity prices were “crucial to unlocking the success of the UK steel industry”, which would enable the sector to be the “backbone of a strong and thriving British economy. For too long, the UK steel industry has been crippled by high industrial electricity prices, placing a heavy burden on the industry’s competitiveness, profitability and ability to invest in future growth.”

Britain is standing at a crossroads, with plans to shut down the vast blast furnaces of Port Talbot in south Wales and Scunthorpe in Lincolnshire and to replace them with lower-carbon electric fan furnaces fed by recovered and recycled scrap metal. The issue presents a tough challenge for the Labour government, which has pledged a £3 billion “green steel” fund to support the overall steel industry in its transition to electric technology.

“This new government has already set out its willingness to deliver for the steel industry,” Stace said, “and it now has the opportunity to bring industrial electricity prices in line with our competitors.”