Fury as UK steel firms 'pay double for electricity compared to foreign rivals'
UK steel firms pay nearly twice as much for crippling electricity costs than foreign rivals, a study shows today.
The average price faced by British steelmakers in the 2023/24 financial year is £113 per megawatt hour, according to trade body UK Steel. However, German and French companies pay just £61/MWh - meaning UK manufacturers will pay £117million more this year for their power than European competitors.
The finding - in UK Steel’s latest report, Industrial Competitiveness: Electricity prices faced by UK steelmakers - comes after Tata and British Steel confirmed plans to scrap traditional coal-fired blast furnaces and replace them with less-polluting electric arc furnaces, with the loss of 3,000 jobs at Port Talbot, South Wales, and 2,000 at Scunthorpe, Lincs. Experts say electric arc furnaces will mean plants using even more electricity.
UK Steel’s director-general Gareth Stace said: “As our steel sector fully switches to electric furnace to reach net-zero targets, we must not lose sight of how important electricity costs are in the move to green steel.” The trade group says the high bills paid in Britain are “partly due to higher grid connection costs in the UK, which the Government could reduce further”.
In February, ministers announced the “British Industry Supercharger” scheme, through which energy costs for 300 businesses in the steel, metals, chemicals and paper sectors were meant to be brought “in line with other major economies around the world”. But UK Steel said that even with the help in place, it would still leave British firms paying an extra £24/MWh compared with European competitors.
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It outlined four recommendations to cut prices, including introducing the Supercharger package by April; compensating “industry for 90% of its network charges, matching French/German support levels”; “wholesale market reforms, which could include splitting the wholesale market”; and tracking “industrial energy price disparities between countries”.
Mr Stace said: “We are on the cusp of the biggest transformation of the UK steel industry in decades. Government needs to enact our four recommendations to make the business environment even more attractive to invest here in the UK. With truly competitive electricity prices, the UK’s electric arc furnace steel industry will be here to stay.”
Community steelworkers’ union assistant general secretary Alasdair McDiarmid said: "For too long British steelworkers have been forced to compete with one hand tied behind their back when it comes to the UK's sky-high industrial energy costs. This new report from UK Steel suggests that this bleak pattern is continuing.”
He added: "These aren't just pie-in-sky figures from a spreadsheet, but a very real obstacle to steel companies investing in sites across the UK - including on support for decarbonisation, which we know is of paramount importance. UK Government action on industrial energy costs has been too slow and has completely failed to keep up with the substantial levels of investment other governments have put forward to help their domestic steel sectors - particularly in France and Germany. Recent developments at Tata and British Steel have demonstrated just how vital it is that the UK Government has a robust, future-facing industrial strategy - something that we at Community have long called for. Helping our steel sector with the uncompetitive industrial energy costs is a vital part of this.”
Shadow Business Minister Sarah Jones said: “While European competitors move forward with cheaper energy bills, our vital British steel industry has been left behind, paying the price for the Conservatives' failure on energy and betrayal of British steel. We cannot afford to let the Conservatives run down our great British industry. Labour has a long term plan to lower industrial energy costs and create good jobs up and down the country. Only Labour will give UK steel its future back.”
A Government spokesman said: “We recognise the vital role steel plays within the UK economy, supporting local jobs and economic growth. Our British Industry Supercharger, expected to be implemented from Spring 2024, will introduce a decisive set of measures to make our steel industry more competitive by bringing down electricity prices. This is on top of previously announced reviews into electricity markets, where we are considering a range of options and incentives to ensure a fair deal for industry.” The Mirror has been campaigning to Save Our Steel since 2015.
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