Reduce electricity prices ahead of electric steel future – UK Steel

UK Steel has launched a report showcasing the vast chasm between UK industrial electricity prices and what European competitors pay, setting out four recommendations to deliver competitive electricity prices for the UK steel industry.

After the two landmark declarations by UK steelmakers, Tata Steel and British Steel, that they will invest in electric arc furnace technology, competitive electricity prices become even more important. UK Steel says it welcomes the sector’s vision for new, modern steelmaking, but to maximise the value of these investments the industry will need affordable electricity supplies.

Steelmakers in the UK pay nearly two times as much as Germany and France’s industrial electricity prices. This is partly due to higher grid connection costs in the UK, which the Government could reduce further.

Steel production’s energy-intensive nature leads to high electricity consumption, and these costs can represent up to 180% of steel producers’ Gross Value Added (GVA) in the UK. With a switch to electric arc furnaces, it is expected that the sector’s electricity consumption will roughly double.

UK Steel makes four recommendations to cut prices:

1. Implement the British Industry Supercharger package by April 2024
2. Compensate industry for 90% of its network charges, matching French/German support levels
3. Wholesale market reforms, which could include splitting the wholesale market
4. Track industrial energy price disparities between countries

UK Steel 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.

“While Government should be applauded for implementing the Industry Supercharger package, it doesn’t match what other governments provide for their steel industry. The average price faced by UK steelmakers for 2023/24 is £113 per MWh compared to the German and French prices of £61/MWh. That’s a price gap of £52/MWh, meaning we pay £117m more for our electricity this year than our European competitors.

“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.”

UK Steel
www.uksteel.org