UK Steel is excited to see the Government taking significant steps in its new Industrial Strategy aimed at making industrial electricity prices more competitive.
They’ve adopted three major recommendations that will help address the high costs of electricity for the steel industry:
- The Network Charging Compensation will rise to 90% starting in 2026, aligning with what’s offered in Germany and France. This change is expected to lower power prices by about £6.5/MWh, saving the steel sector around £14.5 million each year.
- The indirect compensation scheme will continue, which helps offset the carbon taxes that the steel industry pays through their electricity bills. Without this renewal, industrial electricity costs would have jumped by £20/MWh, leading to an additional £45 million in electricity expenses for the steel sector.
- Starting in 2027, the British Industrial Competitiveness Scheme will exempt less electro-intensive businesses from the Renewables Obligation, Feed-in Tariffs, and the Capacity Market. UK Steel estimates that this could cut power prices for qualifying manufacturers by £43/MWh, potentially reducing their electricity bills by up to 25%.
The increase in Network Charging Compensation from 60% to 90% will significantly lower industrial electricity prices by £6.5 per megawatt hour (MWh) for the steel industry, translating to an impressive £14.5 million in annual savings.
However, even with these reductions, there’s still a gap of £10-16 per MWh compared to electricity costs in Europe, which adds up to an extra £36 million annually for steel bills. This disparity in costs for energy-intensive industries is largely due to the UK’s dependence on natural gas for power generation.
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Here’s the text we’re looking at: Addressing network charges, indirect compensation, and the new British Industrial Competitiveness Scheme are positive moves toward making energy more affordable and fostering a better business climate. UK Steel has a plan to close the gap in industrial electricity prices between the UK and its European rivals. Working alongside the well-regarded energy consultancy Baringa, UK Steel has suggested implementing a two-way Contract-for-Difference that would align wholesale prices with those in France and Germany, effectively eliminating the price gap.
Gareth Stace, Director General at UK Steel, shared his thoughts:
“The Government has rightly taken action to reduce industrial electricity prices and modelled its new policies on UK Steel’s solutions. UK power prices have for too long damaged the profitability and growth of the steel industry hand over fist, driving away investment and opportunities decarbonise our production.
“The Industrial Strategy is a step in the right direction towards competitive electricity prices and a better, more effective business landscape, but we are climbing slowly up the foothills of the mountain we need to climb. This is an important milestone, but we are not out of the trenches yet. The Industrial Strategy must be the first of many changes if we are to fully unlock the potential of the UK steel industry to back the growth and stability of our economy.”
Contact Information
Louise Young
Campaigns and Engagement Manager
UK Steel
07388 370176
lyoung@makeuk.org
