UK Steel calls for action on energy bills as sector electrifies

Steelmakers in the UK are paying more than double the price for wholesale electricity than competitors in France and Spain, according to analysis from UK Steel.

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The trade body is calling on the new government to take action to rectify the disparity, with UK wholesale prices averaging £66 per megawatt hour (MWh) over the past three months. This compares with France’s £27/MWh and Spain’s £28/MWh.

“The steel industry is the foundation of the UK’s manufacturing and economic strengths,” said Frank Aaskov, UK Steel's Energy and Climate Change policy manager.

“UK Steel data shows that wholesale electricity prices in the UK have been double the French and Spanish wholesale prices in recent months.”

According to UK Steel, the comparatively high price of electricity will hamper the industry’s green transition, as more steelmakers move to electric arc furnaces (EAFs) for production. Switching UK steelmaking exclusively to EAFs is expected to roughly double the sector’s electricity demand, meaning national prices will have an increasingly large impact on the cost of each country’s final product. UK Steel said the country’s high prices mean electricity consumption can represent up to 180 per cent of producers’ Gross Value Added (GVA) in the UK.

“We must not lose sight of how important electricity costs are in the move to green steel as we fully switch to electric arc furnace technology to secure steel for our nation,” said Aaskov.

In April 2024, the outgoing Tory government introduced the British Industrial Supercharger, which reduced policy costs such as renewable levies and the Capacity Market levy, and partly lowered network charges. However, UK Steel said its members still face network charges 10 times higher than in France, further tilting the playing field away from UK producers.

“The UK steel industry cannot continue to face electricity prices that are more than double what our main European competitors benefit from,” Aaskov continued.

“For the UK steel industry to prosper and deliver on its decarbonisation targets, a new government must deliver the lowest electricity prices in Europe.”