A new report for UK Steel today reveals a sizeable gap between the prices paid for electricity by UK steelmakers and their European competitors.
The trade body’s report also sets out three recommendations to bring electricity prices in line with European counterparts. As the steel industry is aiming to electrify through investment in new additional electric arc furnaces, electricity prices become even more crucial to the industry’s competitiveness, profitability, and future success.
Steel production is incredibly electro-intensive, and power charges are one of the largest barriers to sustainable steelmaking in the UK. With proposed steel industry switches to electric arc furnaces, it is expected the sector’s electricity consumption will roughly double.
The report finds that UK steel producers pay up to 50% more than competitors in France and Germany, adding £37m to UK steel electricity costs. The price disparity is predominantly driven by higher UK wholesale costs and partly greater network charges.
UK Steel makes three recommendations to cut prices:
1. Compensate industry for 90% of its network charges, matching French/German support levels
2. Undertake wholesale market reforms and discount locational pricing models
3. Track industrial energy price disparities between countries
UK Steel Director General Gareth Stace said: “This new Government has already set out its willingness to deliver for the steel industry, and it now has the opportunity to bring industrial electricity prices in line with our competitors. “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.
“The average price faced by UK steelmakers for 2024/25 is £66 per MWh compared to the French price of £43/MWh and the German £50/MWh. That’s a price gap of up to £22/MWh, meaning we pay £37-50 million more for our electricity this year than our European competitors.
“Steel is integral to the new Government’s ambitions for the UK, from the renewable energy rollout through GB Energy to infrastructure developments and increased housebuilding, which all require and rely on steel. Lower power prices are crucial to unlocking the success of the UK Steel industry, enabling steel to be the backbone of a strong and thriving British economy.”
Allan Bell, British Steel’s Chief Commercial and Procurement Officer, said: “The new government is well-briefed on the challenges our business faces, including high electricity prices. We look forward to working with them to build a clean, green, and sustainable future for British Steel.”
