Today, UK Steel is launching a report on industrial electricity
prices, demonstrating that a sizable gap remains between what UK
steelmakers and their European competitors pay. The report also
sets out three recommendations to bring electricity prices in
line with European counterparts.
As the steel industry is aiming to fully 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 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.
Currently, the UK steel industry's electricity use is equivalent
to 800,000 homes.
The report finds that UK steel producers pay up to 50% more than
competitors in France and Germany, adding £37 million 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:
- Compensate industry for 90% of its network charges, matching
French/German support levels
- Undertake wholesale market reforms and discount locational
pricing models
- 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.
Contact Information
Louise Young
Campaigns and Engagement
Manager
UK Steel
07388 370176
lyoung@makeuk.org
Notes to editors
About the Industrial Electricity
Prices – A barrier to growth, competitiveness, and
profitability report:
- Steel production and processing is a highly energy-intensive
process, with energy making up a substantial proportion of the
cost of converting globally priced raw materials into finished
steel products for consumers.
- The average price faced by UK steelmakers for 2024/25 is
£66/MWh compared to the German price of £50/MWh and French price
of £43/MWh. This indicates a price disparity of £16-22/MWh,
meaning the industry will pay £37-50 million more for their
electricity than European competitors.
- The main driver of the price disparity is now wholesale
electricity costs, driven by the UK's reliance on natural gas
power generation. Further reforms are needed to reduce wholesale
electricity prices for the steel industry, such as an ARENH-like
industry tariff or wholesale market reforms.
- The previous Government introduced a 60% compensation for
network charges, which is lower than the 90% offered by Germany
and France, leaving industry facing network charges up ten times
that of their European counterparts. The new Government can
increase this to 90% and bring network charges in line with
European competitors.
- The UK steel industry's electricity use is equivalent to
800,000 homes
- An electric arc furnace uses roughly 0.5MWh of electricity
per tonne of steel
About UK Steel: UK Steel is the trade
association for the UK steel industry. It represents all the
country's steelmakers and most downstream steel processors.
The UK steel sector:
- Produces 5.6 Mt of crude steel a year, around 70% of the UK's
annual requirement (annual demand of 7.6Mt in 2023)
- Employs 33,700 people directly in the UK and supports a
further 42,000 in supply chains
- The median steel sector salary is £37,315, 26% higher than
the UK national median and 35% higher than the regional median in
Wales, and Yorkshire & Humberside where its jobs are
concentrated
- Directly contributes £1.8 billion to UK GVA and supports a
further £2.4 billion
- Directly contributes £3.4 billion to the UK's balance of
trade
- 96% of steel used in construction and infrastructure in the
UK is recovered and recycled to be used again and again
For further information about the steel industry, please see the
2024 press pack,
Why the UK needs a strong steel
sector or the 2024 UK Steel Key
Statistics report.
