British industry calls for lower electricity prices

In a joint letter, a coalition of manufacturers, investors, and climate groups called on the Chancellor of the Exchequer Rachel Reeves to reduce electricity prices to unlock growth, boost electrification, and secure the UK’s place in the global clean economy.

Among the signatories to the letter are industry association UK Steel and steel producer 7Steel (formerly Celsa Steel UK).

The coalition called on the government to shift policy costs associated with legacy renewable energy incentive schemes to general taxation. According to Energy UK, this will reduce electricity prices for businesses by £40/MWh, which will lead to a 15% reduction in bills.

“The call comes as high electricity prices continue to undermine UK competitiveness, with businesses paying significantly more for electricity than their European counterparts. Some support has been provided by the British Industry Supercharger, but it falls short of what is needed to keep pace with the support on offer in the EU, US, and elsewhere,” the statement said.

The industry believes that this move will allow the government to recover costs more progressively, as they disproportionately affect electricity users, including low-income households and businesses trying to compete internationally. These changes are in line with the government’s mission to grow by improving the global competitiveness of British industry. The signatories warn that if the UK does not act now, it could lose access to the global clean manufacturing market, which is projected to reach $2.6 trillion by 2030.

The signatories refer to the precedent set by Germany. In 2022, the country abolished its green energy surcharge, instead deciding to pay for renewable energy through a special national climate fund.

In March of this year, UK Steel proposed a solution to affordable electricity for steelmakers – the introduction of a bilateral contract for difference (CfD) mechanism, which, in particular, will help ensure price parity with European competitors with the lowest costs by fixing them for the industry.