UK Steel offers affordable electricity solutions for steelmakers

British steelmakers are calling on the government to help the industry with electricity prices. This is stated in the report of the industry association UK Steel.

As noted, industrial electricity prices in the UK are high. UK Steel research shows that the country’s steel producers pay 50% more than Germany and France. New policy solutions are essential to ensure affordable energy supply, to ensure the competitiveness of the steel industry and to strengthen it.

The industry association notes that, unlike many steel-producing countries such as France, Italy, Spain and the UAE, the UK has no mechanism to protect energy-intensive industries from high wholesale prices.

UK Steel proposes a solution by recommending the introduction of a bilateral contract for difference (CfD) mechanism, which could solve several issues

• ensure price parity with lowest-cost European competitors by fixing electricity prices for the steel sector;
• protect against price volatility, which will enable long-term planning and investment in low-carbon technologies such as electric arc furnaces;
• to share risks and rewards – the sector returns funds to the government when prices fall below the agreed contract price.

The EBA calls the proposed CfD a practical and forward-looking solution to support the UK steel industry and drive the green transition. The mechanism will be important for the government’s strategy for the development of the steel industry, helping to create a more competitive business environment for the sector, attract investment and contribute to wider decarbonization.

According to Frank Aaskov, Director of Energy and Climate Change Policy at UK Steel, the steel strategy needs to address the issue of uncompetitive electricity prices.

“We can no longer allow electricity prices to tie our hands behind our backs. To attract investment, international competition, decarbonize and protect jobs, the sector needs a practical, market-based solution that ensures the UK remains a viable steelmaking destination. A successful steel strategy can deliver this as early as next year,” he explained.

As GMK Center reported earlier, the UK government has confirmed its commitment to invest £2.5 billion ($3.15 billion) to support the steel industry and protect jobs in the steel sector. The funds will come partly from the newly created sovereign wealth fund. In February of this year, Business Secretary Jonathan Reynolds announced the launch of a consultation plan for the steel industry.