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UK Steel proposes new electricity price mechanism for UK steel industry

UK Steel has proposed a new mechanism to tackle the problem of high electricity prices faced by the UK steel industry.

UK Steel proposes new electricity price mechanism for UK steel industry

Research published by UK Steel highlighted that UK steelmakers pay up to 50% more in electricity costs than Germany and France. This challenges the UK's industrial competitiveness and threatens its economic resilience.

The UK, unlike other steel producing countries such as France, Italy, Spain and the United Arab Emirates, does not have any mechanism to protect its energy intensive industries (EIIs) from high wholesale prices. Therefore, UK Steel has proposed a two-pronged Contract for Difference (CfD) mechanism that aims to improve global competitiveness by stabilizing electricity prices in the steel sector. These are; fixing electricity prices in the steel sector to ensure price parity with the lowest-cost European competitors and increasing global competitiveness. Protect against price volatility by enabling long-term planning and investment in low-carbon technologies such as electric arc furnaces, and reimburse the government when prices fall below the agreed implementation price.

“The introduction of the wholesale mechanism is a unique opportunity for the Government to deliver on its manifesto commitment to lower industrial electricity prices, and UK Steel's report provides the blueprint to make this happen,” stated Frank Aaskov, Director of Energy and Climate Change Policy.

“The United Kingdom is an outlier”

Underlining that the British steel industry is at a serious competitive disadvantage due to long-term high electricity costs, Frank Aaskov stated: “The UK is in an outlier position as its European competitors benefit from government wholesale price mechanisms that protect them from high electricity prices. As part of the steel strategy, uncompetitive electricity prices must be addressed so that the steel industry can thrive amid heightened geopolitical turbulence, securing thousands of jobs and protecting national steel production. We can no longer allow electricity prices to tie one hand behind our backs. To attract investment, compete internationally, decarbonize and protect jobs, the industry needs a practical, market-driven solution to ensure the UK remains a viable location for steelmaking.”

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