Kwasi Kwarteng is contemplating a support package for steelmakers and other manufacturers struggling to cope with rising energy costs.
The business secretary is exploring whether the government could exempt heavy industrial manufacturers from network charges. These are included in bills to help to maintain and upgrade Britain’s network of gas pipes and electricity cables that carry energy across the country and are regulated by Ofgem.
UK Steel, the industry trade association, has complained that electricity prices for British steelmakers are significantly higher than those in France and Germany. In Germany, steelmakers receive a 90 per cent exemption from network charging. UK steelmakers benefit from incentives for using the electricity network at off-peak times, but Ofgem is planning to reduce those incentives to even out the charges it levies on industrial and domestic users. Steelmakers have warned that the move could push network charges up by almost 85 per cent to £17.50 per megawatt-hour.
The average electricity price Britain’s steel producers faced in 2021-22 reached £95 per MwH, compared with the estimated German price of £59 and the French price of £63, according to UK Steel. In September and October, the price disparity was more than £88 per MwH.
After the rise in commodities prices caused by Russia’s invasion of Ukraine, the association said that steelmakers were having “to assess day-by-day and hour-by-hour whether it is economically feasible to make steel”. UK Steel has argued that the price disparity with its rivals is a “major barrier” to meeting Britain’s target of reaching net-zero carbon emissions by 2050, with options for decarbonising steel production leading to significantly increased electricity consumption.
British steelmakers produce seven million tonnes of crude steel a year, 70 per cent of the UK’s annual need.
A possible relief package from the government was first reported by The Sunday Telegraph. A Whitehall source confirmed the aid was being considered, but said it would be “difficult to do”.
A government spokesman said: “We remain absolutely determined to secure a competitive future for our energy-intensive industries, including the steel sector.”