Hopes of steel companies to reduce carbon production “hampered by high electricity costs”
UK Steel trade body report reveals how UK companies pay much higher energy prices than their European competitors – and how this is delaying investment in cleaner production processes
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Attempts by steelmakers to cut carbon emissions are crippled by sky-high electricity prices, a report warns today.
Soaring electricity costs are hampering plans to move towards cleaner production, as greener methods require even more electricity, according to the UK Steel study.
Yet big energy bills now mean there is less money to put into more environmentally friendly technologies, he says.
The study aims to pressure ministers to reduce electricity costs so that companies have more money to spend on developing cleaner production.
Lower electricity prices would also make it more attractive to use electricity for businesses, says UK Steel.
Its 12-page report, ‘A Barrier to Decarbonization: Industrial Electricity Prices Facing UK Steelmakers,’ shows how UK companies face higher costs than their overseas competitors, who can then sell their products. cheaper steel.
In the fall, as energy prices skyrocketed, UK producers were paying Â£ 88 more per megawatt hour than German companies.
The report states: âWhile gas and electricity prices have increased over the past eight months in Europe, due to increased demand for gas in Asia and lower supply in Russia , the increase is considerably higher here in the UK.
“Average UK electricity prices paid by steel companies in September and October reached Â£ 182 / MWh – almost double the estimated German averages of Â£ 94.02 / MWh.”
The “disproportionately high electricity prices in the UK have cost UK steelmakers an additional Â£ 90million this year” and Â£ 345million over the past six years – “the equivalent of almost two years of ‘capital investment in the sector,’ according to UK Steel.
On average, British producers pay 61% more than German companies and 51% more than the French for electricity, he added.
“The price disparity is a major obstacle to reaching the net zero objective, because all the options for decarbonizing steel production – from CCS (carbon capture and storage) to hydrogen and electric arc generation – lead to a significant increase in electricity consumption, âhe added. warned.
Electricity costs represent about 20% of the cost of manufacturing steel.
The switch from blast furnaces to hydrogen-based steelmaking could imply an additional 250% electricity consumption.
A complete switch to electric arc furnace production would increase consumption by 150%.
UK Steel Managing Director Gareth Stace said: âDisproportionately high electricity prices in the UK are having an extremely negative impact on the industry’s ability to compete, trade, attract foreign investment and ultimately be sustainable in the long term.
âOver the past year, the gap between electricity prices paid by UK and EU steelmakers has almost doubled, costing the industry Â£ 90million in additional costs.
“This is money that could have been reinvested in businesses if the UK had a similar approach to industrial competitiveness as its neighbors.”
Urging ministers to give the industry a lifeline and reduce electricity costs, he added: âThe case for this move is not just economic, but social and environmental.
Edward Moss Photography)
“As the report makes clear, the sector will find it difficult to decarbonize – by investing in new electricity-intensive equipment – if UK electricity prices remain well above those of our competitors.
âIn turn, the long-term future of steel production in the country, and the jobs it provides, rests in large part on our ability to go net zero.
âIn short, this is an issue of existential importance for the sector.
Community Steelworkers Union General Secretary Roy Rickhuss said: âThis government has to decide if it wants a steel industry in this country because it cannot keep kicking the roads.
âFor years we have suffered from paying too much for electricity, and the government must act now to overcome this obstacle to decarbonizing our industry and securing jobs.
âBuilding better and more environmentally friendly will require millions of tonnes of steel, but we need the government to support us because our European competitors are supported by theirs.
“The choice is clear because either we make the steels here, or we can just outsource our jobs and our emissions and rely on dirty imports from countries that don’t play by the rules.”
Labor MP Stephen Kinnock, who chairs the All-Party Parliamentary Group on Steel and whose Aberavon constituency includes Britain’s largest steel plant, Port Talbot, said: ‘Conservative government ministers have made every effort to underscore their ambition to seize the opportunities offered by Brexit. – yet in reality they refuse to support British industry and as a result our steelmakers continue to compete with one hand tied behind their back.
âSteel is the backbone of our economy, and there is no projection for a net zero economy where we use less steel than today.
âEither we keep good, well-paying jobs in the UK or we just outsource the jobs and carbon emissions to competitors overseas.
“We need our steel – but that means we need government action on sky-high electricity prices so that UK steelmakers can compete on a level playing field.”
A spokesperson for the Department for Business, Energy and Industrial Strategy said: ‘We recognize the critical role the steel industry plays in all parts of the UK and are working with the industry to support its transition towards a low carbon future in a way that supports competitiveness and works.
âWe are committed to securing a competitive future for the UK steel industry and in recent years we have provided them with tremendous support including over Â£ 600million to help cover electricity costs. “
The Mirror has campaigned for Save Our Steel since 2015.