Lower electricity grid charge compensation disappoints UK Steel

UK Steel says it is disappointing the disparity between UK and French and German electricity prices will remain after the UK government confirmed a 60% compensation for industry from electricity grid network charges. However, it adds the move is a step to addressing higher electricity prices that hamper UK steelmakers’ competitiveness and ability to attract investment to decarbonise.

The UK government published its Network Charging Compensation (NCC) scheme on Wednesday following a consultation with industry on network charges. This is part of its British Industrial Supercharger programme announced in February. The consultation received 29 responses from stakeholders, including energy-intensive industries (EII) companies, business representative organisations, trade associations, energy suppliers and others.

The government had initially been consulting on compensation of up to 90%, the level provided by other European governments.

“The government notes that a number of EIIs recommended over 80 to 90% in compensation, citing international comparisons. However, the government’s view is that the 60% compensation offered will ensure that eligible EIIs will receive an average electricity price reduction of £24 to £31/MWh once all the measures in the Supercharge are implemented. This level of reduction will bring industrial electricity prices down to an internationally competitive level,” a UK government note says.

“There is a shared ambition between the Government and industry for the British steel sector to transition to net zero, clearly demonstrated by the recent steel sector investment announcement from the Government,” UK Steel director general Gareth Stace says in a note sent to Kallanish.

“While it is clearly disappointing that a disparity in electricity prices will remain after partially compensating the steel industry for its network charges, we look forward to working with Government to address this and deliver competitive industrial power prices,” he adds.

The government now intends to legislate with a Statutory Instrument in spring 2024 to enable changes to be made to calculations and for savings to start to materialise from April 2024. The EII NCC Scheme and EII Support Levy are scheduled to commence in 2025.

Adam Smith Poland