UK consults on exempting heavy industry from green levies, network charges

UK steel, metals, chemicals and paper industries are set to benefit from exemptions to green levies and network charges proposed by the government under the British Industry Supercharger scheme, the Department for Business, Energy and Industrial Strategy said Feb. 23.

A day earlier British Steel announced it would shut its Scunthorpe coking ovens and cut up to 260 jobs, noting its energy and carbon offsetting costs had increased by GBP190 million ($229 million) in 2022.

“The measures announced by the Business and Trade Secretary Kemi Badenoch today will bring the energy costs of the UK’s energy-intensive industries in line with those charged across the world’s major economies,” BEIS said.

The government is to consult on the measures and bring forward legislation in due course, meaning the relief might not start for a year, Director General of UK Steel Gareth Stace said Feb. 23.

Support under the British Industry Supercharger scheme would be available to 300 businesses exposed to the cost of electricity, notably in the steel, metals, chemicals, and paper sectors, BEIS said.

“These industries employ around 400,000 skilled workers right across the UK and support many more in their supply chains. In 2019, their exports made up around 28% of total UK exports,” the ministry said.

Exemptions would relate to renewable energy obligations such as the Feed-in Tariff, Contracts for Difference and the Renewables Obligation, as well as GB Capacity Market costs.

The government would also look at reductions on network charges, BEIS said.

Speaking to BBC Radio, UK Steel’s Stace said UK industrial electricity prices “have been uncompetitive for many years, and today, this announcement from the government goes a long way to bridging the gap between what we pay and what our competitors pay in France and Germany.”

UK steel had been paying 60% more for its energy than its German competitors, Stace said.

“There is a long way to go, and what is particularly concerning is that we might see our electricity prices going down in just over a year’s time” given the government’s proposals had only just gone into consultation, he said.

“My fear is that if we don’t see competitive power and carbon prices within the year we won’t see investments and we might see more closures,” he said.

In a statement to S&P Global Commodity Insights, Liberty Steel, a subsidiary of GFG Alliance and the UK’s third-largest steel producer, also welcomed the announcement but warned that the UK steel industry faces immediate challenges that require further intervention from the UK government.

“With the proposed new measures subject to consultation and not expected to be in place until Spring 2024, the challenges the steel industry in the UK has been facing for some time are still set to continue for another year,” GFG said

“The Chancellor has an opportunity with the budget statement in March to set out additional measures that will foster more confidence in the UK’s commitment to enabling a sustainable future for the industry and its customers, and to securing jobs, growth, and economic resilience in communities across the UK,” it added.

Chemical Industries Association Chief Executive Steve Elliott described the announcement as “welcome news” for UK manufacturers but noted that the package only applies to a “limited number of firms” with many businesses still subject to “high and increasingly volatile prices.”

The CEO of the UK Aluminium Federation, Tom Jones, said that Alfed “very much welcomes” the announcement of the British Industry Supercharger scheme and the measures to reduce UK electricity prices for energy-intensive industries.

“Industrial growth, the development of the UK’s aluminum sector, and job creation come from our sector being competitive with Europe and the rest of the world. This action today from the government recognizes the strategic value of UK manufacturing, the contribution the sector makes to the UK economy and its role in the drive to developing a sustainable manufacturing future,” Jones said.

Two weeks ago, Alfed called on the government to develop a long-term integrated green growth plan encompassing all the departments of the UK government.

Aluminum is among the UK’s most energy-intensive industries. The UK currently has only one aluminum smelter, operated by GFG Alliance in Scotland, although various processing works in the UK make aluminum products, including extrusions. A large smelter previously operated by Alcan at Lynemouth in northern England was mothballed in 2012 due to factors like high electricity prices.

UK spot wholesale prices assessed by Platts, part of S&P Global, are averaging Eur156.11/MWh in the year to Feb. 23, 28% higher than the comparable EPEX spot price average for Germany.

— Henry Edwardes-Evans, Staff