Analysis from the Energy and Climate Intelligence Unit (ECIU) has found that British industry has faced soaring energy costs since the energy crisis that began in 2021.
In the four years since the energy crisis began, British industrial producers have had to pay an additional £29 billion for its gas and electricity when compared to the four years before the pandemic. The worst hit industry is the UK’s iron and steel industry, which has spent around £1.8 billion extra for energy since the crisis began, with energy bills rising by 80% despite the production of steel and steel mill products declining by 20% in the last five years.
Electricity bills for industry overall are around 60% higher than those seen before the energy crisis, with around £600 million being added to costs, largely due to high gas prices and rising electricity costs. Costs of oil, diesel and biomass were around 70% higher. Although energy costs rose by the same amount for each kind of fuel, the impact on gas prices was higher as they made up the smallest part of used energy before the crisis.
Jess Ralston, energy analyst at ECIU, stated that the only way to bring costs down for British industry is to invest in home-grown renewables. Ralston commented: “More British renewables will bring forward more stable prices, more North Sea gas won’t as it’s sold to the highest bidder in an international market.
“A lack of a plan for the industry and the recent high gas price has jeopardised the future of British-made steel,” Ralston added. “Given the experience of the gas crisis, the future of the industry is more dependent on stable prices, which could in part be delivered by more British renewables generating at fixed prices.”
This is not the first time that the concerns have been raised about the impact of energy prices on the steel industry. Last September, trade association UK Steel released a report noting that the rising cost of energy is posing a major barrier to growth in the steel industry, with UK steel producers paying as much as 50% more than competitors in France and Germany.
UK Steel director general Gareth Stace, the UK steel industry has been “crippled” by industrial electricity prices for a significant period of time. The report also noted that the UK steel industry’s electricity use is currently equivalent to 800,000 homes.
