Rising energy prices are killing British industry: UK steel collapse ‘inevitable’ due to Net Zero

By Paul Homewood



While the immediate cause of the present crisis is the collapse of financial partner of the Gupta empire, GFG Alliance, which bought Liberty, the underlying and fundamental cause is the uncompetitiveness of all heavy industry in the UK, and for this government is itself largely to blame.

GWPF has long predicted that Britain’s unilateral climate policies were making it all but impossible to operate heavy industry the UK.

In 2016 we wrote:

As an energy-intensive manufacturer of internationally traded commodities, the steel sector is particularly sensitive to energy costs. It is the first to feel the pain of the UK’s climate policies, but it will not be the last. [Steel] and the energy-intensive sector more broadly can be regarded as a miner’s canary, giving early warning of general economic damage as the costs of climate policies are passed through from energy to all other sectors of the economy.”

Unfortunately, the British Government ignored these warnings and accelerated its Net Zero agenda, making the generation of electricity ever more expensive. It is now faced with intense pressure to bail out the troubled Liberty Steel, the country’s third largest steel maker, which runs twelve steel plants in the UK, and is responsible for about ten per cent of British steel production.

The steel industry body UK Steel is indicating that electricity prices in the UK are between 60 and 80 per cent higher than those in France and Germany, with climate policies accounting for the bulk of this difference.

UK Steel: Closing the Gap (February 2021)

The impact of UK carbon and other policies on the price of electricity to the steel industry is approximately double that in France or Germany. That is hardly surprising since UK subsidies to renewable electricity generators now amount to about £10 billion per year.

UK Steel also notes that the substantial impact on prices of high electricity network costs, which are strongly influenced by the presence of uncontrollable renewables such as wind and solar, which are nearly ten times greater in the UK than in France and Germany. (See UK Steel, Closing the Gap: How Competitive Electricity Prices Can Build a Sustainable Low-Carbon Steel Sector).

Worse still, industrial  electricity prices in Europe themselves are nearly 50% higher than in the G20 — never mind China and India where industrial electricity prices are estimated to be just a third of UK prices.

The GWPF observes that this is wholly unsurprising. UK network balancing costs (BSUoS), for example, were about £300m a year in the early 2000s, before the dash for renewables, but now amount to nearly £2 billion a year, in large part due to the extreme operational difficulties in managing wind and solar.

Dr John Constable, the GWPF Energy Editor, said:

The security of jobs in the steel industry has been sacrificed on the altar of a utopian and incompetent climate policy. Mr Kwarteng can bail Liberty Steel out, but no apology can be sufficient for what successive governments, Labour, Coalition, and Conservative have done to British industry since 2002.”




March 10, 2021 at 08:30AM

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