Gareth Stace, director-general of UK Steel, has welcomed the UK Government's introduction of the Energy Bill Discount Scheme, claiming that it provides some important certainty and stability for steelmakers in terms of production costs during an extremely difficult economic climate.
However, Stace argues that there will be concerns that the newly announced support falls short of that offered in other European countries, including Germany.
"Today's reforms significantly narrow the help that Government will provide, with a maximum discount of £89/MWh, which stops delivering once those prices go beyond a ceiling of £274/MWh," Stace explained, adding that the Government is betting on a calm and stable 2023 energy market, in a climate of unstable global markets, with the scheme no longer protecting against extremely volatile prices.
According to Stace, the German Government guarantees an electricity price of 130 Euros per MWh for the whole of 2023, ensuring that German industry can continue to operate competitively within Europe and beyond.
"Today's reforms significantly narrow the help that Government will provide, with a maximum discount of £89/MWh, which stops delivering once those prices go beyond a ceiling of £274/MWh."Gareth Stace, director-general, UK Steel.
The reformed EBDS, says Stace, provides a discount for electricity prices above £185/MWh, leaving UK steel producers paying an estimated 63% more for power than German steelmakers this year. "The situation will maintain a long-standing competitive disadvantage for UK producers, resulting in higher production costs and a reduced ability to compete this year," he said.
For Stace, it is essential that the Government now delivers on its Energy Security Strategy and addresses the outstanding disproportionate costs UK steel producers face in electricity bills, including high renewable levies and network costs. "Years of paying more for these elements of electricity costs have placed the UK industry at a competitive disadvantage against its European and global competitors," Stace said.
Stace says that steel demand and prices are falling in the UK and across Europe. However, key input costs remain consistently high, leading to reduced production, shrinking market share, and increased imports for the UK. "Whilst we are grateful and pleased to see that the Government has acted to extend the scheme, there remains a vital gap in that delivery. We urge Government to take the next step and look to match what is provided in Germany for the most energy-intensive industries.