UK Steel has welcomed the UK Government’s decision to rule out proposals for zonal electricity pricing. The decision was outlined within the Review of Electricity Market Arrangements (REMA), after the need to protect security was recognised by Secretary of State, Ed Miliband.
According to UK Steel, zonal pricing could have increased industrial electricity by more than 10%. The company had previously been concerned with the lack of a cost-benefit analysis and assessments of potential shielding options to demonstrate that the industry would have not been worse off.
Gareth Stace, director-general at UK Steel, said: “We are pleased that the Government has listened to industry warnings and ruled out this risky proposal. Zonal pricing would have penalised existing industrial sites, driving up electricity prices, further damaging our ability to thrive, foster jobs, and undermining much needed investment in steelmaking.
“Electricity prices for the UK steel sector are among the highest in Europe. UK Steel warned that zonal pricing would have created a ‘postcode lottery’ for industrial power prices, conflicting with the Government’s own ambition to reduce power costs for British industry.”
The decision follows warnings from UK Steel, highlighting the threat zonal pricing would have posed to energy intensive industries like steel. The company also outlined that US tariffs and the disparity of energy prices between the UK, France and Germany, introducing zonal pricing would have threatened jobs and decarbonising initiatives.
Looking to the future, Stace added: “As the industry transitions fully to electric arc furnace technology, price competitiveness will become even more central to the sector’s future. While today’s decision provides clarity on the direction of electricity market reforms, the Government must ensure that the alternative to zonal pricing, reformed national pricing, supports rather than hinders industrial competitiveness.”
