Electricity prices to UK industry will soar by the end of the decade, offering little comfort to those already concerned about the impact they’re currently having on sectors such as steel.
Depending on your news source or how you filter your personal prejudices, energy prices are either the cause of the UK steel crisis or peripheral to it.
One thing which is not in dispute, however, is that electricity costs to industry are set to rise sharply over the coming years.
New research by Tyneside firm Utilitywise highlights this stark reality – the consequence of measures to combat climate change such as the Renewables Obligation, Contracts for Difference and the Capacity Market levies.
The North Tyneside firm believes the wholesale electricity cost to industrial users will stay flat at around £40 Per MW/h between now and 2021.
However, taking into account climate change mitigation policy costs, network and transmission charges, the total charge for a MW/h of electricity will rise to more than £110 over the same period.
A UK Government compensation scheme will limit the rise to around £82 per MW/h for the most energy intensive industries, but this is still prompting further concerns about ‘carbon leakage’, while casting a shadow over hopes to attract further investment into the North East.
Stan Higgins, chief executive of NEPIC (North East Processing Industry Cluster), says high energy costs are damaging all British industry.
NEPIC represents over 500 North East businesses in the pharmaceutical, biotechnology, and chemical sectors. They generate in excess of £10bn of sales and comprise 30% of the region’s industrial base.
These including major overseas investors on Teesside such as ConocoPhillips, Huntsman and Sabic. Mr Higgins says many NEPIC members are ‘constantly moaning’ about high UK energy prices.
“Our energy prices are persistently higher than those of Europe and many companies are finding it difficult to compete with continental competitors.
“It is also making it far more difficult to attract new inward investment. Companies are telling us that we have to have a level playing field on industrial costs and they simply won’t invest in the current climate. We are struggling to find new investment,” he said.