Industry fears over UK energy prices

13th July 2012

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  • Mitigation ,
  • Business & Industry ,
  • Manufacturing



Energy intensive industries call for more government support after research reveals UK climate change policies will increase electricity prices above that of competing economies

A new study commissioned by the business department (BIS) has revealed that policies designed to support renewable energy and cut carbon emissions will have impacts on electricity prices in the UK, over and above that of other nations.

According to the research by ICF International, the cost of electricity in the UK will rise by £28.30 per MWh in 2020 due to climate change policies, including the carbon floor price and the EU emissions trading scheme (ETS). Meanwhile in Germany similar policies are only likely to increase electricity prices by £17.30/MWh and in France by £15.20/MWh.

In developing countries the difference is even more dramatic with climate change policies over the same time period projected to increase China’s electricity costs by £10.30/MWh and in India by just £1/MWh.

The study examines in detail the impact of climate change policies on energy intensive sectors across the globe including steelmaking, cement making and chemicals manufacturing.

It projects, for example, that by 2020 the costs of the ETS and renewable energy policy will see UK steelmakers paying at least £6 more for energy per tonne of production than competitors in Germany and France, and almost £20/tonne more than firms in the US.

EEF, the manufacturing body, argues that the findings prove that industrial firms operating in the UK are at a disadvantage because the government’s climate-change policies.

“This report provides clear, independent evidence that UK manufacturers in energy intensive sectors are paying more for their electricity than many of their global and European competitors,” said Terry Scuoler, chief executive of EEF.

“Both the Treasury and DECC believe we must not outpace our competitors in loading costs onto hard-pressed businesses. However, this report shows that there is a mismatch between intent and reality.”

Reacting to the comments a spokesperson for BIS said: “The government is committed to ensuring that manufacturing remains competitive during the shift to a low-carbon economy. That’s why we announced a £250 million energy intensive industries package in the Autumn Statement to help alleviate the costs of rising electricity prices for energy intensive businesses. This report takes no account of this package.”

The CBI, however, argued that study confirmed more support was needed.

“The welcome support for energy intensives announced last year simply won’t go far enough,” said Katja Hall, CBI chief policy director. “[The government] must help those companies most at risk from higher energy costs, and make provisions for them in its forthcoming Energy Bill.”

Meanwhile the government confirmed it was exploring how to reduce the impact of electricity costs for the energy-intensive sectors as a part of plans to reform the electricity market.


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