Exemption 'could save steel industry £400m'
The Government has published a consultation on introducing an exemption for energy intensive industries, such as the steel industry, from renewable electricity costs in a move it said could save the steel industry over £400 million over this Parliament.
Energy intensive industries, such as steel producers, face costs of around £19 megawatt hour (MWh) in the next year for supporting renewable technologies such as wind and solar, according to figures from the manufacturers organisation EEF, 85% of which can be recouped in compensation.
But the industry has been keen to see the cash compensation scheme switched to an exemption, which will give them certainty the protection will continue.
Such a move was proposed by the Chancellor George Osborne in last year's autumn statement.
In addition, steel producers and other energy intensive manufacturers face costs from the EU-wide emissions trading scheme and a UK-imposed "carbon floor price" which together put a price on carbon in their energy bills to help climate change.
According to EEF, these carbon costs will add around £12.50 per MWh to bills, around 60% of which can be claimed back through compensation.
The UK's unilateral carbon floor price, put in place to encourage investment in low carbon power and paid by power generators, adds a cost to electricity bills which manufacturers abroad do not have to face, the industry argues.
In total, policies will add some £31.50/MWh to energy intensive businesses' bills, of which all but £7.35/MWh can be claimed back.
Wholesale electricity prices cost large energy users around £40/MWh and transportation costs are around £20/MWh out of a total bill of around £90/MWh.