The increase has been welcomed by the steel industry; however, since compensation will be paid with a one-year delay for 2026, companies will have to wait until 2027 to benefit from the GBP 14.5 million in electricity cost savings.
UK Steel Director General Gareth Stace noted that UK steel producers currently pay almost 40% more for electricity than their counterparts in France, amounting to a total difference of GBP 41 million in 2025/26. Although the rise in NCC support will reduce this gap by around 25%, the absence of a backdated implementation means the sector will continue to face pressure.
Industrial electricity prices consist of network charges, policy costs, and wholesale prices. Raising the NCC to 90% will align network and policy costs with those in Germany and deliver savings of GBP 6.5 per megawatt-hour (MWh). However, high wholesale electricity prices remain the biggest barrier to lowering overall costs.
Stace stated, “The Government’s decision to increase network compensation is the right move and will save our sector GBP 14.5 million per year. But the UK steel industry still faces significantly higher electricity costs than European competitors, and wholesale prices continue to drive this gap.”
UK Steel has urged the Government to introduce a wholesale price equalisation mechanism and to bring the NCC exemption forward to April 2025 to align UK electricity prices with the lowest-cost European rivals.
Steel production in the UK is an electro-intensive sector, with electricity costs reaching up to 180% of Gross Value Added (GVA). High electricity prices undermine the sector’s competitiveness and investment capacity, threatening progress toward sustainable, low-carbon steelmaking.
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