British companies are paying the highest electricity prices of any country in the developed world. The cost of power for industrial businesses in the UK has more than doubled, increasing 124 percent in just five years, according to Government figures. Industrial electricity prices in the UK are about 50 percent more expensive than in Germany and France, and four times as expensive as in the United States. High energy prices are crippling domestic manufacturers in the UK. Despite those prices, Ed Miliband, the UK Energy Secretary, wants industrial businesses to switch from clean natural gas to very expensive electricity-powered processes.
The electricity price paid by UK industrial users per kilowatt hour increased to 25.85p in 2023, which compares to 10.43p five years earlier and 8.89p a decade ago. It has far outstripped its European counterparts and the United States and Canada. The equivalent industrial price was 17.84p in France, 17.71p in Germany and 6.48p in the United States. Across all the 31 member countries of the International Energy Agency, the median price was 17.70p per kilowatt hour, with Britain’s price higher than any other country. Britain gets high marks from the International Energy Agency (IEA), however, on their “Climate Policy Resilience Indicator,” meaning their energy policies follow those championed by IEA.
Many UK manufacturers are being encouraged to switch industrial processes that use fossil fuels such as natural gas and coal to electricity processes, as part of efforts to reach net zero carbon emissions. Steel producers – including Tata, the owner of Port Talbot – have warned ministers they “must deliver” more competitive prices. Tata is in the process of closing its last blast furnace and transitioning to an electric arc furnace. A report by UK Steel described the electricity price as “a barrier to growth, competitiveness and profitability.” Steel plants that burn coal or natural gas are to be replaced by electric furnaces, which will endanger thousands of jobs. This is remarkable, since the UK pioneered the production of steel and was responsible for vast wealth accumulation which is now slipping away.
UK businesses must also pay a penalty for any carbon dioxide emissions that exceed a legally allowed threshold.
Successive UK governments have tried to bring down Britain’s power costs, with the Conservatives most recently introducing the “supercharger” discount for energy-intensive businesses such as steel producers and glass makers. The supercharger removes the majority of network costs and green levies. But even after this huge discount, UK Steel said electricity prices were still about twice as expensive as in Germany.
UK Steel believes the disparity is due to UK’s electricity generation mix being “more dependent on gas”, with high natural gas prices pushing up UK power prices. The UK has natural gas resources, but under Prime Minister Keir Starmer, the UK has backed away from offshore oil and gas leasing, in much the same way as the Biden-Harris administration has done. The UK generated 33.7 percent of its power using natural gas in 2023, compared to 17.1 percent in Germany and 5.9 percent in France, where nuclear dominates the supply mix. In the UK, wind was second in rank behind natural gas, generating 28.7 percent of its electricity. The wholesale price of electricity is set by the most expensive generating technology to meet demand.
Rather than use natural gas to the extent of the UK, Germany is using coal to back-up its wind and solar generation as it has domestic brown coal (lignite) resources. During the 2022 energy crisis, Germany reactivated several coal plants and has since constructed new natural gas facilities. The UK, however, has closed its last coal plant, being the first major industrialized economy to eliminate that fossil fuel that countries such as China and India are highly dependent on for their manufacturing processes Those two nations consume the vast majority of the world’s coal, and their consumption of coal resulted in global coal consumption reaching record levels in 2023–8.5 billion metric tons. The UK used its coal resources to begin the Industrial Revolution, which changed the world by changing from renewable energy (mainly wood) to powerful hydrocarbons. Now the UK’s largest power plant is burning wood pellets imported principally from the United States.
The Ratcliffe-on-Soar plant was the last coal-burning power station in the UK where the Industrial Revolution started, fueled by coal. The 2,000-megawatt Ratcliffe-on-Soar facility sited on 750 acres in the East Midlands region of Britain had operated since 1967 and will be converted to a “low-carbon energy hub,” according to Uniper, the power company that operated the plant. The closure comes 142 years after the world’s first coal-burning power plant began producing electricity at the Holborn Viaduct in London in 1882 and accelerating Britain’s rise as a major industrial and imperial power. The UK government plans to generate all its electricity from non-fossil-fuel sources by 2030.
Conclusion
Electricity prices in Europe have skyrocketed during its energy transition and aided by Russia’s invasion of Ukraine, where sanctions have resulted in inexpensive Russian natural gas being replaced by much pricier LNG. The rise in energy prices has resulted in deindustrialization in Europe. Surprisingly, the UK leads in high energy prices, and its industrial businesses have indicated that the government needs to take action to reduce them. The supercharger discount, however, will still result in industrial electricity prices that are still twice those of Germany. Some believe the problem is the energy mix in the UK, where natural gas is the major supplier of electricity. In France, nuclear dominates the supply mix and in Germany, coal has been reactivated and is backing-up its wind and solar plants.
The United States faced with a similar energy transition under the Biden-Harris administration may be in the same situation in the future as replacing coal and natural gas generation with wind and solar power and very expensive batteries for back-up with produce skyrocketing electricity prices. Deindustrialization of Europe and the United States will further play in China’s hands, who is waiting patiently to become the dominate manufacturing power in the world with its vast supply of coal-powered plants whose capacity surpasses the total generating capacity from all technologies in the United States.
