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Wednesday, October 20, 2021

Energy prices: Industry calls for government action

IDBS ART GALLERY

The government has failed to find solutions to halt soaring energy prices, UK Steel boss Gareth Stace has said.

He was speaking after a meeting with Business Secretary Kwasi Kwarteng with leaders of energy-intensive industries.

“We can hardly wait for Christmas and beyond.” Or even a couple of weeks. “We need action now, and it needs to be quick and decisive,” Mr Stace said.

The government stated that it was looking into ways to manage high energy costs.

Since January, gas prices have increased by 250 percent, causing costs to skyrocket.

Mr. Stace told the BBC that Mr. Kwarteng listened but offered “no immediate solutions or guarantees.”

The director general of UK Steel said he was “baffled” because governments in the rest of Europe had stepped in to support industry, despite the fact that they faced lower energy costs than the UK.

Representatives from energy-intensive industries such as paper, glass, cement, lime, ceramics, chemicals, and steel met with the business secretary on Friday.

The Energy Intensive Users Group (EIUG) expressed hope that the government would find ways to assist those industries.

Mr Kwarteng assured the business representatives that he would continue to collaborate with them to solve the problem.

His department stated that the government would evaluate the industry’s proposals, with a spokesperson saying, “We recognise that the recent increase in global gas prices will be a source of concern for businesses in the UK.”

“We are in regular contact with Ofgem and business groups to explore options for mitigating the impact of rising global prices.”

Mr Kwarteng also emphasised the government’s faith in the security of gas supplies this winter.

Following the meeting, EIUG chair Richard Leese stated that the government took “positive first steps to develop practical solutions.”

“The EIUG will collaborate with the government to avoid threats to the production of essential domestic and industrial products, as well as an enormous range of supply chains critical to our economy,” he said.

According to Andrew Large, director-general of the Confederation of Paper Industries, there are “serious” risks that factories will cease operations due to high gas prices.

Due to high energy costs, there have already been plant shutdowns at fertiliser and steel plants.

He did say, however, that the business secretary appeared to share the industry’s desire to avoid any potential supply chain disruption.

Mr Kwarteng said on Thursday that the government’s plan to transition to “clean” energy sources such as wind, solar, and nuclear by 2035 would reduce reliance on fossil fuels.

“The volatility of the gas price has demonstrated that we do need to plan strategically, and net zero assists us in doing so,” he said.

Mr Stace had previously stated that if the government did not act, it would “strangle steel production” in the UK.

A steel production crisis caused by high energy prices would have a ripple effect on the economy, he said, adding that the government should consider taking additional measures in the short term.

“We’re already halting production at some steel producers in the UK…. and it’s going to happen more frequently unless something is done, or the energy market corrects itself, which I don’t think will happen anytime soon.”

He suggested that the government address the disparity in energy costs for UK steelmakers, who he claimed were paying 50-80% more for electricity than German producers.

Other countries, including Italy and Portugal, had “committed billions of euros” to address rising gas prices, he added.

“If the government does nothing, there will be a steel crisis tomorrow, and given the impact on jobs, that would not be good, not only for the steel sector, for those regions where steel is, but for the UK economy as a whole,” he said.

Since the beginning of the year, the wholesale price of natural gas has skyrocketed. Furthermore, the UK has less gas stored than other European countries, which may help to cushion price volatility.

Domestic customers’ bills are protected from these sharp increases in part by a price cap managed by the regulator Ofgem, which limits how far and how quickly bills can rise.

Nonetheless, the impact on UK households has been felt since the price cap was raised at the beginning of October.

Customers will face additional “significant increases” in the spring, according to Ofgem.

The cap is revised twice a year, with the next change scheduled for April.

This month, it applies to households in England, Scotland, and Wales.

Households in Northern Ireland have also seen a recent sharp increase in their bills, but they are not protected by the Great Britain energy price cap.

SourceBBC
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