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Proposals to split the UK’s electricity market so that prices differ by region risk driving up costs for manufacturers and discouraging investment, some of the UK’s biggest industry bodies have warned the government. There is.
UK Steel, Make UK, Renewable UK and the Global Association of Infrastructure Investors have written to ministers saying they are concerned that proposals drawn up by the Conservative government could “increase the risk of deindustrialisation”. said.
“It is clear that dividing the UK into regional price bands risks undermining investment in low carbon energy and penalizing the UK’s energy-intensive industries through higher electricity prices.” , they said in a letter sent on Friday and seen by the Financial Times. .
The message comes at a sensitive time for the New Labor government, which is trying to showcase Britain’s appeal to investors ahead of the World Investment Summit on October 14. Recipients included Energy Secretary Ed Miliband and Business Secretary Jonathan Reynolds.
The proposed reforms are part of potentially sweeping changes to the electricity market that will first be rolled out in 2022 to accommodate the transition to renewable generation sources such as intermittent wind and solar power. Labor is making a big push for renewable energy, but has yet to make its position on renewable energy clear.
There is currently a single wholesale electricity price set nationally in the UK. The proposal includes an option to segment the market so that wholesale prices vary by region depending on supply and demand.
Proponents say it would make the market more efficient and lower system costs by encouraging consumers to use electricity when it is plentiful nearby, rather than wasting it, as so often happens. claims that it can be done.
Guy Newey, CEO of the Energy Systems Catapult, an innovation center, said the market needed “urgent reform” and added: “Zonal pricing is already a huge problem in international markets. “This is common in the United States and is driving down costs for consumers,” he added.
Ultimately, supporters say the measure could encourage industry to move to areas with abundant supplies of renewable electricity, such as parts of Scotland, while allowing developers to obtain higher prices. Therefore, the company claims that it has the potential to expand its business in areas where the supply of renewable electricity is low.
But industry groups fear the proposal risks raising prices for electricity-intensive industries such as steel, glass and ceramics. It would also increase the risks faced by renewable energy developers, they said.
In separate comments to the letter, UK Steel’s director of energy and climate change policy, Frank Ascoff, said: “We want to operate miles of steelworks to take advantage of lower electricity prices elsewhere. “It is impossible to retreat,” he added.
“This is before considering the billions of dollars invested in business operations, let alone the workers who may be left behind.”
Relatively high electricity prices have long been a source of frustration for industries transitioning away from fossil fuels. Both Tata Steel and British Steel are shutting down coal-fired blast furnaces in the UK and moving to electric furnaces.
John Phillips, CEO of the Global Infrastructure Investors Association, said investors around the world are “looking for long-term, low-risk investments that generate stable returns.”
He further added: . . It risks undermining the Government’s ambitions to attract further international investment to the UK. It is important that energy policy provides the long-term stability that investors seek. ”
A UK government spokesperson said the UK was considering its response to a consultation on the issue and that “future reform options will focus on protecting bill payers and promoting investment”.
“Our new industrial strategy will deliver long-term, sustainable growth across the UK by supporting our industry and boosting private investment in our economy,” they added. Ta.
