UK energy prices uncompetitive for manufacturers

31 October 2011

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31 October 2011 | Angeline Albert

Energy buyers from the UK manufacturing sector are getting a poor deal compared with counterparts in Germany, according to analysis by EEF (Engineering Employers Federation).

EEF, which represents 6,000 member companies, said UK government policy is forcing businesses to use more renewable energy, which costs them more. It believes they should receive rebates for using more environmentally friendly power sources to help them stay in business and remain competitive. The UK government’s position is that industries that use the most energy have a responsibility to invest in low-carbon electricity generation.

It said that in Germany, energy-intensive industries receive a 98.5 per cent rebate on the country’s renewable energy tax, while UK equivalents receive no such relief. EEF said this means energy-intensive manufacturers in the UK paid 10 per cent more than German competitors for electricity in 2010 and are likely to pay 15 per cent more by 2013.

Much of the anticipated rise for 2013 is based on the impact of the ‘carbon price floor’. This, EEF said, will cost UK manufacturers £250 million a year when it is introduced on 1 April 2013, rising to £1.2 billion by 2020. The carbon price floor will require industries to pay a top-up if the market price for carbon falls below a certain level. It essentially means polluters must pay a minimum amount for the right to pollute and aims to encourage investment in low-carbon electricity generation.

By 2013, the rising cost of renewable energy subsidies and the introduction of the carbon floor will see climate change policies account for almost a quarter of electricity prices for energy-intensive companies in the UK. This compares with 16 per cent in Germany.   

The EEF wants UK manufacturers to be on a level-playing field with competitors. It wants direct compensation for the costs within energy prices that these companies will incur as a result of the carbon price floor.

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