The British government has promised to work with the heaviest industrial energy users to help them cope with soaring costs over the winter, but stopped short of offering any immediate measures at a crisis meeting on Friday.
Representatives of some of the country’s most power-hungry sectors such as steel, chemicals and glass said that business secretary Kwasi Kwarteng told them he would ask his officials to find “practical solutions” to protect them from further shocks in the coming months.
The meeting came at the end of a week that saw prices of UK and European wholesale gas and electricity hit record highs amid lower-than-usual stocks this summer, reduced supply from Russia and the prospect of colder temperatures around the corner.
Although prices have fallen back after Russia’s President Vladimir Putin said his country was prepared to help stabilise supply, Britain’s heavy industry users remain concerned about the impact on their operations. Many have warned of higher prices for goods and the prospect of factories having to close.
Richard Leese, chair of the Energy Intensive Users Group (EIUG), which represents industrial sectors with the heaviest energy consumption, said the message delivered to Kwarteng was for “prompt and preventive measures to help avoid recent production curtailments in the fertiliser and steel sectors being replicated in other areas this winter”.
Leese said the group welcomed the “positive first steps” from Kwarteng to “develop practical solutions and work with Treasury colleagues”.
The group earlier in the week called on the government to introduce so-called “winter cost containment measures” on gas, electricity and carbon prices to ensure factories could continue to operate through the coldest months. Some industrial users want ministers to put in place a price cap, similar to the one already in place for households, to reduce the impact of the recent price surges.
The EIUG also wants Ofgem, the energy regulator, to reduce network costs for industrial users, similar to network tariff discounts that are being offered to competitors in some European countries.
National Grid this week warned that Britain faced tight electricity supplies this winter on rising demand and capacity constraints. A number of fertiliser companies and steel producers have curtailed production in recent weeks.
Steve Elliott, chief executive of the Chemical Industries Association, who also attended the meeting, said Kwarteng had been “sympathetic” to their concerns and “fully understands the concerns and the potential disruption to key supply chains”.
“If we can get a sticking plaster and a cap for industrial consumers as a short-term measure, the other thing that would help would be to ensure that we do everything possible to make sure gas flows to the UK this winter,” Elliott told the FT.
Gareth Stace, director-general of UK Steel, said producers currently face “energy prices five times higher than the average of last year, in addition to remarkable price volatility”, warning that the situation was “simply not sustainable for the sector”.
A survey of its members by UK Steel found that all of the country’s large producers would be forced to put electricity and carbon surcharges on their products from next month.
The government could, added Stace, “relieve us of carbon, renewable and network charges that it has applied and reduce the costs in one go. It just needs to choose if it wants to”.
The Department for Business, Energy and Industrial Strategy did not immediately respond to a request for comment.
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