UK Steel Power Costs to Hit £91/MWh, 49% Above France
British steelmakers are expected to pay £91/MWh for electricity in 2026/27, almost 50% more than competitors in France and about 15% more than those in Germany, according to UK Steel, widening a cost disadvantage as the industry becomes increasingly dependent on electric steelmaking.
- UK electricity cost: £91/MWh forecast for steelmakers in 2026/27.
- France: £61/MWh, putting the UK about 49% higher.
- Germany: £79/MWh, putting the UK about 15% higher.
- Annual France gap: UK Steel estimates an additional £66 million of cost in 2026/27.
- Cumulative gap: Estimated at £917 million since 2017/18.
- Proposed solution: A two-way electricity-price rebalancing mechanism modelled by Baringa at an estimated £51 million annual cost during 2026–2030.
Britain's electricity-price problem is becoming more consequential as steelmaking itself becomes more electric. The gap is no longer only a margin issue for existing mills: it directly affects the economics of planned electric-arc-furnace investment, future capacity utilisation and whether lower-carbon steel can be produced competitively in the UK. Trade protection can restrict lower-cost imports, but it does not remove the underlying production-cost disadvantage.
MONTREAL (SteelPrices): British steelmakers are expected to face significantly higher electricity costs than major European and international competitors in the 2026/27 financial year, according to a new analysis from industry association UK Steel.
The association's report, Competitive electricity prices: a prerequisite for reindustrialisation, estimates an electricity cost of £91/MWh for UK steel producers.
That compares with approximately £61/MWh in France and £79/MWh in Germany.
| Market | 2026/27 Electricity Cost | UK Premium |
|---|---|---|
| United Kingdom | £91/MWh | — |
| France | £61/MWh | ~49% |
| Germany | £79/MWh | ~15% |
UK Power Costs Also Exceed Several Global Competitors
UK Steel said the disparity extends beyond Europe.
Its analysis estimates that British steelmakers' electricity costs will be:
- 125% higher than producers in Alberta, Canada.
- 68% higher than producers in Vietnam.
- 71% higher than producers in Turkey.
The association said the comparisons account for available exemptions and compensation measures.
France Gap Alone Adds £66 Million to UK Steel Costs
The difference between British and French power costs has a significant cumulative impact on the industry.
UK Steel estimates that the £30/MWh gap with France will add approximately £66 million to British steelmakers' electricity bills during 2026/27.
Since 2017/18, the association estimates that the cumulative additional cost created by the UK-France electricity-price disparity has reached £917 million.
Gap Has Widened Despite Government Support
The latest report follows earlier government measures intended to reduce electricity costs for energy-intensive manufacturers.
From April 2026, qualifying industries including steel received a 90% rebate on electricity-network costs, up from the previous 60% level.
Earlier UK Steel analysis put average network charges after the intervention at approximately £2.17/MWh in Britain, compared with £0.85/MWh in France and £2.56/MWh in Germany.
However, UK Steel argues that the principal competitiveness problem has increasingly shifted to wholesale electricity costs.
Baringa Models Two-Way Electricity Price Mechanism
UK Steel is calling for a new wholesale electricity-price rebalancing mechanism based on independent modelling by energy consultancy Baringa.
Under the proposal, qualifying energy-intensive industries would receive compensation when British wholesale electricity prices exceed an identified European benchmark.
The mechanism would also operate in reverse: when UK wholesale prices fall below the benchmark, participating industries would make payments back.
UK Steel describes the proposal as a two-way mechanism rather than a permanent one-direction subsidy.
- UK wholesale price above European benchmark → industry receives support.
- UK wholesale price below benchmark → industry pays money back.
- Estimated 2026–2030 net cost → £51M/year.
- Estimated household equivalent → 42p/year.
- Estimated 2031–2035 net return → £13M/year.
UK Steel said the mechanism could operate within the existing regulatory framework while longer-term electricity-market reforms are developed.
Electricity Costs Become More Important as UK Steel Electrifies
The electricity-cost gap is becoming increasingly important because the UK industry is moving toward lower-carbon, electricity-intensive steelmaking.
Tata Steel is replacing blast-furnace production at Port Talbot with electric-arc-furnace capacity, while wider UK steel policy is increasingly focused on electrification and recycling-based production.
As electricity becomes a larger share of the steelmaking cost base, the difference between British and competing European power prices has greater influence over production economics and investment decisions.
UK Has Tightened Steel Import Protection
The electricity-cost issue comes as Britain has also strengthened protection against imported steel.
A new UK steel trade measure took effect on July 1, 2026, sharply reducing tariff-free quotas and imposing a 50% out-of-quota duty.
The policy is intended to protect domestic producers from global steel overcapacity and import surges.
SteelPrices covered the measure here: UK Cuts Steel Import Quotas and Raises Out-of-Quota Tariff to 50% .
UK CBAM Starts January 1, 2027
The United Kingdom will also introduce its Carbon Border Adjustment Mechanism on January 1, 2027.
The measure will apply a carbon charge to specified imports from the iron and steel, aluminium, cement, fertiliser and hydrogen sectors.
HM Revenue & Customs published an illustrative iron and steel CBAM rate of £9.69/tCO?e on October 16 using current preliminary data.
The government stresses that the figure is illustrative only. Actual rates will be published quarterly beginning in 2027 and will vary with UK ETS carbon prices, sector emissions data and the phase-out of free allowances.
UK Government: Illustrative CBAM Rates and Methodology
High Energy Costs Are Already Affecting European Steel Pricing
Energy costs are also influencing steel-pricing strategies elsewhere in Europe.
SteelPrices reported in October that European HRC producers were seeking higher prices as energy costs increased alongside tighter import conditions.
In Northern Europe, workable HRC prices were reported around €740–750/t EXW, while producers were also seeking higher prices in first-half 2027 automotive contracts.
Global HRC Market Dynamics Vary by Region in October
What Does the £91/MWh Power Cost Mean for UK Steel?
The latest electricity comparison strengthens the case that Britain's steel challenge is no longer only about global overcapacity or low-priced imports.
UK Steel estimates that domestic producers will pay substantially more for power than competitors in France, Germany and several international steelmaking markets.
That disadvantage becomes more important as the sector moves toward electric steelmaking and as government policy seeks to increase the share of domestic steel in UK consumption.
The industry's proposed rebalancing mechanism would not eliminate all cost differences, but UK Steel argues that it could reduce the wholesale-price disadvantage at comparatively limited public cost.
Primary source: UK Steel — Competitive electricity prices: a prerequisite for reindustrialisation
Independent modelling: Baringa, as cited by UK Steel.
UK CBAM verification: HM Revenue & Customs.
Courtesy: Eurometal / GMK Center.
