UK Industrial Electricity Prices Still Highest

Strain showing on Ed Miliband as latest data shows the UK still has the highest industrial electricity prices in the IEA.

Introduction

Ed Miliband did not look like a well man at Labour Conference this week.

Figure 1 - Miliband Looking Ill

Perhaps it is the strain from allegedly almost being sacked by the Prime Minister in the summer reshuffle. Maybe it’s union leaders calling for his head as another oil refinery edges towards closure. More likely it’s the stress of cognitive dissonance. He has repeatedly stressed that it is gas and not net zero that is to blame for soaring electricity prices, but the evidence to the contrary keeps mounting up. Yesterday, his department released new international energy price statistics using data from the IEA that shows Britain still has the highest industrial electricity prices and the second highest domestic electricity prices.

Let’s dig into the detail to find out how the UK has been faring on industrial and domestic gas and electricity prices.

The data covers 28 of the countries that are part of the IEA. The data for some countries, such as Italy and Japan, is patchy and charts containing so many lines are difficult to decipher, so the chart analysis focuses on France, Germany, UK, Canada Korea and the USA as well as the median IEA price. We should also note that this 2024 data has undergone significant revisions and for some reason the industrial gas and electricity prices for the US are shown as blank since 2021.

The commentary does discuss other countries when appropriate. All prices quoted are in pence per kWh and include taxes.

International Industrial Electricity Prices

Beginning with international industrial electricity prices (from Table 5.3.1), we can see how the UK performs as shown in Figure 2.

Figure 2 - International Industrial Electricity Prices (p per kWh)

UK industrial electricity prices at 26.63p/kWh are the highest of the 25 countries reporting data to the IEA. These are down slightly on the 2023 cost of 27.15p/kWh, but the 2023 figure has been revised upwards from the 25.85p/kWh reported last year. UK prices are three and a half times more than Canada that has the cheapest industrial electricity prices at 7.43p/kWh. Our prices are also 2.4 times those of Korea and 63% higher than the IEA median. As we shall see below, UK industrial gas prices are below the IEA median, so it cannot be gas that is driving UK electricity prices ever higher.

There is no hope that we can compete in either traditional energy intensive industries or industries of the future like AI or making batteries with such extortionate electricity prices. Labour will never be able to deliver on its growth agenda if it does not do anything about energy prices.

International Industrial Gas Prices

If we look at industrial gas prices (Table 5.7.1) as shown in Figure 3, we can see that our competitive position is better, but still not good enough.

Figure 3 - International Industrial Gas Prices (p per kWh)

For much of the world, gas prices are still elevated. However, prices in Europe are higher than in Canada and Korea. However, UK prices at 5.77p/kWh are about 1.5% below the IEA median and lower than both Germany and France. The outlier in this analysis is Canada (no data for the USA) where prices are some six times lower than those in the UK.

Any industrial processes that require methane, for example making fertiliser, or industrial heat are clearly not going to be competitive in Europe which explains the rapid deindustrialisation being faced by the continent.

The country rankings of industrial gas and electricity prices are shown side by side in Figure 4.

Figure 4 - International Industrial Electricity and Gas Prices (p per kWh)

Even though the Government chart does not quite match the data, we can see that UK gas prices are middling, but we have the highest industrial electricity prices.

International Domestic Electricity Prices

Sadly, UK domestic electricity prices (Table 5.5.1) are almost as bad as industrial prices, as seen in Figure 5.

Figure 5 - International Domestic Electricity Prices (p per kWh)

The UK has the second highest domestic electricity prices in the IEA at 30.45p/kWh (remember this includes standing charges), second only to Germany where domestic prices were highest in 2024. UK prices are 45.8% above the IEA median of 20.89p/kWh. UK prices are 2.4 times those of the US and 3.4 times prices in Korea. The cheapest domestic prices in the IEA are in Turkey where prices are only 4.24p/kWh and are presumably heavily subsidised.

International Domestic Gas Prices

Domestic gas prices (Table 5.9.1) paint a similar picture to industrial gas prices as shown in Figure 6.

Figure 6 - International Domestic Gas Prices (p per kWh)

UK domestic gas prices at 7.44p/kWh are 24.9% lower than the IEA median and well below those of France and Germany. However, UK prices are still twice those of the US, 3.2 times those in Canada and 1.5 times Korean prices. Sweden has the highest domestic gas prices in the IEA (14.79p/kWh) and Turkey the lowest at 1.77p/kWh.

Conclusions

It is easy to see why Ed Miliband is feeling the strain. Jobs in heavy industry, oil refining and the North Sea are being lost at a rapid rate. It is obvious that Net Zero policies are driving this economic decline.

Industrial electricity prices are 63% above the IEA median, yet industrial gas prices are below the median. It is not gas that is driving electricity prices higher. It is the £12bn per year in subsidies, another £2.7bn in grid balancing and £1.3bn in capacity market back up costs. These costs are added to our bills and are set to rise further.

Moreover, gas-fired electricity is lumbered with extra carbon costs from the Emissions Trading Scheme and the Carbon Price Support mechanism. These costs make up almost a third of the wholesale price of electricity.

There is an extra £112bn of transmission network costs in the pipeline to connect remote, intermittent renewables to the grid that will continue to push up prices. The first £80bn by 2030 is set to add another £74 to our bills.

These energy prices represent an existential threat to the economy and to broader society. The highest industrial electricity prices in the world ought to be considered a national emergency. The Government’s primary mission should be to cut energy prices because cheap energy is the key to unlocking growth. They should focus first on ending subsidies for renewables, cutting carbon costs and cancelling any further auction rounds. This would stop the rot at source.

The Government should also encourage investment in new sources of gas supply by encouraging more North Sea drilling and lifting the moratorium on fracking. In the longer term, there should be a renewed focus on nuclear in the form of conventional reactors, small modular reactors (SMRs) and advanced reactors. These will need to be supplemented by gas-fired generation for the time being until nuclear is able to respond effectively to rapid changes in demand.

We can but hope that reality dawns on Keir Starmer and he follows the advice of union leaders and finally sacks Ed Miliband before it’s too late.

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