Soaring energy costs are forcing Sheffield manufacturers to close down their operations at peak times.
Why is this happening? Very simply – at peak periods the costs of energy can rise 300 fold.
How can this happen?
It happens because of energy rules in the UK market and the “triad system” which determines how the largest electricity users are charged for their use of the network. Triads are the three half-hour periods when electricity demand is at its highest across the UK – the three peak mismatches between supply and demand. They fall any time between November and February and penalise energy consumption at peak times.
One company accidentally operated during a half – hour peak time period, and it cost the business £1m.
At another company, during a triad workers sit in the mess room together to keep warm because the company cannot afford to operate during these periods. In fact, it costs £27 to boil a kettle during a triad. The business will have to shut down about 30 times this winter.
Some companies are going abroad for some manufacturing processes because energy costs are cheaper.
High energy prices are making Sheffield businesses uncompetitive in international supply chains and are costing them orders.
Sheffield businesses are paying 50 per cent higher energy costs than those in France and Germany. Government say keeping down energy bills is key for economic growth, and few would disagree, but the reality is that energy costs are escalating and the concern is that we are sacrificing our economy to fight climate change.
Energy costs vary across Europe, as do policies supporting industry. The European goal is to develop a “super grid” and a single European market in conventional and alternative power. But that is a long-term project and it will require a heap of EU energy, green and industrial policy to be rewritten.
So what are we going to do help our businesses? They need action now.
A reduction in energy costs is the single biggest lever the Government could pull to create a favourable business landscape for manufacturers and businesses across the Sheffield City Region and indeed throughout the UK.
* Martin McKervey is a partner at Nabarro LLP and is Chair of Sheffield City Region LEP property & construction sector