Tata Steel, the giant steel manufacturer has said it wants to expand its steel production, which is used to make wind turbines, but is concerned that the new carbon tax will threaten its competitiveness by increasing its business electricity prices.
Tata Steel, which employs around 3,500 people in Wales has said that while it is keen to increase steel production for the manufacture of wind turbines, the new carbon tax, which is supposed to encourage investment in sources of renewable energy, may weaken its position in the market.
Tata Steel which has plants in Port Talbot and Llanelli, said that the new Carbon Price Mechanism could reduce its competitiveness. The Carbon Price Mechanism was introduced in the Budget last week and is designed to increase the number of renewable energy schemes. The new Carbon Floor Price (CFP) of £16 a tonne is supposed to encourage fossil fuel powered plants to invest in carbon capture and storage schemes or move towards a low carbon form of energy generation. However, as Utility Exchange reported earlier this week week, there are concerns that energy providers will simply pass this new tax on to customers in the form of higher electricity rates.
Tata Steel says the CFP could add as much as £20 million a year to its business energy bill by 2020 but wants to increase steel production to supply steel for wind turbine manufacturers. Ironically, wind turbine makers are the ones who should be benefitting from the extra income from the carbon tax. But if those manufacturing the parts for these sources of renewable energy have to increase prices because their manufacturing costs have increased then it appears to defeat the object. They will simply get their raw materials from overseas.
As the UK moves towards low carbon energy generation there’s going to be a vast increase in offshore wind farms in the next few years and this should benefit steel manufacturers such as Tata Steel. Steel is used in the manufacture of turbine foundations, blades and other things including bearings. This is why a spokesman for Tata said this industry was so important to them.
He said “It is growing and we do hope to capitalise on that. But if our initial competitiveness is undermined, the people who make renewable energy infrastructure are going to buy their steel from abroad”.
Because the UK is the first country to implement a Carbon Floor Price it puts Tata Steel at a disadvantage with its rivals, especially those in Europe.
But Tata doesn’t just have to cope with the Carbon Floor Price in 2013 – that same year the European Union will introduce the next part of its emissions trading scheme – so the firm will be hit twice.
It remains to be seen what effect the new Carbon Tax will have on electricity prices for business but companies are already concerned that they will have to pay more for their business utilities and will therefore have to increase their prices – making them less competitive.