News
19/03/26
UK chemicals power use falls more slowly than output
London, 19 March (Argus) — UK chemicals-sector electricity demand is falling
more slowly than output and gas use, and could in future be supported by new
hydrogen electrolysis load even without a recovery in traditional production. UK
chemicals-sector electricity consumption was 14.7TWh in 2024, down by 7pc from
15.8TWh in 2019 before the pandemic, according to the latest data from the
Department for Energy Security and Net Zero (Desnz), having fallen slowly but
steadily over the period. The production for manufacture of chemicals and
chemical products index fell by 27.2pc over the same period, according to data
from the Office for National Statistics (ONS). This means output has fallen
almost four times faster than electricity consumption, suggesting the remaining
industrial base is more power-intensive ( see consumption and output graph ).
Natural gas consumption in the chemicals sector has aligned more closely to the
fall in output, with gas demand falling by 41pc between 2019 and 2024, to
12.3TWh. That divergence between the decline in gas and electricity consumption
is consistent with natural gas often functioning as both feedstock and fuel in
bulk chemicals. In ammonia production, gas typically accounts for most of the
production cost, leaving domestic output vulnerable when UK costs rise above
import parity. Recent closures and curtailments in some of the UK's most
gas-intensive segments, including ammonia and ethylene, have resulted from
higher gas prices. UK industrial natural gas prices excluding taxes rose from
£20.50/MWh in 2019 to £52.30/MWh in 2024, around 20pc above the IEA median and
higher than in France and Germany ( see industrial gas price graph ). Remaining
base more resilient The operations that remain are the most
electricity-intensive parts of the sector, with some better able to sustain
power demand. Chlor-alkali production is highly power-intensive, with rising
electricity costs reducing UK output to a negligible share of European capacity.
And much of that capacity is currently off line, with Ineos Inovyn at Runcorn
being the sole major UK chlorine producer. Other electricity-intensive
activities that remain in the sector are tied to more diversified end markets
than bulk chemicals. German firm Linde's subsidiary BOC operates seven air
separation units across the UK and Ireland, serving customers in healthcare,
food processing, metals and electronics — end markets broad enough to buffer
sector-specific demand shocks. "The primary factor is their ability to pass
through additional cost because of the cruciality of certain industrial gases
for manufacturing processes," industry association the Energy Intensive Users
Group director Arjan Geveke said. "Also, the trade intensity of certain
industrial gases is low," he said. Unlike ammonia or ethylene, cryogenic gases
such as oxygen and argon are not widely traded internationally, limiting the
import competition that has hit commodity chemical producers. High electricity
costs still weigh on the sector UK government support schemes have so far done
little to change the sector's broader cost disadvantage. The pressure on
producers reflects both structurally high input costs and weak demand. "For some
chemical companies energy, as a proportion of their cost base, [is] 50, 60,
70pc," Chemical Industry Association (CIA) chief executive Stephen Elliott told
Argus . Among CIA members, electricity accounted for a greater share of total
energy spend than gas in 2024, despite members consuming roughly four times more
gas, Elliott said. Schemes such as the British Industry Supercharger — a UK
government initiative launched in 2023 to support the competitiveness of
energy-intensive industries — had provided temporary relief for some sites. But
under the recently proposed British Industrial Competitiveness Scheme aimed at
cutting electricity costs for manufacturers in key growth sectors, "the relief
will be far outweighed by the incoming increase in policy and network costs",
Elliott said. And unless the full chemicals sector is covered, costs will be
redistributed to non-eligible sites. Some companies benefiting from
network-charge relief under existing arrangements will mean that "it's the rest
of industry that pays for the relief", he added. Hydrogen may add some future
demand New electrolysis projects could add some load later this decade, although
the effect on chemicals demand is likely to be limited. Based on the nine active
projects in the first hydrogen allocation round (HAR1), renewable hydrogen
output could reach around 15,700 t/yr by the end of the decade, implying about
880 GWh/yr of electricity demand assuming electrolyser consumption of 56 kWh/kg
( see HAR1 projects table ). The build-out is expected to be gradual, with one
active project from HAR1 due to enter service by 2027, four by 2028 and a
further four by 2029. Not all of that new load would sit within chemicals, since
some projects are aimed at a broader industrial base and some at users outside
chemicals altogether. MorGen Energy's 20MW Milford Haven project is intended to
supply customers in the industrial, chemical and port sectors, while beyond the
first allocation round, Meld Energy's proposed 100MW Saltend Green Hydrogen Hub
would supply users at Saltend Chemicals Park, and EdF Hynamics' planned 120MW
Fawley project is intended to supply ExxonMobil's refinery and petrochemical
complex. By Timothy Santonastaso HAR1 projects summary Project name Developer H2
output (MW HHV) Implied H2 output (t/yr) Implied electrical consumption (GWh/yr)
Long stop date Active projects 106.15 15,721 878 Barrow Green Hydrogen Carlton
Power & Schroders Greencoat 21.02 2,557 143 31 Mar 2029 Bradford Low Carbon
Hydrogen Hygen Energy & N-Gen Energy 24.49 4,202 235 31 Dec 2028 Green Hydrogen
3 (Northfleet Green Hydrogen) Hyro (Octopus Energy Generation) 9.00 1,203 67 01
Dec 2028 HyBont Bridgend Green Hydrogen Hygen Energy 5.20 687 38 29 Jun 2029
HyMarnham Power GeoPura & JG Pears 9.30 1,774 99 26 May 2027 Langage Green
Hydrogen Carlton Power & Schroders Greencoat 7.01 850 48 31 Mar 2029 Tees Green
Hydrogen Hynamics (EdF) 5.51 1,059 59 31 Dec 2028 Trafford Green Hydrogen
Carlton Power & Schroders Greencoat 10.52 1,524 85 31 Mar 2029 West Wales
Hydrogen MorGen Energy (Trafigura) 14.10 1,865 104 31 Dec 2028 Paused projects
17.70 3,551 199 Cromarty Green Hydrogen ScottishPower & Storegga 10.60 2,131 119
26 Dec 2028 Whitelee Green Hydrogen ScottishPower 7.10 1,420 80 29 Dec 2028 —
Low Carbon Contracts Company, Argus UK chemicals sector, output, electricity and
gas consumption Indexed 2019=100 Industrial gas prices, excluding tax £/MWh Send
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