The government has published a consultation to gain views on widening the eligibility for relief that is available to Energy Intensive Industries (EII) from the indirect costs of renewable energy schemes.
The relief scheme was introduced to help EIIs in the UK to compete with companies in countries with lower costs. It is open to particular sectors such as steel, chemicals, engineering, and plastics. Eligible businesses that have an electricity intensity of 20% or above can apply for relief from a proportion of the indirect costs of funding renewables that is passed through to their electricity bills.
Schemes such as the Renewables Obligation (RO) and Contract for Differences (CfD) were introduced in the UK to encourage the development of renewables generation. The cost of funding these schemes are recovered from electricity suppliers who ultimately pass the cost though to consumers.
As policy charges make up an increasing element of the energy bill, the potential savings for energy-intensive users are significant. At present, an application can be made to BEIS for an exemption from a proportion of the indirect costs of the RO and CfD. A system of compensation is in place for relief from the costs of small scale Feed-in -Tariffs (FiT), which might be replaced by an exemption in due course.
The newly published consultation is seeking views on options for lowering the current electricity intensity threshold for the exemption from the indirect cost of RO and CfD from 20% to either 17%, 15%, or 10%. Because the cost of the exemption is passed on to non-eligible consumers, the bill impact of lowering the threshold must be considered as part of the consultation. With the aim of reducing this impact, a number of approaches are being discussed, such as varying the proportion of exemption available.
Other issues being considered in the consultation include:
- The redistribution of money recovered from over-exempted EIIs
- Improving the operation of the exemption schemes
Following this consultation, the government will consider the feedback received before deciding if any changes are required and, if so, what they should be. Any decision will be subject to state aid approval and Parliamentary approval. The consultation closes on 7th September 2018.
