For the eligible sectors and those looking to net zero, as well as ensuring competitiveness, business energy users cannot afford to ignore the opportunities relief schemes present. While CCAs are reopened, the window of opportunity is short.
Industrial energy users in the UK pay some of the highest electricity prices in Europe, partly due to the impact of green levies and policy measures. Fortunately, the government provides various forms of relief for the most energy-intensive industries so they can remain internationally competitive. A key element of this relief is the discount on the Climate Change Levy for sectors which make commitments to improve energy efficiency – Climate Change Agreements (CCAs) – where performance targets are determined by negotiation with government.
BEIS is consulting on a two-year extension to CCAs, which had been due to stop at the end of 2023. There will be a new Target Period running from 1 January 2021 to 31 December 2022. The plan is to extend certification for reduced rates of CCL for participants meeting obligations under the scheme until 31 March 2025, giving greater certainty to the affected industries.
It was always likely that BEIS would announce some form of extension, or an alternative form of relief, but the news will nevertheless be a reassurance for industrial energy users at a time when economic risks are already uncomfortably high and the prospect of losing CCL discounts would have been particularly damaging.
BEIS plan to re-open the current scheme to allow eligible facilities that are not currently participating to apply to join.
Eligibility is confined to fifty sectors in a wide range of energy-intensive industries from steel and chemicals to food and drink manufacture and bakeries. There may be companies in these sectors operating facilities that are potentially eligible to join CCAs and hence benefit from the CCL relief. It is unlikely that a huge number of additional businesses are in this position. Nevertheless, BEIS is anxious to ensure relief is available wherever it is needed, including businesses that for one reason or another might not already be participants. Businesses that suspect they may be eligible should consult BEIS, suitable consultants, and/or relevant sector associations.
Companies can apply now for inclusion in the scheme and should consider doing so promptly if they can, ahead of the deadline of 30th September (subject to the outcome of the consultation), in order to benefit from relief in Target Period 5 (TP5).
BEIS propose increasing the buy-out price from £14/tCO2e to £18/tCO2e for TP5. The baseline year for all sectors will be updated to 2018. There will be no carry over of benefits from TP4 to TP5.
BEIS propose that there should be a 20% improvement in overall energy efficiency by 2030 relative to this baseline. The final targets for the extended period will be negotiated with sectors, as before.
BEIS are keen to hear initial views on potential reforms for any future CCA scheme that might succeed the current one. Something similar will certainly be required so long as the government remains committed to the CCL and maintaining international competitiveness remains an issue, which seems likely for the foreseeable future.
The debate on this and other reforms to green levies and reliefs will no doubt continue for a long time to come, but in the meantime BEIS are requesting responses to their consultation by the remarkably precise deadline of 11:45pm on 11 June. Interested businesses, sector associations, and those with energy-intensive clients are strongly advised to respond.
Listen to The Resonance, Alfa Energy’s podcast. and the latest episode, Climate Change Agreements – Extending the Benefits. In this episode, we talk about: