In line with the government-stated intention to reduce the impact of renewables policies for most Energy-intensive Industries (EIIs) and safeguard their competitiveness internationally, from April 2017 EIIs will be exempt from a significant proportion of the costs of the Renewables Obligation (RO) and the Small Scale Feed-in Tariff (ss-FiT).
Subject to state aid approval, companies operating in sectors such as steel, chemicals, engineering, brick making, metal casting, heavy manufacturing, and mining will benefit from this exemption, but non-exempt customers will pay extra to cover the shortfall.
Non-exempt businesses will be asked to pick up the cost to the Treasury, potentially adding approximately £1.10/MWh to the RO forecast and around £0.30/MWh to the ss-FiT forecast, which would mean an increase from current rates upwards of 6.3% for RO and 6.4% for ss-FiT
These increases will mean an overall increase in bills that can be estimated at around 1.5% costs or roughly £1,500 for every 1 GWh your business uses, although this will depend on contract type and supplier.
Based on 2016 average prices, the government estimate increases in energy bills per annum of £5 for household bills, £360 for small business energy users, £15,000 for medium-sized energy users, and £140,000 for non-exempt large-sized energy users.
At the start of the scheme, the exemption is paid out as a rebate directly from the government, requiring companies to register with the Department of Business, Innovation and Skills (BIS).
The government is currently consulting with industry and stakeholders on proposals to apply the exemption via electricity suppliers from April 2017, although the requirement to register will be retained regardless.
The exemption is worth up to 85% of the Renewables Obligation and Feed-in Tariff costs for eligible businesses. Based on forecasts for 2017/18 costs, that could work out to a figure of more than £20 per MWh. A qualifying business using 10GWh of electricity per year could, therefore, save more than £200,000 per year.
If you qualify, your exemption will only be applied from the date you submit your documentation. If you do not qualify, your energy costs will increase immediately at the start of the scheme.
Whether you need support through the complex process of determining your eligibility or to mitigate its costs impact, please do get in touch with us.
