Energy Intensive Industry Subsidies (EIIs)
To ensure the UK meets its low-carbon targets, the government has introduced several policies encouraging the growth of renewable technologies to help shape a sustainable future.
As a consequence of these policies, new renewable charges have been introduced to business and domestic invoices, hence increasing the cost of electricity to the end user.
With charges such as; Feed in Tariff (FiT), Renewable Obligation (RO) and Contracts for Difference (CfD) now part of a supplier invoice. The cost of wholesale electricity makes up less than half of the total electricity rate. Third Party Charges (TPCs) passed on from the local Distribution Network Operator (DNO) including DUoS and TNUoS makes up the remaining 20-30% of an invoice charge, depending on the location within the UK.
In an effort to ensure UK businesses are able to compete on a global stage and lower the cost of electricity, the government has introduced legislation to exempt Energy Intensive Industries (EIIs) from some of the environmental subsidies.
Eligible businesses can apply for up to 85% exemption from the Renewable Obligation and Contracts for Difference environmental charges.
What Are EIIs?
EIIs include sectors such as quarrying, engineering and heavy manufacturing that typically consume a high amount of energy. As a result, the cost of electricity makes up a substantial amount of the production costs.
The government has listed the sectors that are eligible for the environmental exemption and can be accessed here. As predicted by the Department of Business Energy and Industrial Strategy; the policy will benefit over 130 energy intensive users saving around £100m a year in energy costs. The total energy exempt volume will be approximately 10TWh per annum.
Most businesses will not qualify for the rebate however. The additional cost as a result of the exemption will be paid for though supplier invoices by all non-EII exempt electricity including domestic properties.
Environmental Charges and Dates
Contracts for Difference:
Exemption started on the 1st November 2017
Exemption will start in 1st April 2018
Feed in Tariff:
At the present moment there has been no confirmation whether EIIs will be given an exemption. The Department for Business Energy and Industrial Strategy have confirmed however that no exemption will be applied before 1st April 2019.
Find out more about the government’s list of designated EIIs and the qualification rules. (GOV.UK website)