Regulations to save energy intensive industries around £100 million a year in energy costs have been laid in parliament today.
The government expects the new measures to benefit over 130 eligible energy intensive companies across the UK in sectors including steel, chemicals, glass and cement. The new measures will exempt these companies from a proportion of costs of the Contracts for Difference scheme, which is designed to encourage investment in low-carbon energy generation.
The costs of funding the Contracts for Difference scheme are recovered through a levy on energy suppliers which is passed on to domestic and business energy bills. The new measure
The government committed in the Industrial Strategy green paper to minimise business costs and commission a review of the opportunities to reduce the cost of achieving our decarbonisation goals in the power and industrial sectors.
Energy Minister Jesse Norman said: “These industries are worth £52 billion to the UK economy, support 600,000 jobs and produce essential products that people use every day. That is why we have taken this action to support them.”
Although energy costs on average account for 3% of UK business expenditure, there are 15 sectors where this reaches 10%. Under the exemption, eligible businesses will receive up to an 85% exemption from the indirect cost of funding CFDs. Eligible businesses belong to a sector identified as energy intensive and trade intensive, and pass a business level test which demonstrates their electricity costs meet or exceed 20% of Gross Value Added.
The exemption will be subsidised by domestic customers and other business customers. The impact on an average domestic bill will be approximately £1 each year between 2018 and 2024.
Read more from the government’s response: Energy Intensive Industries (EIIs): exemption from the indirect costs of Contracts for Difference (CFD) – government response
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