The government has announced plans to completely exempt heavy industries from green levies in a bid to curb the impact of spiralling electricity bills on such firms.
The Department for Business, Energy and Industrial Strategy launched a consultation on Friday (12 August) on revisions to the support scheme for energy intensive industries including steel, paper, glass, ceramics, and cement.
Under the existing rules governing the Energy Intensive Industries Exemption Scheme, such heavy power users enjoy a discount of up to 85% on indirect costs of the Contracts for Difference, Renewables Obligation and Feed In Tariff subsidy schemes.
This discount reduced total electricity costs for energy intensive industries by around a quarter in 2021, according to the consultation paper. This though still left UK industries paying more for their electricity than their European competitors, it added
The government is proposing to increase the exemption level to 100%, which BEIS estimates would save eligible firms up to £38/MWh.
The paper added the caveat that this complete exemption may lessen the incentive for such businesses to invest in energy efficiency.
The government has estimated that its proposal would help around 300 industrial businesses, supporting 60,000 jobs, to keep their operations in the UK.
The consultation document also included proposals to tighten the eligibility criteria for the exemption. It said that in order to qualify, companies must demonstrate that they are “ailing or insolvent” because they would “almost certainly” go out of business without the exemption or are unable to pay debts.
This criterion, which reflects the terminology in the UK’s recently introduced post-Brexit state subsidy regime, is designed to replace the previous European Commission-derived requirement that companies must demonstrate they are an “undertaking in difficulty”.
Kwasi Kwarteng, secretary of state for business and energy, said: “With global energy prices at record highs, it is essential we explore what more we can do to deliver a competitive future for those strategic industries so we can cut production costs and protect jobs across the UK.”
Gareth Stace, director general of UK Steel, said the proposals will provide “some much-needed relief in the face of extremely challenging circumstances”.
BEIS is seeking feedback on the consultation by 16 September.