New cost exemption for energy intensive industries

Regulations to save heavy electricity users such as the steel and chemicals industries around £100mn a year in energy costs have been laid in Parliament. The government says it 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.

Contracts for Difference are won through a competitive process which guarantees companies a certain price for the low carbon electricity they produce for a set number of years. This gives them the support and certainty they need to attract investment and get projects off the ground. 

The costs of funding the scheme are recovered through a levy on energy suppliers which is passed on to both domestic and business energy bills. This only makes up a minor part of most electricity bills, but has a more significant impact on those industries that use a lot of electricity.

The government committed in the recent Industrial Strategy green paper to minimise business costs and to commission a review of the opportunities to reduce the cost of achieving its decarbonisation goals in the power and industrial sectors. 

Energy Minister Jesse Norman said: ‘These [energy-intensive] industries are worth £52bn 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%.’