The government has finalised the compensation scheme for energy intensive industries to reduce the impact on their bills from policies to decarbonise electricity generation.
The regulation, which has been laid in parliament, exempts more than 130 eligible companies from some of the costs of the Contracts for Difference (CfD) scheme, which encourages investment in low-carbon energy generation.
The costs of funding the scheme are recovered through a levy on energy suppliers and passed on to domestic and business consumers in their energy bills. The impact is biggest on industries that use large amounts of electricity, such as steel, chemicals, glass and cement.
Although energy costs account on average for 3% of UK business expenditure, there are 15 sectors where this reaches 10%, according to the Department for Business, Energy & Industrial Strategy (BEIS). The exemption is worth £100m a year to such companies, BEIS said.
The exemption was promised by the government in 2011, but had been delayed. There is no date as yet for when the exemption would come into force.
Energy minister Jesse Norman said: ‘We want the UK to be one of the best places in the world to build and grow a business, and that means creating the right conditions for companies to thrive and succeed.
‘These industries are worth £52 bn 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.’
The government has also published its response to the technical consultation outlining how it plans to deal with changes to eligibility for the exemptions.
Gareth Stace, director of UK Steel, said: ‘With the introduction of this exemption, we move another step closer to the comprehensive protection from climate change policy costs our sector has long called for.
‘The long-term certainty that the exemption provides is a hugely important element in delivering a more competitive business environment for steel makers in the UK, placing them on a more even footing with their EU competitors.’
However, more can and needs to be done on the issue of industrial energy costs, he added. ‘Even with the government action taken to date, electricity prices for the sector remain stubbornly high, some 50% higher than in Germany.’
BEIS said that it was in discussion with the EU about securing further exemptions from policy costs for energy intensive industries.
