Energy intensive industries will be exempt from the costs associated with Contracts for Difference.
Energy intensive (EI) industries will be exempt from up to 85% of the costs of the Contracts for Difference (CfD) scheme. However, schemes such as Renewables Obligation and Feed-in Tariff will remain in effect until legislation is changed to exclude EI businesses.
The government imposed changes at the end of October to exempt EI industries from CfD after initially proposing the plans in the 2011 Autumn Statement. The initial proposal planned to exclude eligible businesses from paying a proportion of indirect costs brought about by the CfD scheme and a number of consultations have taken place to finalise the changes.
This exemption is the first of three for EIIs which will be imposed over the next few years. Renewables Obligation (RO) and the Feed-in Tariff (FiT) scheme will be replaced which will see EII customers receive a rebate on their energy bills for the costs incurred by these schemes, instead of compensation at a later date.
RO exemption legislation is currently subject to parliamentary approval and is expected to be passed in 2018, although the FiT exemption is awaiting government response to the initial consultation and no timescale has been established.
The aim of the exemptions are to provide guarantees that EIIs can operate in international markets and are not at a disadvantage due to the cost of renewable energy schemes. Should these industries become uncompetitive then this could have a serious impact on the UK economy.
Electricity suppliers cover the costs of CfD, RO and FiT based on their share of the market and these policy costs make up some of the non-energy costs on a customer’s utility bill. (To learn more about non-energy costs, watch our quick video here).
EIIs must register with the Department of Business, Energy and Industrial Strategy to receive a certificate of eligibility and to benefit from compensation and any future exemptions. This certificate can then be passed on to the company’s energy supplier who will take the necessary action.
If you would like more information on this then please get in touch with Apollo by calling us on 01257 239500 or by filling out the call-back form on our contact page.