The government has announced plans to introduce legislation allowing Energy Intensive Industries (EII’s) up to an 85% exemption on the cost of the Contracts for Difference (CFD) element of their electricity bills.
Although the regulations detailing the full operation of the exception and timescales for implementation are yet unpublished we do know that the criteria for determining which EII’s will qualify for the exception will be the same as that for the RO (Renewable Obligation) and FiT (Feed in Tariff) compensation scheme that currently exists (please refer to our full briefing document for details). We also know that the loss in revenue will be somehow redistributed across non EII’s, the latest Government forecast of the impact on electricity bills is in the table below.
The CFD element of the bill funds the CFD scheme which is used to incentivise suppliers to install renewable generation. This element of the bill is expected to rise significantly over the coming years and may put EII’s operating in international markets at a competitive disadvantage due to higher electricity prices. It is for this same reason that the RO and FiT compensation scheme was introduced which is currently under consultation to also become an exception scheme.
When the new regulations are published Energy Intensive Industries may be eligible to claim an exemption for the CFD, RO and FiT costs on their electricity bills and if they operate in an eligible sector may also be able to apply for a CCA (Climate Change Agreement) to reduce their (CCL) climate Change Levy costs. For the existing RO and FiT compensation scheme and details on obtaining a CCA please see our full briefing documents. For more information on the RO and FiT exemption consultation and the CFD exception regulations watch this space.