Is It Time To Stop Exemption for Energy Intensive Industry Renewable Costs?

Is It Time To Stop Exemption for Energy Intensive Industry Renewable Costs?

  • 14 Aug 0

The Government has made a move toward giving exemptions from some of the costs associated with renewable energy policies to Britain’s most energy-intensive industries. The move has ignited a debate over whether such a move is needed for the growth of green business. The Department for Business, Energy and Industrial Strategy (BEIS) has confirmed that it intended to push ahead with plans to make businesses operating in areas such as heavy manufacturing and mining exempt from paying the Renewables Obligation (RO) scheme tariff which is intended to support large-scale renewable electricity generation.

Energy-intensive businesses are currently recompensed for the cost of the RO scheme for up to 85% of their eligible electricity but under new proposals businesses would not be expected to pay in the first place for exempted energy. The scheme is expected to come into force in January 2018 subject to Parliamentary approval mirroring a similar exemption model regarding the Contracts for Difference incentive scheme in March 2017.

The current compensation model does not provide energy-intensive industries with sufficient certainty beyond the parliamentary term, as compensation is contingent upon departmental budgets which can fluctuate. An exemption will provide greater certainty. It is estimated that the exemption would save energy-intensive businesses around £196m annually.

Not all are in favour of the move, particularly due to the fact that it is likely to result in higher bills for non-eligible businesses and households as the shortfall will need to be recouped. The Government’s own impact assessment reveals that the exemption could cost SME energy users an extra £160 annually, medium-sized businesses an extra £6,700; and large-sized energy users an extra £62,900 should the Government back its own recommendation.

This decision is disappointing when the Government has demonstrated its position on renewables subsidies to reduce household bills. This is bad news for the majority of businesses and for households. The costs which would otherwise be borne by large businesses will now will be burden those who may already be struggling with high energy costs.

Whilst it is generally accepted that energy intensive industries are important to the UK economy but they also contribute significantly to greenhouse gases and air pollution. At a time when the UK is under increasing pressure to drive down emissions on the domestic and global stage, it is time to ask whether such businesses should contribute to support the building of the cleaner energy infrastructure that the UK needs.


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