In recent years, Britain’s energy intensive industries (EIIs) have faced the steepest industrial electricity prices in Europe. The net zero transition and the rising price of carbon presents another challenge, particularly when competing in a global market.

The UK government wants EII business to remain competitive, so there are several forms of support available. These include new schemes, as well as existing schemes that have been extended into the future. We’ve outlined them below – with a handy ‘jump to’ menu for quick access to the info you need.

British Industry Supercharger

In April 2024 the government implemented the ‘British Industry Supercharger’ – a package of support for sectors particularly exposed to the high cost of electricity including steel, metals, chemicals, cement, glass and paper.

Taken together, this support is expected to be worth around £24 to £31 per MWh to industry on average.

The measures are:

  • The EII Renewable Levy Exemption Scheme subsidy has increased from 85% to 100% aid intensity. For the first time, this scheme now also includes a full indirect exemption from Capacity Market charges.More information below.
  • EII Network Charging Cost Compensation: A compensation for the charges paid for using the GB electricity grid to reach a £10/MWh reduction. This is set to be implemented in April 2025. More information below.

EII Renewables/Capacity Market Levy Exemption

What is the EII Renewables Levy and Capacity Market Exemption scheme?

The UK government has three main schemes for supporting the delivery of new renewables: Contracts for Difference (CfD), Renewables Obligation (RO) and Feed-In Tariffs (FiTs). It pays for these schemes through levies on electricity suppliers, who then pass the costs on to customers.

In addition, the government has placed additional policy costs on bill payers to cover the costs of operating the GB Capacity Market (CM).

The government recognises that these additional costs risk putting electricity-intensive businesses at a significant competitive disadvantage when they are operating in international markets. So, it created this scheme to exempt certain businesses from these levies.

This scheme previously offered up to 85% aid intensity, and only applied to CfD, RO, and FiT levies. In April 2024 (under the British Industry Supercharger), the government added an exemption to Capacity Market charges, and increased the aid intensity to 100%.

Who benefits from the Renewables/Capacity Market Levy Exemption scheme?

Businesses operating within energy-intensive sectors in England, Wales and Scotland can benefit from the EII exemption scheme if they meet all the criteria. The EII exemption scheme does not operate in Northern Ireland.

Does my business qualify for Renewables/Capacity Market Levy Exemption?

Businesses must meet several tests to qualify for Renewables/Capacity Market Levy Exemption.

  1. The Sector Level Test. This means your business must carry out one of the activities the government deems to be eligible. These all have an electricity intensity of at least 7% and are subject to international competitive pressures. The full list of eligible activities is listed in Annexe 1 of the official guidance.
  2. The Business Level Test. The business must demonstrate that its own electricity intensity is 20% or over – that is, its electricity costs amount to 20% or more of its Gross Value Added (earnings before taxes, interest, depreciation and amortisation) over a specified reference period.
  3. The business must have at least two quarters of financial data.
  4. The application for EII exemption must include evidence of the proportion of electricity needed to manufacture the product for at least three months.

How do I apply for Renewables/Capacity Market Levy Exemption?

Download and fill in the forms on the government website. (Read the full official guidance first.) If your application is successful, you will be issued with a certificate confirming your exemption. Then you should pass this certificate on to your electricity supplier so that they can pass on the exemptions in future bills.

What if my business carries out a mix of activities?

You will be eligible for exemption, but only in proportion to how much of your activity is eligible under the government rules. You will ideally need to calculate exactly how much electricity your business consumes in relation to eligible products and/or processes and show evidence of this in the form of records from your meter.

If that isn’t possible, you could alternatively calculate the proportion of your activity that relates to the eligible product and then base the proportion of electricity usage on that. For example, if your output is 60% non-woven fabric (not apparel) and 40% apparel, you could estimate that 60% of your electricity use is eligible for the exemption.

What if the business dramatically reduces its electricity consumption because of exceptional circumstances?

The rules recognise that unusual circumstances, such as a flood or fire, may drastically reduce the electricity consumption of a business to below a point where it passes the Business Level Test. If these circumstances were beyond the company’s control and not foreseeable or avoidable, you may still be able to get an EII certificate. You will need to supply evidence of whatever impacted your business (the so-called force majeure).

EII Network Charging Cost Compensation (NCC)

The NCC is a new scheme that compensates energy intensive industries for up to 60% of their network charges, including transmission network, distribution network and balancing services use of system charges. The scheme is funded by a levy on electricity suppliers, known as the EII Support Levy, which will be charged from April 2025.

Who is eligible for the NCC?

Any person that has held an EII certificate for the whole of any month may apply for an electricity support payment. Payments begin in May 2025.

How do I apply for the NCC?

The scheme is administered by Elexon. Eligible EII businesses will need to register for the scheme online through the NCC Portal. They will then be able to submit a quarterly online application for payment – it will not be made automatically.

There are specified application windows for each quarter:

  • 31 December to 31 January for quarter period October, November and December
  • 31 March to April for quarter period January, February and March
  • 30 June to 31 July for quarter period April, May and June
  • 30 September to 31 October for July, August and September

Elexon has published an NCC payment schedule so EII businesses know when to expect their monthly payment for the associated claim month.

EII – UK ETS Compensation Scheme

What is the UK ETS Compensation Scheme?

Carbon pricing and emissions trading schemes increase costs for electricity generators because they have to buy allowances for the emissions they cause. These costs are then passed on to consumers, and energy-intensive industries pay more because of their higher consumption. This could lead to a significant price differential between the UK with its emissions trading scheme and countries which have lower or zero pricing for carbon. The EII Compensation Scheme is designed to help UK businesses stay competitive globally and reduce the risk that they will move overseas to territories with a lower carbon price.

Who benefits from the UK ETS Compensation scheme?

Businesses in certain energy-intensive sectors are eligible for the scheme. You need to establish that you manufacture a product which has one of the relevant SIC (standard industrial classification of economic activities) codes. The categories are updated periodically and listed in the official guidance.  If your business sells or resells any of the eligible products but does not manufacture them, your organisation is not eligible.

The UK ETS Compensation Scheme does not operate in Northern Ireland.

Does my business qualify for the UK ETS Compensation Scheme?

To qualify for the scheme, as well as being in an eligible sector, your business must pass the ‘5% test’. This means proving that the indirect carbon costs of the business amount to more than 5% of its Gross Value Added. Calculations should be based on the most recent five years of accounting data, unless a business has been operating for less time than this. The official guidance has information on how to calculate this.

How do I apply for the UK ETS Compensation Scheme?

The official guidance has details on how to apply and worked examples to help you calculate the compensation due to your business.

What if my business carries out a mix of activities?

Your business is still eligible, but only in relation to the proportion of its activities which count as eligible. As with the exemption scheme, you will need to identify the proportion of electricity usage which is connected to producing eligible products, ideally through metered records.

For more details, read our in-depth guide to the UK ETS Compensation Scheme. 

Industrial Energy Transformation Fund

The £500 million Industrial Energy Transformation Fund (IETF) helps businesses with high energy usage cut their consumption through investment in energy efficiency measures and low carbon technologies. The scheme launched in 2020 and is now in its third phase, which will provide up to £185 million in funding between 2024 and 2028.

Who benefits from the IETF?

The IETF is for businesses with specific projects designed to cut industrial energy use. Phases 1 and 2 allocated money for feasibility studies, industrial energy efficiency projects and deep decarbonisation technologies. Phase 3 of the IEFT covers similar areas:

  • Engineering studies
  • Energy efficiency deployment
  • Deep decarbonisation projects

Businesses in England, Wales and Northern Ireland can apply for the IETF. Businesses in Scotland can apply for the Scottish Industrial Energy Transformation Fund (IETF) instead.

How do I apply for the IEFT?

Funding for Phase 3 will be allocated across two competition windows. The first opened in January 2024 and closed in April 2024. The remaining budget will be allocated in a second window, which – while initially scheduled for autumn 2024 – is yet to be announced. We will bring you more information on the next competition window as it develops. 

Climate Change Agreements

Introduced in 2001, a Climate Change Agreement (CCA) is a voluntary agreement between your business and the Environment Agency to reduce its energy use and carbon emissions. If you achieve your target, you get a discount on the Climate Change Levy (CCL), which is otherwise automatically added to your energy bills. This discount is up to 90% on the CCL for electricity, and 65% for other fuels.

Who benefits from Climate Change Agreements?

CCAs are available to a wide range of industries, including EIIs such as steel, glass, data centres and textiles manufacturing. To be eligible for the scheme, your business must carry out specified activities as listed in Appendix A of the operations manual.

How do CCAs work?

There are two kinds: umbrella agreements and underlying agreements. Umbrella agreements apply to a whole sector and is managed by your sector body – for example, the Metal Packaging Manufacturers’ Association. Underlying agreements are held by an operator for a specific site. The targets for these are calculated based on the metrics in the umbrella agreement for the sector.

How do I apply for a CCA?

The previous CCA scheme targets ended on 31 December 2024, with reduced CCL rates available until 31 March 2027. However, the Government has committed to a CCA scheme for a further six years, with reduced CCL rates until March 2033.

Importantly, the new CCA scheme will be a separate and new scheme, rather than an extension to the existing scheme. This will require companies to enter into new CCAs and meet new targets – you will not automatically be transferred to the new scheme and will need to be assessed to ensure you meet the existing eligibility criteria. New entrants (in existing sectors) will be able to join between 1 January to 31 August in every year throughout the scheme. There will be an additional application window, which will run from 1 May – 31 August 2025, for new entrants to apply before the start of the new scheme.

The scheme will also be opened up to new sectors; their eligibility is being assessed against certain criteria, and we should know more on the successful sectors soon. It is likely that new sectors will not be able to join until 1 January 2027.

What are the other changes to CCAs?

Other key features of the new scheme include:

  • The baseline year for targets will be 2022.
  • The new scheme removes ‘bubbling’, where multiple facilities operated by a business are grouped together (or ‘bubbled’) with a single target applied to all. The new scheme will use facility-level reporting.
  • Energy Management Systems (EMS) will not be mandatory for the new scheme, but are recommended as best practice.

For more details on the new scheme, read the Government’s CCA consultation document. We will update you as more information becomes available.

Energy bill support for ETIIs

In April 2023, the UK government replaced the Energy Bill Relief Scheme with the less generous Energy Bill Discount Scheme (EBDS). Organisations classed as Energy and Trade Intensive Industries (ETIIs) may be eligible for greater support under this new scheme. These kinds of firms don’t automatically; they will need to apply.

Who is eligible for ETII energy bill support?

Organisations must be UK-based and able to prove that at least 50% of revenue generation is from UK-based activity within eligible SIC code sectors.

Local Authority sites may also be eligible for support under the scheme, including libraries and museums.

What support is available?

Organisations will receive discounts based on the difference between the price threshold and the relevant wholesale price, which are listed as follows:

  • Electricity – £185 per MWh
  • Gas – £99 per MWh

Only 70% of energy volumes will be eligible for this discount, which has a “maximum discount” of £40/MWh for gas and £89/MWh for electricity. The remaining 30% will receive the baseline level of support where customers wholesale price meets the baseline eligibility criteria.

Read our full guide to ETII energy bill support.

“Non-standard customer” energy bill support

“Non-Standard Customers”, or NSCs, can also apply for help with their bills from April 2023 to March 2024, similar to the support others will receive under the government’s Energy Bills Discount Scheme (EBDS).

Non-standard customers are those in Great Britain and Northern Ireland that consume gas or electricity supplied by wire or pipe from a license-exempt supplier, for which they pay a price that is pegged to wholesale energy prices. Customers include some public sector organisations and energy intensive industries, such as steelmakers, recycling plants and manufacturers.

Backdated support is available too

NSCs can also apply for backdated support under the previous Energy Bill Relief Scheme (which supported firms through a tough winter, and ended in March 2023). It applies to those that get their licence-exempt supply from the public grid, as well as those that get a licence-exempt supply from waste, anaerobic digestion and biomass plants.

The government is urging companies to check their eligibility on GOV.UK.

Should we look into applying for NSC support now?

Yes. The claims window is open now and it is possible to backdate your claim as far back as October 2022. Since this is a new and complex scheme, it makes sense to read the technical guidance first and get in touch with your QEP about its application on your behalf.

If you’d like to know more about any of these schemes and how you can benefit, get in touch for advice.

If you’d like more information any of the mentioned EII funding, please get in touch for a no-obligation chat with our experts at Sustainable Energy First.

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