Why change from compensating EIIs to exempting them?
Good question. Government has already recognised that, in the short to medium term, the increase in retail electricity prices from renewable and low-carbon electricity schemes may place those businesses which have particularly high electricity costs at a competitive disadvantage.
That is why the compensation scheme was originally opened in January 2016.
Government wanted to provide those EIIs with more long-term certainty and to allow them to remain competitive. It has stated expectations of the benefits to an exemption scheme; particularly that support should be faster, more accurate and more certain. Critically, electricity bills are reduced as opposed to compensation being claimed. This is why the government moved from compensation to exemption for the indirect costs of the CfD (Contracts for Difference) scheme from November 2017 and for RO (Renewables Obligation) with effect from 1 April 2018.
They expect to move to an exemption scheme for the indirect costs of the FIT scheme “by April 2019, or as soon as practically possible after that date.”
