Proposals on how to work out which energy intensive industries (EIIs) will be given compensation to provide relief from the costs of renewable policies have been published.
Those such as the Renewables Obligation (RO) and Feed-in Tariffs (FiTs) which offer payments to green energy generators add extra charges on energy bills.
The RO will be replaced by the Contracts for Difference (CfDs) for new projects from 2017, which could lead to increased energy bills in the short term for EIIs and they could even face higher costs compared to other countries, according to DECC.
The Government has proposed to exempt the most electricity intensive businesses from a proportion of the costs of the CfDs and compensate the same firms from the cost of the RO and small-scale FiTs.
The consultation paper sets out the preferred method, which includes targeting businesses “whose competitiveness is at risk from rising electricity policy costs”, i.e. only exempting firms that are “both electricity and trade intensive”. That would be closely aligned to the definitions set out in the European Commission’s Environmental and Energy Aid Guidelines (EEAG).
The government previously consulted on which sectors would be eligible for relief from CfD costs but the new Commission guidelines forced it to re-consult.
DECC said: “We welcome views from all interested stakeholders on the proposed eligibility criteria so that these schemes target the support where it is needed most, helping to secure and maintain critical industrial investment in the UK.”
The impact of the revised exemption on domestic energy bills is estimated at an average of around £0.70 a year for the period 2015-2020, rising to £1.80 in 2020. The RO and small-scale FITs compensation will be paid out of departmental budgets and will have no impact on consumers, according to DECC.