Big energy users exempt from new low carbon costs

Major energy users won’t have to pay for new low carbon schemes in the Energy Bill and will be getting a bumper £250million to counter existing energy costs, the Government […]

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By Vicky Ellis

Major energy users won’t have to pay for new low carbon schemes in the Energy Bill and will be getting a bumper £250million to counter existing energy costs, the Government revealed today.

While the long-overdue Bill trundles into parliament with support for low carbon energy, the Department of Energy and Climate Change has arranged some “relief” for firms which industries on massive quantities of energy such as steel or glass-making.

These firms won’t be included in new long term ‘contracts for difference’ (CfD) for energy from nuclear power and wind farms.

DECC and BIS have yet to say how far the exemption will stretch but they will run a consultation on it in 2013. The measure needs state aid clearance from the European Commission.

Uncannily echoing his Tory Coalition partner George Osborne’s mantra that industrialisation is all, Energy Secretary Ed Davey declared that “decarbonisation should not mean deindustrialisation.”

He said: “Energy intensive industries are an important part of the UK economy, in terms of economic output and employment throughout the supply chain.  There would be no advantage – both for the UK economy and for global emissions reductions – in simply forcing UK businesses to relocate to other countries.

“The transition to the low carbon economy will depend on products made by energy intensive industries – a wind turbine for example needing steel, cement and high-tech textiles. This exemption will ensure the UK retains the industrial capacity to support a low carbon economy.”

Environmentalists are certain to complain the measure runs counter to ‘greening’ the economy but industry claims the CfD get out clause is “vital”.

Jeremy Nicholson of the Energy Intensive Users Group told ELN: “It’s an encouraging development which was somewhat expected after the Chancellor’s Autumn Statement last year, and a report on international industrial energy prices published by BIS in July 2012 showing climate policies impacting UK industrial electricity users more than anywhere else in the world. It’s vitally important industry gets some relief. We’re obviously waiting for the details, but this will help reduce further cost increases from renewable subsidies when there’s a lot of momentum already built in as a result of the existing Renewables Obligation and small-scale Feed-in Tariffs.”

However he suggested today’s measures would be just enough to help businesses keep their head above water.

Mr Nicholson went on: “This is relief from additional cost increases, badly needed when the existing Renewables Obligation and Feed in Tariff have already added around £10 per megawatt hour (MWh) to the cost of supply to large energy users. The RO is set to go up 35% to around £8.70/MWh next year, for example, so these costs are already built into the system and set to carry on rising to 2017.”