British Industry Supercharger: Government to cut green energy surcharges for heavy industry
Industrial sectors including steelmaking will soon see their energy costs cut, with the UK Government bringing forward new measures to shield them from certain charges typically related to electricity and renewables.
The Government will today (23 February) set out proposals for a new ‘British Industry Supercharger’ scheme, implementing targeted measures to reduce energy costs in sectors such as steel, metals, paper, automotive manufacturing and chemicals. Businesses and trade bodies in these sectors have implored the Government over the past year to bring forward more targeted support for rising energy costs, in line with the support on offer in the EU.
The Department for Businesses and Trade is proposing reductions on network charges, which industrial energy users pay for their electricity. It is additionally planning exemptions from GB Capacity Market costs.
It is also set to exempt energy-intensive firms from certain surcharges typically paid to assist with the transition to renewable energy. Firms are set to be exempt from the Renewables Obligation, fir example, which has been in place since the early 2000s and is used to help electricity suppliers source an increasing proportion of electricity from renewable sources.
The Supercharger scheme will additionally exempt industrial players from costs relating to the Contracts for Difference (CfD) auction schemes.
Consultations on the changes proposed under the Supercharger scheme will be consulted upon this spring. There is an expectation that the scheme will come into effect in Spring 2024.
Business and Trade Secretary Kemi Badenoch said: “This is carefully crafted support that will mean strategically-important UK industries like steel and chemicals remain competitive on the world stage.”
edie will update this story once the full set of Supercharger scheme proposals has been announced, and as reaction comes in from the green economy. While the move will doubtless be a relief to energy-intensive businesses, there will surely be questions about the financial shortfall for key clean energy surcharges, and how this could impact progress towards the Government’s energy transition ambitions.
“UK industrial electricity prices have been uncompetitive for many years, and today, the Government took a great step towards levelling the playing field for the steel industry,” said UK Steel’s director general Gareth Stace.
“We welcome this announcement and look forward to working with Government to ensure full price parity with European competitors. It is essential we can compete on an equal footing, in the short term, within the fiercely competitive steel market, both in Europe and globally.”
Support so far
The Government has stated that, in 2020, it provided some £522m of support for energy-intensive industries’ energy bills, comprising £122m waived emissions trading costs, under the Energy Intensive Industries Compensation Scheme, plus £400m of reduced electricity costs through exemption from green surcharges.
In April 2022 it was confirmed that the Energy Intensive Industries Compensation Scheme would benefit from a three-year extension.
Another incentive offered by the Government is the Industrial Energy Transformation Fund, which supports businesses with the adoption of technologies that help to reduce their fossil energy use. These include energy efficiency technologies or more innovative, early-stage technologies, such as those enabling the use of electricity or hydrogen rather than fossil fuels in industrial heating processes.
The Fund is running through to 2025, with funding allocated in stages. The latest phase of funding, totalling £12.4m, was announced earlier this month.
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Let us hope that the help will run through the whole system and not be licked up by the supply chain.
We await results.