Energy intensive industries to retain competitive edge with CfD exemption
Energy intensive businesses are to be made exempt from the costs of Contracts for Differences (CfDs), under plans published by the Department for Business, Innovation & Skills.
Subject to consultation, the Government says the move will “level the playing field” by ensuring that British businesses are not made uncompetitive due to the costs of low-carbon energy policy.
CfDs have been introduced as part of the Electricity Market Reform (EMR) and aim to stimulate investment by providing a stable long-term price for low carbon electricity.
The CfD mechanism works by providing a stable price for the electricity generated – a ‘strike price’. If the market price is lower than this strike price, the generator will receive a payment for the difference.
Business and Energy Minister Michael Fallon said: “As we reform the market to attract new investment into our energy infrastructure, it is vital that we do not undermine the competitiveness of UK industry.
“Energy intensive manufacturing is central to strengthening our industrial base and rebalancing our economy. These industries are significant employers and play an important role in the low carbon economy through the products they manufacture.”
The Government’s preferred option is to use the same eligibility criteria as the EU Emissions Trading System and Carbon Price Support indirect costs compensation. This would exempt industries with a total combined value to the UK of approximately £50bn in turnover and 150,000 in jobs.
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