Government considering further electricity subsidies for energy-intensive businesses

Businesses that use a high amount of energy, such as steel and paper mills, could see further relief under new proposals to help subsidise their electricity costs.

The UK government is consulting on the option to increase the level of exemption for certain environmental and policy costs from 85% of costs up to 100%.

This reflects higher UK industrial electricity prices than those of other countries including in Europe, which could hamper investment, competition and commercial viability for hundreds of businesses in industries including steel, paper, glass, ceramics, and cement, and risk them relocating from the UK.

The Energy Intensive Industries Exemption Scheme provides businesses with relief for the costs of renewable levies, including Contracts for Difference, the Renewable Obligation and Feed in Tariffs, in their energy bills.

The government says launching the consultation now would provide the new Conservative prime minister with the option to introduce the scheme, given the current high electricity prices.

The launch of the consultation follows the extension of the separate but similar Energy Intensive Industries Compensation Scheme for a further three years and a more than doubling of its budget.

The compensation scheme provides businesses with relief for the costs of the UK Emissions Trading Scheme (ETS) and Carbon Price Support mechanism in their electricity bills.

The government estimates that the plans would help around 300 businesses supporting 60,000 jobs in the UK’s industrial heartlands. 

In a statement, the government said: “Looking at ways to reduce the cost of doing business for key industries would help secure the future of domestic manufacturing and maintain a competitive business environment in the UK, ensuring economic growth and protecting thousands of jobs across the country.”

Business Secretary, Kwasi Kwarteng, commented: “British manufacturers are the lifeblood of our economy and central to our plans to overcome this period of economic uncertainty.

“With global energy prices at record highs, it is essential we explore what more we can do to deliver a competitive future for those strategic industries so we can cut production costs and protect jobs across the UK.”

Director General of UK Steel, Gareth Stace, added: “The publication of this consultation is a significant step forward in delivering competitive electricity prices for the UK steel sector and should provide some much-needed relief in the face of extremely challenging circumstances at the current time. While there remain difficulties, this announcement demonstrates that UK government understands the challenges of British industry and continues to support steelmakers and steel communities across the country.”

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