The rising fuel and energy costs have created a crunch for UK businesses and energy intensive industries in particular. The MMTA asked the department for Business Energy and Industrial Strategy (BEIS) to clarify what support is available for business and industrial energy users.
Since then, on 17 October, UK’s new chancellor Jeremy Hunt announced that any current support packages, specifically the Energy Bill Relief Scheme , will continue until April 2023. However the government will now launch a review, led by the UK Treasury, into how any support beyond April 2023 could be designed, aiming to significantly reducing the cost to the taxpayer. It was “not responsible to continue exposing public finances to unlimited volatility in international gas prices”, Hunt warned.
The BEIS response to MMTA questions is published here.
- What measures will the government take to ensure that the UK primary and recycling metals industries would have access to secure energy supply and would be protected from unsustainable energy and fuel costs?
- The Energy Bill Relief Scheme will provide a price reduction to ensure that all businesses and other non-domestic customers are protected from excessively high energy bills over the winter period. Non-domestic customers do not need to take action or apply to the scheme – support will automatically be applied to bills.
- The price reduction will run initially for 6 months covering energy use from 1st October 2022 until 31st March 2023.
- We will publish a review of the scheme in 3 months’ time with a view to considering how best to offer further support, in particular to customers who are the most vulnerable to energy price increases. These are likely to be those who are least able to adjust, for example by reducing energy usage or increasing energy efficiency. Continuing support to those deemed eligible would begin at the end of the initial 6-month support scheme, without a gap.
- What action will the government take in the immediate term (alongside help for household consumers) to reduce the excess cost of gas and fossil fuel power to industrial consumers in the UK?
- For gas, see answer to Q1.
- For other fossil fuel power: Equivalent support will also be provided for non-domestic consumers who use heating oil or alternative fuels instead of gas. Further detail on this will be announced shortly.
- What tax relief measures, including measures such as VAT relief or a cap on tax and surcharges, are being put in place for industrial gas and energy consumers?
- The Climate Change Levy (CCL) is not levied on supplies of energy used by businesses in mineralogical or metallurgical processes. For any energy supplies which are subject to CCL, the Climate Change Agreements Scheme similarly offers tax discounts of up to 92% worth £255m a year across 53 industrial sectors, in return for businesses meeting energy and/or carbon reduction target.
- We are also providing tax incentives for less energy intensive technologies by bringing forward an exemption on business rates for green technology, saving businesses an extra £35 million in 2022-23.
- At Budget 2021 the Government has also committed to freezing the business rates multiplier in 2022 to 2023, which is a tax cut worth £4.6 billion to businesses over the next 5 years.
- Most businesses that are VAT registered can already reclaim VAT they pay so a VAT cut would not benefit them.
Climate change agreements (CCA) are voluntary agreements made between UK industry and the Environment Agency to reduce energy use and carbon dioxide (CO2) emissions. The Environment Agency administers the CCA scheme across the UK.
In return, operators receive a discount on the Climate Change Levy (CCL), a tax added to electricity and fuel bills. To find out more, visit: https://www.gov.uk/guidance/climate-change-agreements–2
- Is any state aid being considered to support the UK’s primary metal and steel producers and recyclers?
- The 2022 UK Energy Security Strategy announced that the EII Compensation Scheme will be extended for a further 3 years with an increased aid intensity which will represent a doubling of relief.
- It also announced that we would consider making changes to the EII Exemption Scheme with a view to increasing the aid intensity and we will explore other possible measures to reduce electricity prices for EIIs.
- These two EII schemes look to address the ongoing structural costs for EIIs which are additional to the rising energy costs that all business are currently facing. EIIs will therefore also be able to access the Energy Bill Relief Scheme.
- Government is reviewing options to provide relief to energy intensive industries for a proportion of the indirect costs of funding renewable electricity policies.
For guidance on compensation of indirect costs of UK Emissions Trading Scheme (ETS), visit: https://www.gov.uk/government/publications/uk-emissions-trading-scheme-and-carbon-price-support-apply-for-compensation/compensation-for-the-indirect-costs-of-the-uk-ets-and-the-cps-mechanism-guidance-for-applicants
- What help will be provided through accelerated roll-out of renewable energy generation, what support will be provided by the government for renewable energy expansion?
- Contracts for Difference (CfDs), the Government’s flagship renewables auction scheme, will now be held annually from March 2023, rather than running approximately every 2 years as previously.
- CfDs give greater certainty and stability of revenues to electricity generators by reducing their exposure to volatile wholesale prices, while protecting consumers from paying for higher costs when electricity prices are high
- The CfDs scheme has delivered substantial new investment. The most recent CfD round, in July, delivered record capacity of almost 11GW of clean energy, almost 7GW of which is from new offshore wind projects. This is enough to power around 12 million homes.
- The Growth Plan announces new legislation (the Planning and Infrastructure Bill) to accelerate priority major infrastructure projects across England.
- These reforms will mean that energy infrastructure, including renewables, gets built more quickly. The government will work with the devolved administrations in relation to devolved planning responsibilities.
To find out more about Contracts for Differences please visit: https://www.lowcarboncontracts.uk/contracts-for-difference
- What additional support can be offered to UK metal producers and recyclers through the emissions trading scheme?
- A proportion of ETS allowances, worth several billion pounds a year at current prices, are already allocated for free to businesses at risk of carbon leakage under the UK ETS.
- Some metal producers and recyclers may be eligible for support through The Climate Change Agreements Scheme, which since 2013 provides Climate Change Levy reduced rates worth an estimated £255m annually in total to around 2,600 businesses in over 50 industrial sectors.
- The sector is eligible for support through the £289 million Industrial Energy Transformation Fund (IETF) and the £34 million Scottish IETF. These programmes provide capital support to industrial sites, helping them to become more energy efficient and to switch away from fossil fuels to lower carbon alternatives.
To find out more and apply for IETF (Phase 2: Autumn 2022) visit: https://www.gov.uk/government/publications/industrial-energy-transformation-fund-ietf-phase-2-autumn-2022
For Scottish IETF, please visit: https://www.gov.scot/policies/energy-efficiency/scottish-industrial-energy-transformation-fund/
- Recognising the need for certainty in the near term, we are guaranteeing current levels of free allocation until 2026 for those industrial sectors at risk of carbon leakage, subject to activity level changes. This will support industry in the transition to net zero in the context of high global energy prices while incentivising long term decarbonisation
- Free allocation is part of a wider UK Government programme to protect against carbon leakage which includes other support such as the Energy Intensive Industries compensation scheme worth over £125m.
- For 2022, free allocations amounting to around 42m allowances have been issued to eligible operators.