Government sets out plan to protect energy intensive industry from renewables costs

The business secretary has set out details of an exemption for the steel sector and other energy intensive industries from energy costs. The exemption, first announced at Autumn Statement, will spare all energy intensive industries from paying some £390 million a year in policy costs of the Renewables Obligation and Feed-in Tariff.

The exemption is expected to come into force in 2017. Energy intensive industries include the steel and ceramics industry amongst others. The industries employ around 600,000 people and contribute £52 billion to the UK economy. The government claimed it would be worth more than £400 million to the steel sector by the end of this parliament. Prior to the exemption coming into force, the government will continue to pay compensation to these industries (£160 million to date since 2013) to reduce their energy costs.

Business secretary Sajid Javid said: “Help with energy costs has been one of the steel industry’s key asks and, having extended last year the compensation we are paying out, I want to see progress on exempting them altogether.

“While we can’t control the global price of steel, we are doing everything we can to help our steel industry, not just on energy costs but also securing flexibility on EU emissions rules and on tariffs.”

The scheme will work by reducing an energy supplier’s liability for the costs of renewable generation (through the Renewables Obligation and Feed in Tariffs) by a certain portion of its supply to each (if any) of its eligible energy intensive industry customers. The suppliers are then expected to pass on this saving to it’s energy intensive industry customers.

The scheme will increase the electricity bills of other energy users. In it’s impact assessment, the government estimated that household bills would increase by around £5 per year.  It also said there will be “a very small increase in the number of fuel poor households” as a result of the exemption. The exemption scheme applies only in England and Wales.

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