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Changes to the Energy Intensive Industries Exemption Relief Scheme – what businesses need to know

17 June 2024 | 4 minutes

The government has updated the application process for its Energy Intensive Industries (EII) Exemption Relief Scheme. In this article, we explore the changes in further detail, confirm when they come into force and explain what they mean for major energy users.

What is the EII Exemption Relief Scheme?

The EII Exemption Relief Scheme provides energy intensive businesses with financial support for the indirect costs of national renewable energy policies – namely Contracts for Difference (CfD), the Renewable Obligation (RO) scheme and Feed in Tariffs (FITs). These initiatives aim to accelerate the UK’s progress towards achieving net-zero greenhouse gas (GHG) emissions by 2050, but their related costs ultimately fall on energy users through increased energy bills. The government recognises that additional costs put energy intensive businesses at a significant disadvantage when operating in international markets and therefore offers financial support for those most heavily impacted. This not only increases global competitiveness for UK businesses, but also acts to prevent the risk of ‘carbon leakage’ – a scenario where companies send their high emissions operations offshore to countries with far less stringent environmental policies. Prior to April 2024, eligible businesses could secure compensation for up to 85% of indirect costs through the EII Exemption Relief Scheme. Recent changes have seen this percentage increase. It is important to note that exemption isn’t automatic and businesses must apply to secure relief.

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Which businesses qualify for exemption?

To qualify for exemption relief, businesses must meet the following five criteria: 1. They must manufacture a product in the UK, within an eligible industry, and pass the ‘sector level test’ (more detail can be found here) 2. They must pass a 20% electricity intensity test, whereby more than a fifth of total site costs are spent on energy 3. They must have at least two quarters of financial data to present 4. They must not be classified as an “Ailing or Insolvent Economic Actor” (AIEA), which is in essence a business that would almost certainly fail in the short to medium term without subsidy support 5. They must be able to demonstrate the proportion of energy required to manufacture products (for a period of at least three months) A business that successfully applies for an exemption will be provided with a certificate confirming their eligibility. This must be passed on to its electricity supplier to receive the full benefit of exemption.

What is changing in 2024?

At the start of the year, the government announced a number of updates to the scheme’s application process. While relatively minimal, energy intensive businesses should be aware of these changes and what they mean for submissions. First, eligibility has been amended to allow new businesses to apply with just three months of previous data. This aims to increase inclusivity for organisations who are new to market.

Second, applicants can now also exclude 2020 and/or 2021 data, to account for the impact of the COVID-19 pandemic. After all, with production figures impacted by numerous lockdowns and reduced productivity, data captured during that period is considered inaccurate. Finally, a new application form has been published to reflect a change in the reference price used to calculate eligibility and to eliminate duplication, clarify information, add a field for company registration numbers (CRNs) and update hyperlinks. Find out more about how to apply for the exemption scheme here. EII exemptions cannot be backdated, so the sooner you apply, the sooner you can start saving on your energy bills. If you would like to find out more about changes to the application process, whether your business is eligible or how to apply for certification, speak to our team of energy experts today.

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