British Industrial Competitiveness Scheme: consultation on scheme eligibility and approach

Question 1

General information

Accepted Answer

Why we are consulting

This consultation seeks views on the proposed approach to, and eligibility for, the new British Industrial Competitiveness Scheme (BICS).

The scheme aims to reduce electricity costs for manufacturing frontier industries within the Industrial Strategy’s growth sectors (the ‘IS-8’), and manufacturing foundational industries which provide important inputs to the frontier industries, who meet a certain threshold of electricity intensity.

Eligible businesses are to be exempt from paying the indirect costs of the Renewables Obligation (RO), Feed-in Tariffs (FIT) and the Capacity Market (CM). This consultation seeks views on the proposed approach and how businesses eligible for the scheme should be selected.

Consultation details

Opened: 24 November 2025

Closing date: 19 January 2026

How to respond

You can respond to the consultation:

online
by emailing bics.correspondence@businessandtrade.gov.uk

Audiences

We are seeking views from a wide range of audiences, including:

manufacturing businesses (irrespective of whether they are likely eligible for BICS)
other electricity consumers (including households and non-manufacturing businesses)
trade bodies
consumer associations
energy suppliers
the devolved governments
other interested parties

Territorial extent

This consultation covers Great Britain (England, Scotland and Wales) and does not apply to Northern Ireland.

Confidentiality and publishing responses

The Department for Business and Trade (DBT) may be required to publish responses to this consultation in response to Freedom of Information requests under the Freedom of Information Act 2000 on legislation.gov.uk.

A summary of responses and government response to this consultation will be published within 12 weeks of the end of the consultation period.

For more information, see DBT’s public consultations privacy notice.

Question 2

Foreword

Accepted Answer

The United Kingdom stands at a pivotal moment in its industrial evolution. As global competition intensifies and technological transformation accelerates, we must ensure that British industry is not only resilient but also relentlessly competitive.

The British Industrial Competitiveness Scheme (BICS) is a flagship intervention of the Industrial Strategy – a strategy built on a clear vision: to back the sectors and businesses with the greatest potential to drive sustainable growth, productivity and prosperity across the country.

This scheme directly addresses one of the most pressing challenges facing these businesses today: how to remain globally competitive while navigating some of the highest industrial electricity costs in Europe.

By providing eligible manufacturing businesses with exemptions from the indirect cost of the Renewables Obligation, Feed-In Tariffs and Capacity Market schemes, BICS will reduce cost pressures and support the long-term viability of our most strategically important industries.

This consultation seeks views on how to determine which businesses within the Industrial Strategy manufacturing frontier industries, and manufacturing foundational industries in their supply chains, should be eligible for the scheme.

We want to ensure that the approach we put in place is workable for businesses and support is directed to where it will have the biggest impact on economic growth. Your feedback will help us shape a fair, transparent and effective scheme that reinforces the strength of our manufacturing base.

This scheme is part of our broader commitment to backing British industry with practical, responsive policy. By reducing electricity burdens, we can unlock investment, protect jobs and ensure our Industrial Strategy sectors remain world-leading in both productivity and industrial excellence.

I encourage all stakeholders to engage with this consultation and help us deliver a scheme that reflects the needs and ambitions of British industry. I look forward to hearing from respondents on this important topic.

The Rt Hon Peter Kyle MP

Secretary of State for Business and Trade and President of the Board of Trade

Question 3

Introduction

Accepted Answer

Context

The government is committed to retaining a modern, dynamic and globally competitive industrial base as part of its wider Industrial Strategy. However, high electricity costs have made it increasingly difficult for businesses to compete with their international counterparts.

This government has been clear that the long-term answers to the challenges around energy security, affordability and sustainability point in the same direction – clean energy. Last December, we launched our Clean Power 2030 Action Plan which set out a detailed plan for achieving the target of clean power by 2030. Our clean power target means transitioning to an electricity system that produces at least 95% of Great Britain’s generation from clean sources.

To address the more immediate electricity cost challenges, the government announced the British Industrial Competitiveness Scheme (BICS) as part of its Modern Industrial Strategy. The scheme aims to support eligible manufacturing frontier industries within ‘IS-8’ manufacturing sectors, and manufacturing foundational industries which provide important inputs to the frontier industries, who meet a certain threshold of electricity intensity. It will do this by bringing British electricity costs more in line with other economies in Europe, and level the playing field for British businesses.

Businesses eligible for BICS are to be exempt from paying the indirect cost of 3 schemes:

the Renewables Obligation and Feed-in Tariffs which require electricity suppliers to make payments to support generation of electricity from renewable sources
the Capacity Market which requires electricity suppliers to make payments to ensure the UK has adequate electricity capacity

The proposed scheme will apply in Great Britain only, given that energy policy is largely devolved in Northern Ireland. The scheme will require implementing legislation and be designed in compliance with the Subsidy Control Act, the UK-EU Trade and Cooperation Agreement (TCA) and other international subsidy control commitments.

As the scheme is developed, it is vital to ensure that its design is robust, fair and delivers the intended benefits to British industry. This consultation seeks views on the proposed approach, including how eligible businesses should be selected.

This scheme is one of a suite of interventions announced in the UK’s Modern Industrial Strategy which made the following commitments:

an increase in support for our most energy-intensive industries (EIIs) eligible for the Supercharger package, with an uplift of the Network Charging Compensation (NCC) scheme from 60% to 90%. The NCC uplift will reduce electricity prices for about 500 eligible highly electricity-intensive users by around a further £8 to £10 per megawatt-hour (MWh), bringing the total reduction to around £65 to £87 per MWh.
continued support for the Energy-Intensive Industries Compensation Scheme which tackles carbon leakage. We will conduct a review of the scheme by the end of this year that will set out how we plan to continue supporting EIIs through the scheme when the UK Carbon Border Adjustment Mechanism (CBAM) is implemented in 2027.
supporting the development of the Corporate Power Purchase Agreements (CPPA) market in the UK, as a potential route for energy consumers to secure more stable electricity prices for the long term. The government will call for evidence in due course on how the market for CPPAs can be developed and improved for industry.
a new ‘Connections Accelerator Service’ which will provide support connecting to the grid for demand projects, including prioritising those that create high-quality jobs and bring the greatest economic value. We will work closely with representatives from the energy sector, local authorities, Welsh and Scottish governments, trade unions, and industry to design this service, which we expect to begin operating at the end of 2025.
new powers, in the Planning and Infrastructure Bill (PIB), which will allow amendments to regulatory processes and accelerate connections for strategically important projects; and launching a new Strategic Sites Accelerator (SSA) and setting up AI Growth Zones (AIGZs) across the UK. The SSAs will enable the government to deploy a range of interventions to bring sites to market faster, such as land remediation, anticipatory grid capacity, transport improvements and fast-tracked planning approval.
establishing AIGZs as dedicated hubs to fast-track artificial intelligence (AI) infrastructure development, support planning approvals, and unlock access to energy.

The rationale for the scheme

Evidence from advanced economies suggests that there is a strong link between high energy prices and reduced economic activity. Over the last 20 years, higher electricity and energy costs have been associated with lower investment^{[footnote 1]}, lower productivity (including lower capacity utilisation)^{[footnote 2]}, lower rates of employment^{[footnote 3]}^{[footnote 4]}, and more firms leaving the market^{[footnote 5]}.

These effects have been pronounced for advanced manufacturing industries and more energy-intensive foundational sectors in their supply chains, which play a crucial role in driving economic growth.

Great Britain has been particularly heavily affected by rising electricity costs. Between 2008 and 2020, electricity prices in the UK rose by approximately 50%^{[footnote 6]}, resulting in an estimated fall in manufacturing investment of between 13% and 26%^{[footnote 7]}.

The same analysis also suggests that increasing electricity costs could account for a reduction of 9% of jobs in pharmaceuticals, and 8% in chemicals, with similar reductions in other manufacturing sectors. Firms frequently cite high electricity costs as one of the largest risks to their business^{[footnote 8]}.

While many countries have faced similar increases in electricity costs in recent years, the UK has seen a sharper rise than other comparable nations. In 2024, the UK’s industrial electricity prices (including taxes) were the highest of all countries in the International Energy Agency data published by the Department for Energy Security and Net Zero (DESNZ), and more than double the EU-14 + UK median for large and very large industrial users^{[footnote 9]}.

We recognise the need for a broader approach to help level the playing field on electricity costs between Great Britain and our competitors, so we can capture major growth and investment opportunities and secure our supply chains. Our most electricity-intensive sectors at risk of carbon leakage already receive support through the British Industry Supercharger, among other schemes.

The international price gap

Retail electricity prices are made up of 3 components:

wholesale price – the costs suppliers incur to purchase electricity from generators
network costs – the costs of maintaining and operating transmission and distribution infrastructure
policy costs – the costs used to fund environmental and social policies, including investment in homegrown low-carbon generation, such as the Renewables Obligation. These costs are levied on electricity suppliers, who typically pass them on to consumers via their electricity bills. This investment is vital to lowering wholesale electricity prices and reducing exposure to international gas price volatility

Great British electricity prices are high due to a combination of structural and policy factors. British wholesale electricity costs are relatively high for a number of reasons including a reliance on natural gas for electricity power generation, periods of higher carbon prices on electricity generation due to the Carbon Price Support and lower levels of interconnection than within mainland Europe.

They are broadly comparable to similar nations (apart from the USA whose domestic gas price is decoupled from world markets because they are self-sufficient in gas), and are expected to fall as the amount of renewable generation increases.

However, British policy costs on industrial electricity are significantly higher than most other major economies. For very large industrial users in the UK they typically are around £61 per MWh or around 27% of the overall electricity bill compared to around £2 per MWh for France and £10 per MWh for Germany^{[footnote 10]}.

Great Britain has historically funded the development of renewables infrastructure via electricity bills rather than taxpayer funding. Britain distributes these costs more evenly between households and industrial users, compared to other countries where household bills bear a larger proportion of the cost^{[footnote 11]}.

The government is committed to addressing high wholesale and network costs through long-term investment in infrastructure and generation capacity. Our plans to deliver clean, homegrown power and accelerate to net zero will reduce the exposure of industry to volatile fossil fuel prices.

However, high electricity prices are an urgent concern for our manufacturing sectors, where there is fierce competition for investment to gain advantage in future growth markets. This means there is a strong case to take action now, and providing exemptions from some policy costs provides an efficient mechanism to reduce costs in the immediate future.

Question 4

Overview of the scheme

Accepted Answer

This scheme has 2 main objectives:

grow the economy: retain and attract investment in manufacturing businesses in frontier industries within IS-8 manufacturing sectors with high growth potential, by bringing their electricity costs more in line with other economies in Europe
protect the basis of our economy: support manufacturing foundational industries that supply important inputs to the IS-8 by addressing high electricity costs, with a view to boosting supply chain resilience

Together, these objectives are designed to ensure that manufacturing businesses with the greatest potential to deliver growth can thrive in a challenging international environment, supporting both immediate economic growth and long-term industrial resilience.

How the exemptions will be implemented

To achieve the objectives, BICS proposes to exempt eligible business activity from the indirect costs of the RO, FIT, and CM schemes.

These costs fund policies to support the development of renewable energy (in the case of the RO and FIT) and protect the security of electricity supply (in the case of the CM). They are levied on electricity suppliers, who typically pass them on to customers via their energy bills. We expect this exemption to reduce costs for eligible businesses by between £35 per MWh and £40 per MWh.

To implement these exemptions, we intend to amend existing secondary legislation establishing the RO, FIT and CM. For the RO, which is devolved in Scotland, the Scottish government will be responsible for making the necessary legislative changes. We will further engage stakeholders in advance of making these legislative changes.

The proposed scheme is due to commence in April 2027, subject to implementing legislation and the completion of subsidy control processes. The scheme will run until 2035, with a review in 2030 to ensure that, as prices evolve, it continues to deliver its aim of supporting the competitiveness of British businesses in critical manufacturing Industrial Strategy sectors through support on their electricity prices, and that it is operating in an efficient and cost-effective way. This review will also consider whether the methodology for identifying businesses in eligible sectors will need to be updated.

Impacts of the scheme

Anticipated impacts of the scheme are outlined and a full impact assessment of the scheme will be published alongside legislation.

Impact on eligible businesses

Eligible businesses will incur a familiarisation and administrative burden in the application process. Through the scheme design and lessons learnt from previous support schemes, the aim will be to minimise these costs.

Impact on other electricity users

By bearing down on costs across the energy system, we expect to deliver BICS and ensure that the scheme is delivered in line with our wider priorities to deliver affordable power for businesses and households. For example, the proposals in DESNZ’s recent consultations on RO and FIT indexation, if implemented, could contribute to that goal.

Impact on suppliers and delivery bodies

There are 64 domestic and non-domestic electricity suppliers in the Great British market with a further 38 suppliers which serve non-domestic consumers only. All licensed suppliers are expected to be in scope for applying BICS exemptions to RO, FIT and CM costs for eligible businesses, and may face familiarisation costs and administrative burdens associated with the change of policy.

Suppliers’ obligations with respect to these policies will be unchanged overall. We will work closely with suppliers to explore the requirements and costs related to system changes and aim to design the scheme in a way that minimises administrative burdens. We will support suppliers to implement the scheme in a robust and cost-effective manner. This will include specific engagement that will run in conjunction with this consultation.

We are conscious that the scheme should not create unnecessary financial risk for suppliers and are interested in views on how best to ensure the scheme does not place additional burdens on supplier cashflow or result in uncertainty of cost recovery. For example, we will pay particular regard to the period of notification to suppliers before commencement of the scheme to assist them with tariff pricing.

We will continue to work closely with existing scheme administration bodies, including Elexon and the Low Carbon Contracts Company, to plan a cost-effective and streamlined delivery pathway for the scheme.

Interaction with other schemes

The British Industry Supercharger (BIS)

Since 1 April 2024, eligible Energy Intensive Industries (EIIs) have benefited from the British Industry Supercharger (BIS): a decisive set of measures to make Britain’s strategic EIIs more competitive and tackle the challenge of carbon leakage. The BIS scheme and BICS are both designed to support British businesses with high electricity costs.

Both schemes exempt eligible businesses from the indirect costs associated with the Renewables Obligation, Feed-in Tariffs, and Capacity Market. However, the BIS scheme also exempts eligible businesses with costs associated with Contracts for Difference and provides compensation for the charges paid for using the Great British electricity grid through the EII Network Charging Compensation (NCC) Scheme.

Some businesses, such as high electricity-intensive firms in the steel and chemicals sectors, may meet the criteria for both the BIS scheme and BICS. These businesses will only be able to apply for 1 of the 2 schemes, as the same exemptions cannot be provided twice.

Businesses already in receipt of, or eligible for, the Supercharger will be ineligible for BICS for the same reason. Businesses which meet the criteria for both schemes are recommended to apply for the BIS, to take advantage of the higher level of support.

While eligibility for both schemes is dependent on an electricity-intensity test, the threshold for this test will differ across both schemes. For BICS, this electricity intensity threshold will be determined following consultation. It will be lower than the BIS scheme (which is set at 7% at the sector level and 20% at the business level), considering the different objectives of the 2 schemes.

Question

What do you expect the impact of the scheme to be on stakeholders in the British energy system (for example businesses, suppliers and delivery partners)? Please provide supporting evidence where possible.

a. Positive
b. Neutral
c. Negative
d. Do not know

Question 5

Eligibility for the British Industrial Competitiveness Scheme (BICS)

Accepted Answer

BICS is aimed at manufacturing businesses in manufacturing frontier industries within IS-8 sectors, and manufacturing foundational industries in their supply chains, which meet a certain threshold of electricity intensity.

This means that, to be eligible, a business must:

operate in one of the manufacturing frontier industries within an IS-8 sector, or in a manufacturing foundational industry which provides important inputs to the frontier industries
carry out manufacturing activities
meet the required level of electricity intensity

Figure 1: illustration of the steps to determine eligibility

The following section sets out the rationale for including each of these tests and outlines how they will be administered.

Criterion 1: eligible businesses must operate in a manufacturing frontier industry within an IS-8 sector, or in a manufacturing foundational industry providing important inputs to the frontier industries

Why we are targeting these businesses

Support is being targeted to specific sectors which we have identified as having the greatest potential to achieve our policy objectives: namely, growing the economy by retaining and attracting investment in high-potential industries, and enabling production of the inputs required by those industries.

The IS-8 are the sectors identified by the Industrial Strategy as having the highest potential to drive growth across the whole economy. Within those sectors, the frontier industries are the subsectors at the cutting edge, where there are major opportunities to be captured if the UK can attract the necessary investment and build competitiveness.

Supporting the foundational industries is necessary to ensure frontier industries have ready access to important components. These sectors provide important inputs for the IS-8 sectors, meaning they play a significant role in underpinning broader growth opportunities. Foundational industries are heavily impacted by high electricity prices and are natural targets for BICS support.

How this test will be administered

We need a system which will enable business to clearly identify whether they are in scope and that can be reflected in legislation. Businesses applying for BICS will need to provide verifiable evidence that they manufacture products included in eligible manufacturing frontier or manufacturing foundational Industrial Strategy industries.

Manufacturing frontier industries

Our proposal is that to receive BICS support businesses in manufacturing frontier industries must be within eligible Standard Industrial Classification (SIC) codes and produce eligible ‘Harmonised System’(HS) products mapped to a SIC code in that frontier industry.

The Industrial Strategy published a list of SIC codes to define the frontier industries in the June 2025 white paper. These covered both services and manufacturing aspects of those sectors, which meant that SIC definitions were not feasible in some instances (for example, Clean Energy Industries, where service activities are spread across a wide range of codes).

However, BICS focuses on manufacturing activities, where SIC mapping is more feasible, although still challenging in more nascent sectors such as Clean Energy Industries and Digital and Technologies. DBT has produced more granular SIC mappings for manufacturing frontier industries for the purposes of delivering BICS. These are included in Annex A. Note that sectors listed in Annex A will not automatically be eligible for the scheme.

SIC mappings alone may not be sufficiently nuanced to identify eligible businesses. SIC mappings may capture businesses that manufacture products which are not primarily used in frontier industries. Similarly, companies may be producing frontier industry products, but these are only part of their production and/or they report under a different SIC.

This scheme will therefore use HS codes alongside SIC codes. The Harmonised System provides a list of codes for goods, which can be mapped to SIC codes using open-source methods. SIC codes are capped at the 4-digit level to correspond to NACE (Nomenclature statistique des activités économiques dans la communauté européenne) and CPA (Classification of Products by Activity) rev 2.1^{[footnote 12]}.

Using correspondence tables^{[footnote 13]}, these codes can then be attributed to the relevant HS6 code. The list of SIC codes are in the Annex A and HS codes^{[footnote 14]} in the proposed scope for BICS are included in the excel document accompanying this consultation (Annex B).

Our proposal is that to receive BICS support businesses in manufacturing frontier industries must be within eligible SICs and produce eligible HS products mapped to a SIC code in that frontier industry. This will allow government to objectively define who is operating in a frontier industry and producing associated goods.

However, we welcome feedback where businesses consider themselves to be clearly within the narrative^{[footnote 15]} definition of a frontier industry but are not captured by the proposed SIC and HS codes.

We will review the feedback and consider if the BICS list of SIC or HS codes need to be adapted. We are also considering if there are alternative approaches to scheme eligibility to better capture industries where SIC/HS code mapping is challenging and ensure consistency with other Industrial Strategy initiatives.

For example, we recognise that manufacturing frontier and manufacturing foundational industries can include a number of activities that support the circular economy within their specific industries. We welcome feedback where businesses engaged in this type of activity consider themselves within a narrative definition of an eligible manufacturing frontier industry or manufacturing foundational industry but may not be captured by the proposed SIC and HS codes.

This list of eligible SIC-4 industries and HS commodities will be made public before applications for the scheme open.

Note: HS codes are predominantly used by businesses and government to classify imports and exports of goods. They are being considered for use in the BICS methodology because they are a useful proxy for manufacturing activity. However, we recognise that they may be unfamiliar to businesses who are not engaged in international trade.

The application process for BICS will signpost applicants to the HS code look-up tool, which provides a simple way to identify the correct codes for the products they manufacture. There will be no requirement for a business to be an importer or exporter to access support under BICS.

Manufacturing foundational industries which supply the frontier industries

Our proposal is that to receive BICS support businesses in manufacturing foundational industries must be within eligible SIC codes.

The Industrial Strategy white paper and Technical Annex provides information on how foundational industries are identified and treated. See Annex A for the SIC codes identified in the initial analysis and published in the June 2025 Industrial Strategy.

As outlined in the Industrial Strategy Technical Annex, we will work with government’s new Supply Chain Centre to analyse and refine the list of important inputs into frontier industries. This will inform the creation of a more refined list of SIC-4 sectors within manufacturing foundational industries which provide important inputs to the frontier industries. The codes in Table 3 of Annex A are indicative and not guaranteed to be eligible for BICS.

This list of eligible SIC-4 industries will be made public before applications for the scheme open, alongside any further relevant information about eligibility.

As BICS provides support on manufactured products rather than services, service foundational industries are excluded. However, the manufactured products used by those service industries may fall in scope, for example the manufacture of electric cables, or the production of building materials, dependent upon the insights from the Supply Chain Centre analysis.

Note: The new Supply Chain Centre, based in DBT, will lead the government’s work, in tandem with business, to build resilience of the supply chains critical to the UK’s security and prosperity. The new Supply Chain Centre will review inputs required for our growth industries and national security, consider the impact of future trends on demand, and determine what action may be required to build resilience.

Criterion 2: eligible businesses must be manufacturers

Why we are targeting these businesses

As set out in the previous section on the rationale for the scheme, there is substantial evidence linking high electricity costs with decreasing investment and growth in manufacturing industries, leading to increased firm exits and job losses over the past 2 decades. Responses to the Industrial Strategy consultation also showed that there was a clear demand for intervention on electricity costs in manufacturing sectors.

How this test will be administered

This scheme will filter for manufacturing activity at both the sectoral and business level. Only manufacturing frontier industries within the IS-8 manufacturing sectors and manufacturing foundational industries will be in scope for support.

We intend to identify manufacturers within these sectors using a combination of SIC and HS code information submitted by applicants, in line with the methodology outlined in this document.

Criterion 3: eligible businesses must meet the required level of electricity intensity

Why we are targeting these businesses

The purpose of introducing an electricity intensity threshold is to increase efficiency of the scheme by targeting support to sectors and businesses which will be more responsive to electricity price changes. This ensures the support will make a meaningful difference to growth and investment.

How this test will be administered

This test can be applied at the sector and/or business level. We are considering which is the most appropriate combination of tests to administer.

The sector-level electricity intensity test. Sectoral electricity intensity will be calculated by DBT using the most recent Annual Business Survey and Annual Purchasing Survey Data available.

The intensity will be calculated as the electricity consumption as a proportion of measures of economic activity such as total expenditures or gross value added (GVA). Details of the threshold for the electricity intensity test, and a list of sectors which pass the test (and are therefore eligible for support), would then be provided to businesses.

The business-level electricity intensity test. Under this approach, applicants would be required to provide evidence of their business’s level of electricity intensity and would only be eligible if this figure exceeds the threshold defined by DBT. This threshold would be determined based on comprehensive modelling of a business level test’s impact, and details would be shared before applications open.

There are also multiple possible ways to measure electricity intensity.

We have identified 2 options for consideration:

option 1: electricity intensity could be calculated as (total electricity expenditure/Gross Value Added). This is the measure of electricity intensity used by several other electricity price support schemes, such as the British Industrial Supercharger
option 2: electricity intensity could be calculated as (total electricity expenditure/total expenditure). This measure focuses on the importance of electricity costs in the cost base

Pro-rating exemptions

It is likely that many businesses will produce a mixture of both eligible and ineligible products. To accommodate this, we are consulting on the option to administer exemptions on a pro-rated basis. The options in scope are presented for consultation.

Option 1: exemptions are pro-rated

Under the pro-rating approach, applicants would need to provide verifiable evidence of the percentage of their output comprised of eligible products. Rather than receiving a 100% exemption from the relevant levy costs, they would receive a proportional exemption.

For consultation, we are proposing 2 different options as to how this could be calculated:

option 1a: pro-rating based on proportion of revenue generated by eligible products
option 1b: pro-rating based on proportion of electricity usage used in the manufacture of eligible products

Example A illustrates how each of these approaches could work in practice.

Example A: pro-rating based on revenue

A business produces 2 products, Product A and Product B. Product A accounts for 65% of the firm’s revenue, and Product B accounts for 35%.

The HS code for Product A is included in the eligible list, while the HS code for Product B is not. The business would therefore be eligible for an exemption from 65% of the costs of the Renewables Obligation, Feed-in Tariffs, and Capacity Market schemes, provided it meets the other eligibility criteria.

Example B: pro-rating based on energy usage

A business operates 2 sites, Site A and Site B. 100% of the energy used at Site A contributes to the manufacture of eligible products, while Site B manufactures no eligible products and therefore 0% of the energy used is eligible.

The business would be eligible for an exemption in proportion to the electricity used to produce eligible products. This means it would receive an exemption from Renewables Obligation, Feed-In Tariffs, and Capacity Market costs for all of the electricity used at Site A, but not for the electricity used at Site B.

Pro-rating would allow the scheme to target eligible activities more precisely. Eligibility would not be restricted only to businesses whose primary product(s) are eligible. Any firm which produces a relevant product, even if it is a smaller part of their overall business, may be able to receive support, provided they meet the other eligibility criteria.

However, many beneficiaries would receive a lower value of exemption under this approach when compared to the option without pro-rating. Only businesses which exclusively manufacture products within Industrial Strategy sectors would be eligible for a full exemption from the relevant levy costs; all other eligible businesses would receive partial exemptions.

In addition, this approach is likely to be more complex for government, applicants and energy suppliers to administer. Applicants would need to provide details of how their output breaks down between eligible and ineligible products, in a form that can be verified by scheme administrators. Suppliers may require more complex processes to administer partial exemptions to the levies, as opposed to full exemptions.

Option 2: exemptions are not pro-rated

Under the non-pro-rating approach, all businesses which meet the eligibility criteria would be exempt from 100% of the relevant levy costs. For businesses producing both eligible and ineligible products, there would be an additional test to determine if they, as a whole, operate in an Industrial Strategy sector.

This may include a minimum requirement for proportion of eligible activity. This consultation includes a question on the most suitable way to approach eligible businesses in these circumstances.

An approach that does not include pro-rating is likely to result in a narrower cohort of eligible businesses, with a greater benefit for businesses which meet the criteria. However, this approach carries a risk of potential distortive effects in sectors outside the scope of the Industrial Strategy. Businesses which predominantly produce eligible products, but have some output in ineligible sectors, may be able to pass their cost savings through to the non-eligible portion of their business, in a way which gives them an advantage over other businesses in those sectors who are not eligible for support.

Scheme cost control

It is vital that we have robust measures in place to manage the ongoing costs of BICS and that costs do not exceed the savings – as made clear in the government’s Modern Industrial Strategy – that will be realised by bearing down on levies and other costs in the energy system. The primary method of controlling costs will be through applying the eligibility criteria as outlined – specifically exercising discretion on the level of the sector and/or business-level electricity intensity test.

We welcome feedback on the merits of additional measures, for example, modest year-on-year adjustments to the overall level of exemption available to eligible businesses, to control the cost of BICS alongside the level of sector- and/or business-level electricity intensity test. We welcome views on how such measures may impact business and investment decisions and suppliers when administering the proposed exemptions.

Future scheme conditionality or flexibility

Ensuring businesses have a sustainable way of managing their energy costs in the long term is integral to delivering the growth this government seeks to achieve. This can be supported through the uptake of baseline energy flexibility and efficiency technologies in these sectors as they grow, allowing the system benefits and business savings to naturally grow with them.

For industrial energy users specifically, businesses of all sizes may be able to save by using electricity flexibly. These electricity optimisation processes can increasingly be automated within defined ranges, such as by setting a defined temperature zone on a freezer system, so that business processes are unaffected.

On a system level, integrating energy flexibility and efficiency will help to shorten network connection times for businesses generally and reduce energy demand peaks that require reinforcement work at both transmission and distribution level. Ultimately, this lowers electricity system costs and bills for all consumers, which is central to this government’s Clean Energy Superpower and growth missions

A critical barrier that currently prevents industrial participation in flexibility services is outdated building management systems. This can pertain to a lack of adequate and appropriate metering technology, or to a lack of smart systems preventing flexibility from being automated. Consequently, the journey for many businesses in becoming ‘flexibility ready’ and enabling participation can vary.

We welcome views on whether you agree with the principle of linking flexibility readiness to participation in the scheme or differentiated benefits, and this being considered at the 2030 review point. We also want to identify the opportunities and challenges this might present, including potential benefits for the system and businesses, impact on business and investor confidence and any technical, financial or operational implications.

Questions

2․ Does your business carry out activities and/or manufacture products within the manufacturing frontier industries in IS-8 sectors and/or foundational manufacturing industries listed in Annex A? If yes, please specify which industry and whether your activities include the manufacture of goods within that industry.

3․ If your SIC-4 was not captured in a manufacturing frontier or foundational industry (as set out in Annex A), and you believe you should be considered as a part of this, then please submit:

a. Your Companies House number
b. The manufacturing frontier industry or manufacturing foundational industry you are in
c. The SIC-4 code under which your business is registered in Companies House data
d. Relevant HS6 codes for products you manufacture

4․ Do you agree with the proposal to use SIC and HS codes to identify products and manufacturing activities within eligible IS industries? Please provide reasons for your response.

a. Agree
b. Disagree
c. Neither agree nor disagree
d. Do not know

5․ Are you aware of other approaches which would be more suitable for identifying manufacturing activity in Industrial Strategy sectors, particularly in emerging technologies? Please provide details.

a. Yes
b. No
c. Do not know

6․ If an electricity intensity test is applied at the business level, which definition of electricity intensity is more suitable for BICS? Please provide reasons for your response.

a. Electricity expenditure as a portion of total expenditure
b. Electricity expenditure as a portion of gross value added
c. Other (Please specify)
d. Do not know

7․ Do you agree with the proposal to pro-rate exemptions based on the proportion of firm activity which relates to eligible industries? Please provide reasons for your response.

a. Agree
b. Disagree
c. Neither agree nor disagree
d. Do not know

8․ Which approach to pro-rating exemptions is more appropriate? Please provide reasons for your response.

a. Using the proportion of revenue generated by eligible products
b. Using the proportion of energy used in the manufacture of eligible products
c. Other (Please specify)
d. Do not know

9․ If exemptions are not to be pro-rated, what would be the most suitable way to account for businesses producing both eligible and ineligible products (such as introducing a minimum threshold for eligible activity)?

10․ Do you think the scheme should include additional ongoing cost controls (alongside the level of the sector- and/or business-level electricity intensity test)? Please provide reasons for your response.

a. Yes
b. No
c. Do not know

11․ What do you expect the impact of additional ongoing cost control measures to be? In your response, it would be helpful to consider their effectiveness in managing potential scheme cost impacts on non-eligible businesses and other electricity users, as well as impact on business/investor confidence and any financial or operational implications for businesses or suppliers.

12․ Do you agree that the principle of linking eligibility for the scheme or level of exemption to investments in energy efficiency improvements or ‘Flexibility Ready’ smart system retrofits should be considered as part of the 2030 scheme review? Please provide reasons for your response, specifying whether you are referring to energy efficiency or flexibility and the opportunities and/or challenges we would need to consider.

These may include potential benefits this could deliver for the system and/or businesses, impact on business/investor confidence and any technical, financial or operational implications

a. Agree
b. Disagree
c. Neither agree nor disagree
d. Do not know

Application process and evidence requirements

We aim to create a simple and accessible application process for businesses to apply for the scheme, prove eligibility and subsequently manage their exemption (for example, by adding new electricity meters, changing business details and applying for periodic renewals of their exemption certificate). We are looking to identify the simplest possible process for applying, which is robust against fraud, but not excessively burdensome for applicants.

Under current proposals, businesses will be required to provide evidence to demonstrate eligibility for BICS.

This evidence could include:

company name
company registration number
eligible SIC code(s) matching Companies House records
eligible HS code(s)
energy supplier
relevant Meter Point Administration Number(s)
evidence of the percentage of firm revenue generated by eligible activities

We will put in place a robust verification system to validate the submitted information and prevent fraudulent claims for support. If the application is approved, the company would be granted an exemption certificate containing all of the required evidence (including the exemption percentage proportionate to eligible activity), which will be provided to energy suppliers to deliver exemptions onto businesses’ electricity bills. Where reasonable, an appeals process will be available for businesses who believe they are eligible but have not been granted an exemption certificate following verification.

We will work closely with suppliers to explore requirements and costs related to system changes and support them to implement the scheme in a robust and cost-effective manner. This will include through specific engagement that will run in conjunction with this consultation.

Questions

13․ Businesses could be required to evidence the proportion of activity, or manufactured outputs, that relate to eligible SIC and HS codes within the Industrial Strategy frontier industries and foundational industries. What evidence would be easiest for your business to produce to show the proportion of its output which relates to eligible activities?

14․ Are you aware of any barriers (for example, organisational structure or accounting arrangements) which would make proving eligibility for an exemption challenging at a meter level? Please provide reasons for your response.

a. Yes
b. No
c. Do not know

15․ Following an exemption certificate being granted to an eligible business, how would a supplier implement the exemptions?

16․ What information would a supplier require to implement exemptions onto eligible businesses’ electricity bills in a cost-effective manner? When would this information be required by? Please include any concerns or risks related to this.

Question 6

Summary of questions

Accepted Answer

1․ What do you expect the impact of the scheme to be on stakeholders in the British energy system (for example businesses, suppliers and delivery partners)? Please provide supporting evidence where possible.

a. Positive
b. Neutral
c. Negative
d. Do not know

2․ Does your business carry out activities and/or manufacture products within the manufacturing frontier industries in IS-8 sectors and/or foundational manufacturing industries listed in Annex A? If yes, please specify which industry and whether your activities include the manufacture of goods within that industry.

3․ If your SIC-4 was not captured in a manufacturing frontier or foundational industry (as set out in Annex A), and you believe you should be considered as a part of this, then please submit:

a. Your Companies House number
b. The manufacturing frontier industry or manufacturing foundational industry you are in
c. The SIC-4 code under which your business is registered in Companies House data
d. Relevant HS6 codes for products you manufacture

4․ Do you agree with the proposal to use SIC and HS codes to identify products and manufacturing activities within eligible Industrial Strategy industries? Please provide reasons for your response.