Energy intensive businesses will get help to offset the cost of energy policy on their electricity bills under plans published today by Business and Energy Minister Michael Fallon.
Proposals to exempt the most electricity intensive industries from a proportion of the costs of Contracts for Difference will be subject to consultation. The move will “level the playing field” so that British businesses are not made uncompetitive due to the costs of this policy.
Contracts for Difference have been introduced to support investment in low carbon electricity generation. They are a significant element of Electricity Market Reform (EMR) and aim to stimulate investment by providing a stable long-term price for low carbon electricity.
Business and Energy Minister Michael Fallon said:
As we reform the market to attract new investment into our energy infrastructure, it is vital that we do not undermine the competitiveness of UK industry.
Energy intensive manufacturing is central to strengthening our industrial base and rebalancing our economy. These industries are significant employers and play an important role in the low carbon economy through the products they manufacture.
The exemption from the costs of Contracts for Difference is part of a government package to support the most electricity intensive industries. This consultation sets out what the exemption might look like, and seeks views on eligibility criteria.
The recommended option is to use the same eligibility criteria as the EU Emissions Trading System and Carbon Price Support indirect costs compensation. This would exempt industries with a total combined value to the UK of approximately £50 billion in turnover, employing 150,000 people.
Industry and other interested parties are encouraged to comment on the proposals.
Notes to editors
Contracts for Difference will provide an incentive for developers to build low carbon electricity generation. They do this by providing a stable price for the electricity generated – a ‘strike price’. If the market price (i.e. the reference price) is lower than this strike price, the generator will receive a payment for the difference. Similarly, if the market rate is higher than the strike price, the generator will pay the difference.
Contracts for Difference will not be available to Northern Irish projects before 2016, at the earliest. This consultation will therefore only apply to Great Britain.
The consultation Electricity Market Reform: Eligibility for an exemption from the costs of Contracts for Difference closes on 30 August 2013. It is available online at https://www.gov.uk/government/consultations/electricity-market-reform-contracts-for-difference-costs-exemption-eligibility
The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’, published at Budget 2011:
- to create the most competitive tax system in the G20
- to make the UK the best place in Europe to start, finance and grow a business
- to encourage investment and exports as a route to a more balanced economy
- to create a more educated workforce that is the most flexible in Europe.
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.