steel furnace

UK to subsidise electricity costs for high energy firms

Image credit: DT

The government has said it will support high-energy usage businesses, such as steel and paper manufacturers, with their electricity costs to help them continue operating while oil and gas prices soar.

The Energy Intensive Industries (EII) compensation scheme began rolling out in 2017 as a way to keep high-energy businesses in the UK competitive while the economy transitions to net zero.

The scheme will now be extended for a further three years and have its budget more than doubled following months of rising energy prices. The Department for Business, Energy & Industrial Strategy said it could also encourage greater electrification in some businesses which will ultimately be needed to meet net zero goals. Today’s announcement will see the scheme’s budget expanded by more than £2bn.

Industry minister Lee Rowley said: “We want to keep the UK at the forefront of manufacturing, helping our energy-intensive industries remain competitive and sustainable for the long term, and continuing to power our economy with thousands of jobs across the country.

“We are not only extending our support through the compensation scheme, by offering a greater level of compensation to eligible firms, we are delivering more relief from electricity costs for these industries.”

The scheme provides businesses with relief for the costs of the UK Emissions Trading Scheme (ETS) and Carbon Price Support mechanism in their electricity bills, recognising that UK industrial electricity prices are higher than those of other countries.

The scheme will now also provide support for companies that manufacture batteries for electric vehicles in order to support the UK’s shift to greener technologies.

Investment minister Lord Grimstone said: “For the first time, we are including battery manufacturers in our electricity bill compensation scheme for energy-intensive industries to help keep the UK at the forefront of this growing industry.

“By doing so, we are ensuring the UK continues to attract investment across the country, supporting jobs and building the batteries that will power our automotive industry for decades to come.”

The government said it would also consider further measures to support business including increasing the renewable obligation exemption to 100 per cent.

Gareth Stace, director general of UK Steel, said: “The three-year extension of the EII compensation scheme and the increase in the level of relief provided by it delivers on a long-standing industry ask and gives the UK steel sector a much-needed reduction in electricity costs.

“This increase in compensation is a key priority for the steel sector and is a much-needed step to tackling the industrial electricity prices that hold the UK steel sector back from competing with our European counterparts.”

In March, the US announced that it would partially lift tariffs on steel imported from the UK in a boost to the domestic sector.

However, a recent study warned that UK manufacturers may struggle to move away from traditionally fossil-fuel led production processes.

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