In the race towards a net-zero future, the UK has implemented ambitious renewable energy policies to decarbonise its economy. However, these policies often come with increased energy costs, disproportionately affecting energy-intensive industries (EIIs) such as steel, chemicals, glass, and cement manufacturing. To mitigate this impact and maintain global competitiveness, the UK government introduced the Energy Intensive Industries (EII) Exemption Scheme, a strategic initiative offering substantial relief on renewable energy levies.
What is the EII Exemption Scheme?
Launched in 2017, the EII Exemption Scheme provides eligible businesses with significant discounts on the indirect costs associated with funding renewable energy initiatives. These costs stem from schemes like Contracts for Difference (CfD), the Renewables Obligation (RO), and Feed-in Tariffs (FIT), which are typically passed down to consumers through energy bills.
As of April 1, 2024, the exemption rate increased from 85% to 100%, allowing qualifying companies to avoid these levies entirely. This move aims to prevent “carbon leakage,” where businesses might relocate operations to countries with less stringent environmental policies due to high domestic energy costs.
Who Qualifies for the EII Exemption?
To be eligible for the EII Exemption Scheme, businesses must meet specific criteria:
- Sector Level Test: The company must operate within an eligible energy-intensive sector, identified by specific 4-digit NACE codes. These sectors include manufacturing industries such as steel, paper, chemicals, cement, and glass production.
- Business Level Test: The business must demonstrate that electricity costs constitute at least 20% of its Gross Value Added (GVA), indicating a significant energy expenditure relative to its economic output.
- Operational Criteria: Applicants must not be classified as an “Ailing or Insolvent Economic Actor” (AIEA) and should have at least two quarters of financial data. They must also provide evidence of the proportion of electricity used in manufacturing over a minimum period of three months.
Notably, recent amendments have made the scheme more accessible. New businesses can now apply with just one quarter of trading data, and applicants can exclude data from 2020 and 2021 to account for anomalies caused by the COVID-19 pandemic.
How Much Can Businesses Save?
The financial benefits of the EII Exemption Scheme are substantial. By eliminating up to 100% of certain renewable energy levies, businesses can achieve significant cost savings. For instance, the exemption can reduce energy costs by approximately £30 per megawatt-hour, translating to hundreds of thousands of pounds in annual savings for large energy consumers. These funds can be reinvested into operations, sustainability initiatives, or workforce development.
Additional Support: Network Charging Compensation
Starting April 1, 2025, eligible EIIs will also benefit from a 60% exemption on electricity network charges, including:
- Distribution Use of System (DUoS)
- Transmission Network Use of System (TNUoS)
- Balancing Services Use of System (BSUoS)
This relief is part of the broader “British Industry Supercharger” package, designed to align UK industrial energy prices more closely with those in Europe. To qualify, businesses must provide quarterly evidence of their contributions to these charges from the previous year.
Application Process
Eligible businesses must apply for the EII Exemption Scheme through the Department for Business & Industrial Strategy (BEIS). Upon approval, they receive an EII certificate, which should be forwarded to their electricity supplier to activate the exemption. Certificates are valid for one year, and businesses must reapply annually to maintain their exempt status.
Strategic Importance
The EII Exemption Scheme plays a crucial role in balancing the UK’s environmental objectives with economic competitiveness. By alleviating the financial burden of renewable energy levies on energy-intensive industries, the scheme helps retain industrial capacity within the UK, supports job preservation, and encourages investment in energy efficiency and sustainability measures.
📞 Need Assistance?
Navigating the complexities of the EII Exemption Scheme can be challenging. We assist businesses with eligibility assessments, data gathering, and application submissions to maximise savings and optimise energy procurement strategies.