Government provides more detail on proposals unveiled in yesterday’s Energy Security Strategy on how it will support businesses facing record electricity bills

The government has announced plans to extend its support scheme for energy-intensive businesses facing soaring bills amid the international gas price crisis, arguing the funding will ensure the UK remains an attractive location for heavy industry.

The Energy Security Strategy, published yesterday, confirmed the government would extend the Energy Intensive Industries Compensation Scheme by three years, while also increasing the level of support to eligible businesses.

The scheme, introduced in 2013, provides relief to firms in certain energy-intensive sectors, including mining, paper, steel, cement, chemicals, and electronics and battery production, that can prove their electricity costs amount to more than 20 per cent of Gross Value Added over a reference period.

The payment currently covers the costs eligible businesses face from the UK emissions trading scheme (ETS) and carbon price support mechanism, but the government has this week indicated it is considering expanding the scheme to also cover renewable levies that are added on to energy bills.

Today, the Department of Business, Energy and Industrial Strategy (BEIS) confirmed the budget for the support scheme would be doubled under the plans set out in the Energy Security Strategy, announcing that full details would be published “in due course”. “The government recognises that UK industrial electricity prices are higher than those of other countries and today’s commitment will address this,” the department noted.

Business Secretary Kwasi Kwarteng acknowledged the risk that rising energy prices posed to UK’s heavy industries. “The UK is proudly home to a competitive manufacturing sector that supports well-paid jobs and drives economic growth,” he said. “However, we know that high global energy prices are a concern for our most energy intensive sectors.

“To ensure our energy intensive industries remain competitive on the global stage, we are extending and increasing the budget of our Energy Intensive Industries Compensation Scheme. This package will ensure much needed relief for electricity costs remains in place to help protect British industry from volatile global gas markets.”

Gareth Stace, director general at the UK Steel trade body, welcomed the government’s plans to boost the scheme, noting that it would help UK steelmakers compete in the European market.

“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 provides a much-needed reduction in electricity costs,” he said. “This increase in compensation is something that has been a key priority for the steel sector; and is a key step to tackling the industrial electricity prices that hold the UK steel sector back from competing with our European counterparts.”

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