What is Energy Intensive Industries (EII) Relief?

The UK government introduced Energy Intensive Industries (EII) relief in 2016 to support businesses with high energy demands in their manufacturing processes. Energy intensive industries pay significantly more due to the costs associated with carbon pricing and emissions trading schemes. This was later replaced by the EII exemption scheme, implemented between autumn 2017 and spring 2018. The shift aimed to provide greater long-term stability and certainty, ensuring energy-intensive businesses benefit from higher cost savings and a more predictable financial outlook. This scheme helps industries facing significant competitive disadvantages due to the costs of funding renewable and low-carbon policies.

Eligible businesses can receive exemptions from the indirect costs of renewable policies, with up to 85% off charges for Contracts for Difference (CFD), Renewable Obligation (RO), and Feed-in Tariff (FiT).

Is Your Business Eligible for EII Relief?

To qualify for an EII certificate and benefit from cost exemptions, businesses must meet five key criteria:

1. Sector Level Test – The business must manufacture a product in the UK within an eligible sector.
2. Business Level Test – The business must pass a 20% electricity intensity test.
3. Financial Stability – The business must not be classified as an Ailing or Insolvent Economic Actor.
4. Financial Data – At least two quarters of financial data must be available.
5. Energy Consumption Evidence – The business must provide proof of electricity consumption for the last three months, specifically for manufacturing purposes.

If your business meets these criteria, you could significantly reduce your energy costs through the EII relief scheme. The EII relief is part of a broader compensation scheme designed to alleviate the financial burdens on energy-intensive businesses.

Why Was the EII Exemption Scheme Introduced?

To achieve its net zero emissions target by 2050, the UK government has implemented various policies to support the transition to renewable and low-carbon energy sources. While these initiatives have driven impressive growth—renewables accounted for 47% of the UK’s electricity generation in early 2020—they also come with added costs.

The funding for these renewable energy projects is initially covered by energy suppliers but is ultimately passed down to consumers, including businesses, through higher energy bills. For energy-intensive industries, these rising costs create a competitive disadvantage, particularly against EU businesses with lower energy expenses. Without such support, these businesses would face a significant competitive disadvantage in international markets.

The EII exemption scheme was introduced to address this issue, helping energy-intensive businesses stay competitive by reducing their share of the indirect costs associated with funding renewable energy policies. This ensures the UK can continue to support sustainability efforts without undermining the global competitiveness of key industries.

Benefits of the EII Exemption Scheme

The EII Exemption Scheme offers several benefits to energy-intensive businesses, including:

• Reduced Energy Costs: By exempting eligible businesses from the indirect costs associated with renewable policies, the EII Exemption Scheme helps reduce energy costs, allowing energy-intensive businesses to allocate resources more efficiently and improve their competitiveness.
• Increased Financial Stability: The scheme provides a stable and predictable energy cost environment, enabling businesses to better manage their finances and make informed long-term investment decisions.
• Improved Competitiveness: By lowering energy costs, the EII Exemption Scheme helps energy-intensive businesses compete more effectively with foreign companies that benefit from lower energy costs, thus leveling the playing field.
• Support for Energy-Intensive Industries: Designed specifically for industries with high energy production costs, the scheme ensures that these sectors remain competitive in the global market, safeguarding jobs and economic contributions.

How to resolve energy switch objections

Find out why the switch was objected to. Your current supplier is required to tell you the reason for the objection. The most common reasons are debt on the account or fixed-term contracts that have not yet ended. You should firstly take action, for example if the switch was objected to because of debt on the account, then clear any unpaid balances. Once you have taken action, inform your supplier of the action taken and ask them to remove the objection. 

Suppliers must only give valid reasons for the objection. These are outlined in their supply licence. Suppliers are also obligated to tell you the reason for the objection and to tell you how to resolve it. If you think you have received an unfair objection, you should file a complaint with your supplier’s complaint team. If you have tried this and the issue is still unresolved, you should contact the energy ombudsman.

How to Apply for the EII Exemption Scheme

To apply for the EII Exemption Scheme, businesses must meet the eligibility criteria and follow a structured application process. Here are the steps to apply:

1. Check Eligibility: Ensure your business meets the sector level test and business level test to qualify for the scheme.
2. Gather Required Documents: Collect necessary financial data, including electricity costs and Gross Value Added (GVA), to support your application.
3. Submit Application: Submit your application to the relevant authority, along with all required documents.
4. Receive Exemption Certificate: If your application is successful, you will receive an exemption certificate, which must be passed on to your electricity supplier to apply the exemption to your energy bills

EII Exemption Certificate

The EII Exemption Certificate is a crucial document that confirms a business’s eligibility for the EII Exemption Scheme. Typically valid for a specific period, the certificate must be renewed periodically to maintain the exemption. The certificate includes the following information:

• Business Name and Address: Identifying details of the eligible business.
• Exemption Period: The duration for which the exemption is valid.
• Eligible Electricity Consumption: The amount of electricity consumption that qualifies for the exemption.
• Exemption Amount: The percentage of exemption granted.

Once received, the EII Exemption Certificate must be passed on to the electricity supplier, who will then apply the exemption to the business’s energy bills. This certificate is essential for ensuring that the business receives the correct exemption amount, ultimately helping to lower energy costs and support financial stability.

How Has COVID-19 Affected the EII Exemption Scheme and Electricity Costs?

The COVID-19 pandemic created significant uncertainty across the UK economy, with the energy sector experiencing a sharp decline in consumption during the first half of 2020. This led to lower electricity prices, which in turn made it more challenging to assess a business’s energy intensityand financial standing.

Energy intensive industries (EIIs) faced unique challenges during the pandemic, with fluctuating energy demands and financial instability.

To address this issue, the government has chosen to exclude the period from 31 December 2019 to 30 June 2020 when determining whether a business is considered “in financial difficulty” for EII exemption purposes. This adjustment ensures that temporary disruptions caused by the pandemic do not unfairly impact eligibility assessments.

What Other Support Is Available?

As of April 2024, the EII Renewable Levy Exemptionhas increased from 85% to 100%, affecting the following Third-Party Charges (TPCs): Renewables Obligation, Contracts for Difference, and Small-Scale Feed-in Tariff. The transition from the Energy Bill Relief Scheme to the Energy Bill Discount Scheme provides ongoing support for managing energy bills.

Additionally, new legislation has introduced a full indirect exemption from costs associated with the Capacity Market, aligning with the Capacity Market Delivery Year (October to September). The EII compensation scheme aims to mitigate increased costs for energy-intensive industries, ensuring their competitiveness in a global market.

At Royal Gas and Power, we’re committed to being a trusted energy and decarbonisation partner. We help our EII customers understand the eligibility process and navigate the steps required to access available exemptions and compensation.

Want to learn more? Get I n touch with our team today.