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British Industry Supercharger gives huge boost to UK businesses

Measures will cut network charges and provide exemptions from electricity costs for firms in sectors like steel, metals and chemicals.

Around 370 businesses employing 400,000 skilled workers around the country are set to benefit from lower costs as a result of the rollout of the British Industry Supercharger today (1 April 2024).

The Supercharger, first announced and consulted on by government last year, includes a series of targeted measures to bring energy costs for key industries in line with other major economies, levelling the playing field for UK businesses.

The support will be made available to sectors particularly exposed to the high cost of electricity including steel, metals, chemicals, cement, glass and paper, and is expected to be worth between £320 million – £410 million in total savings to UK businesses next year.

The Supercharger’s measures will fully exempt eligible firms from certain costs linked to renewable energy policies, including the small-scale Feed in Tariff, Contracts for Difference and the Renewables Obligation, as well as GB Capacity Market costs.

There will also be a 60% reduction in network charges – the costs industrial users pay for their electricity supply.

Taken together, this support is expected to be worth around £24 to £31 per Megawatt Hour (1,000 kilowatts of electricity generated per hour) to industry on average, with the most electricity-intensive industries such as steel benefiting the most.

This is the average estimated saving and will mean a British energy-intensive business ends up paying about the same in electricity costs as its competitors in countries in the EU.

Trade Secretary Kemi Badenoch said:

This government is backing British industry, and with this unprecedented energy support we’re levelling the playing field for hundreds of businesses in steel, chemicals and other key sectors.

Energy-intensive industries are vital to our economy. The announcement today will ensure that the UK remains an attractive investment destination and support thousands of high-skilled jobs across the country.

Putting energy-intensive industries on an equal footing with the world’s other major economies is crucial to helping these businesses remain internationally competitive.

It will also enhance the UK’s appeal as a target for international investment as well as remove barriers on the road to greener technology and a sustainable net zero future.

This builds on the Energy Security Strategy, published in 2022, which committed government to taking action to address the UK’s industrial electricity prices, which are higher than those of other comparable countries.

It will also form a key part of the government’s wider plans to seize on the potential of new green industries like electric vehicle battery manufacturing, where the UK is already a pioneer.

The entry into force of the Supercharger has been welcomed from across UK industry:

UK Steel Director General, Gareth Stace, said:

UK Steel welcomes the introduction of the British Industrial Supercharger. Uncompetitive electricity prices have for years been a millstone around the steel sector’s neck, hindering its progress and ability to compete.

We are pleased to see the government taking action to bring the steel industry’s power prices closer to those of our competitors abroad. We look forward to working with the government to reduce industrial power prices further and bring them fully in line with our European competitors.

Arjan Geveke, Director of the Energy Intensive Users Group said:

The Energy Intensive Users Group welcomes the implementation of the various measures to reduce industrial electricity prices in the ‘British Industry Supercharger’ package.

For those companies eligible for support, these measures will bring our industrial electricity prices closer to those in other countries and help the competitiveness and decarbonisation of energy intensive industries in Great Britain.

Dave Dalton, CEO of British Glass, said:

We welcome the implementation of the various measures to reduce industrial electricity prices in the ‘British Industry Supercharger’ package.

The British Industry Supercharger is a key step forward in securing a sustainable future for the glass industry and helps us on our way to reaching our net-zero targets.

Dr Diana Casey, Executive Director for Energy and Climate Change, Mineral Products Association said:

Competitive industrial electricity prices are absolutely critical for cement and lime producers to remain competitive as they transition to net zero especially as key technologies like carbon capture, usage and storage will significantly increase power demand.

We therefore welcome the British Industry Supercharger measures as a step forward in reducing the disparity in power prices between GB and those faced by competitors in Europe and beyond.

Andrew Large, Director General of the Confederation of Paper Industries said:

Access to internationally cost-competitive energy is critical to the operation of energy intensive installations in the UK. Accordingly, we’re grateful for these expanded and new policy measures and hopeful they signal a long-term cross-party political process to deliver policies that make the UK an attractive place for manufacturing.

Nishma Patel, Policy Director of the Chemical Industries Association said:

The delivery of the British Industry Supercharger will reduce power costs for some of our industrial manufacturing sites in the UK. With clean power being fundamental to much of our sector’s net zero transition, we must not underestimate how important competitive electricity prices are to attract investments for both growth and building resilient supply chains in the UK.

Background

  • In April 2022, the government extended the Energy Intensive Industries Compensation Scheme by a further three years, and more than doubled the budget. 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.
  • There has been more than £2.5 billion relief since 2013 to EIIs to make electricity costs more competitive. In 2021 alone this relief was worth over £360 million through a mix of compensation and exemption from indirect policy costs.
  • The UK government announced £315 million of funding in the 2018 Autumn Budget for the Industrial Energy Transformation Fund, with the funding available over the period to 2027. The Fund supports businesses with high energy use to cut their bills and reduce carbon emissions.
  • Phase 1 of the programme made up to £70 million available over 2 separate application windows and businesses were able to apply for support with energy efficiency deployment projects and energy efficiency and deep decarbonisation engineering studies. – IETF Phase 2 launched in September 2021, with around £220 million of funding, to be invested in energy efficiency and deep decarbonisation deployment projects, and feasibility and engineering studies. Phase 2 ran for 4 competition windows with the final window closing on 17 February 2023.
  • The government has already provided through the Energy Bill Relief Scheme a package of support for non-domestic energy users including EIIs through this winter worth £18 billion per the figures certified by the OBR at the Autumn Statement.