UK government sets out its support for energy intensive businesses ahead of Electricity Market Reform

The Department for Business, Innovation and Skills (BIS) has issued a consultation on the eligibility for exemptions for energy-intensive industries (EIIs) from the costs of Contracts for Difference (CfDs). This is the first step in its plan to ensure that EIIs get help to offset any rise in costs that might occur through Electricity Market Reform (EMR).

EMR provides support for low-carbon electricity generation through (among other things) CfDs, the costs of which are borne by electricity suppliers by means of a levy. While CfDs will encourage investment in low carbon electricity generation, they may put pressure on electricity prices over the medium term as the costs incurred by energy suppliers are likely to be passed on to energy users.

Without intervention, EIIs in the UK are likely to face higher electricity costs than in other countries, which would result in such industries becoming uncompetitive in the global marketplace. As a result, BIS and the Department of Energy and Climate Change (DECC) intend to ‘level the playing field’ for EIIs by compensating them for the additional indirect costs of energy and climate change policies…

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