Government announces extended support to keep factories running amid soaring energy costs

Posted on 12 Apr 2022 by James Devonshire

The government has announced additional support for energy-intensive businesses, designed to keep factories running amid soaring energy costs.

As part of the Energy Security Strategy, the Energy Intensive Industries Compensation Scheme will be extended by three years, while the level of support it provides will also increase. According to the Department for Business, Energy and Industrial Strategy (BEIS), the scheme will now run until at least the end of March 2025 and its budget will more than double to help ensure the UK remains “a desirable location for energy intensive industries”.

Since 2013, the Energy Intensive Industries Compensation Scheme has provided more than £2bn to businesses to relieve the costs of the UK Emissions Trading Scheme and the Carbon Price Support (CPS) mechanism in their electricity bills.

Industry leaders have been warning since October last year that factories across the country could halt production as a result of spiraling energy costs.

As Russia’s invasion of Ukraine continues, wholesale gas prices are up by more than 200% on 12 months ago, due to global supply and demand discrepancies. At present, around 40% of the UK’s electricity is generated by gas-fired power plants. In October last year, Prime Minister Boris Johnson confirmed plans to eliminate fossil fuels from UK electricity generation by 2035.

Business Secretary Kwasi Kwarteng said: “The UK is proudly home to a competitive manufacturing sector that supports well-paid jobs and drives economic growth. 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.”

UK Steel Director General Gareth Stace said: “We warmly welcomed the Prime Minister’s recent commitments to tackle the issue of industrial energy costs, and this is the start of translating these commitments into practical action.

“The three-year extension of the Energy Intensive Industries 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.”

The government has said full details of the Energy Intensive Industries Compensation Scheme will be published soon.