The EII Exemption Scheme: everything you need to know

What is the energy-intensive industries (EII) exemption scheme?

The EII exemption scheme aims to help big energy users stay competitive in a global market. Qualifying businesses can claim an exemption of up to 85% of their Contract for Differences (CfD), Renewables Obligation (RO), and Feed-in Tariff (FiT) costs. Providing firm financial footing in a post-Covid economy.

Why was the EII exemption scheme launched?

The UK has pledged to achieve net zero emissions by 2050, which will require a transformative shift towards clean energy across the economy. This has resulted in a variety of government schemes which encourage the rise of electricity generated from renewable and low carbon sources.

This initiative has seen success, with renewables accounting for 47% of the UK’s generation in the first quarter of 2020. And even as consumption dropped in Q2, wind power generated electricity continued to rise due to increased capacity. This upwards trajectory is only expected to accelerate, with promising new renewable energy projects on the horizon.

The levies and obligations funding this growth are initially covered by energy suppliers. But, these costs are passed down to domestic and non-domestic consumers in the form of higher energy bills.

This puts energy-intensive businesses at a disadvantage. Especially when competing against their EU counterparts with lower energy costs. The launch of the EII exemption scheme is a solution to this problem and aims to maintain the UK’s position in the global market.

When was the scheme rolled out?

The original solution to the issue of higher costs for EIIs was a compensation scheme launched in 2016. This allowed big energy users to apply for relief from the energy costs they had already paid.

This was then replaced by the EII exemption scheme, rolled out between autumn 2017 and spring 2018. This change of approach is meant to offer energy-intensive businesses more long time certainty and stability as well as higher cost savings.

Who can apply?

To be eligible for an EII exemption, a business must meet five key requirements.

• The business must manufacture a product in the UK within an eligible sector – the “sector level test”.
• The business must pass a 20% electricity intensity test – the “business level test”.
• The business must not be an Undertaking in Difficulty (UID) – the UID guidelines explain that “an undertaking is considered to be in difficulty when, without intervention by the State, it will almost certainly be condemned to going out of business in the short or medium term.”
• The business must have at least two quarters of financial data.
• The application must contain evidence of the proportion of electricity used to manufacture the product for a period of at least three months.

Learn more about applying for an exemption certificate.

Big energy users who do not qualify for the EII exemption scheme should still be aware of rising energy costs. They should explore schemes such as Carbon Footprinting, Energy Audits, Streamlined Energy and Carbon Reporting (SECR) and Energy Savings Opportunity Scheme (ESOS). These can provide invaluable insight into your environmental impact and routes to improve energy efficiency within your company.

Has Covid-19 had an impact on the scheme?

Covid-19 has thrown various sectors of the UK economy into a state of uncertainty and decline. The energy sector was especially impacted by the fall in energy consumption in the first six months of 2020. And resulted in a subsequent drop in electricity prices. This could make it more difficult to calculate a business’ energy intensity and whether it is “in difficulty”. Because of this, the government will be excluding the period from 31 December 2019 to 30 June 2020 from its assessment of whether a business is in financial difficulty or not.

How can EIC help?

Here at EIC, we support big energy users with the management of their energy, buildings, carbon and compliance. As a result, we’re able to uncover actionable insights that allow you to manage and control all elements of your energy bill on both sides of the meter.

Armed with a comprehensive understanding of government schemes and legislation, we can help turn your frustrating admin into rewarding opportunities. We can navigate complex applications such as that for the EII exemption certificate – saving you valuable time and resources.

Contact us to learn more about how EIC can help your business.