This planned initiative will exempt Energy Intensive Industries (EII), like heavy manufacturing companies, from a large proportion of the CfD element of electricity costs, which are otherwise automatically added to electricity bills.
The CfD charge is replacing the Renewables Obligation (RO) as a means of subsidising new large-scale renewable projects. The RO scheme closed to new entrants on 31st March 2017, however, existing RO projects will continue to receive subsidies for approximately 20 years. The Feed-in-Tariff scheme continues to operate, though subsidies for new projects have been reduced significantly in recent years. Nearly 6GW of new CFD-funded capacity is due online by 2020, which will increase the costs of CFD to more than £2bn.
Clearly this scheme will be welcomed by exempt businesses, but those that aren’t eligible for exemption will absorb the extra costs – which is expected to raise RO and FiT costs by around 6% for each business.
As of this month, the CfD charge is a new addition to the energy bill. The below table shows the impact of the three charges (CfD, RO & FiT) on a range of businesses over the next 3 years:
|Company Scenario||Charges||2016||2017||2018||2019||2016-19 Increase|
|A typical small retail store – 1GWh annual consumption||RO||£14k||£20k||£20k||£20k||£6k|
|A typical cinema – 2GWh annual consumption||RO||£31k||£39k||£40k||£40k||£9k|
|A typical large retail park – 3GWh annual consumption||RO||£46k||£59k||£60k||£60k||£14k|
|A typical inner city university building – 5GWh annual consumption||RO||£78k||£98k||£99k||£100k||£22k|
|A typical manufacturing site – 10GWh annual consumption||RO||£156k||£196k||£199k||£201k||£45k|
Using published rates and forward-looking estimates, Inenco have created an Interactive Non-Commodity Cost Dashboard for users to calculate how their business will be exposed to incremental non-commodity costs (also known as ‘third party costs’ over the coming years.
To view the make-up of your typical energy bill going forward and how your business will be impacted, click here.