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The Industrial Strategy: Inenco response

27th November 2017

The Industrial Strategy: Widening exemption for energy-intensive industries means medium-sized businesses will continue to foot the bill, says Inenco.

Commenting on the Industrial Strategy, David Oliver, a consultant at energy consultancy Inenco, said:

“The Government currently provides substantial compensation to eligible energy-intensive industries for the cost of energy and climate policies, which reduces their exposure to many of the associated levies and taxes via a rebate system. In April 2018, the Government will move away from compensation to an exemption system, so the savings are direct and easier to access.


“And, in its Industrial Strategy, the Government said it will consult on widening the eligibility for the exemption schemes for energy-intensive industries. However, this means that medium-sized businesses will continue to foot the bill, essentially subsidising the industry. They will be paying even more for their energy, and will continue to see their costs per MWh increasing. Indeed, we have already seen the compensation system having an influence; it is partly why the RO Levy will increase from £18.64 per MWh for 2017/18 to nearly £22 per MWh in 2018/19, despite the RO scheme closing to new entrants on March 31 2017.


“The Government has stated that it is committed to minimising business energy costs to ensure the economy remains strong and competitive. It should therefore bear in mind that medium-sized, non-energy-intensive businesses are affected by high electricity costs too, reducing their profitability and competitiveness. For retailers, such energy cost increases may increase prices at the tills, affecting all of us.


“The Industrial Strategy also states that the Government will develop a package of measures to support businesses to further improve their energy productivity, with a goal to increase energy efficiency by at least 20 per cent by 2030. The Government will consult on this in 2018.


“However, we are concerned that the proposed consultation period will mean that measures won’t be agreed until 2019, and, as a consequence, this will actually encourage businesses to delay any energy efficiency investments until the incentives have been confirmed. To reduce this risk, we are hopeful that the Government will allow businesses to retrospectively apply for any benefits that are agreed. We would also ask for clarification on the reference year that this 20 per cent reduction will be judged against, as again this could affect when businesses instigate their energy reduction plans.


“We were pleased to see that one of the Industrial Strategy’s four ‘grand challenges’ is clean growth, and welcome the investment in this area. It should have a far-reaching effect on UK businesses, from potential growth and new revenue streams to improved security of supply and resource efficiency.”