Industry issue:

Renewables Obligation and Micro-generation feed-in-tariff

29 April 2016

The UK Government is committed to reducing carbon emissions in a way that is consistent with meeting its legally binding targets – a reduction of greenhouse gas emissions of at least 80% by 2050. This requires a transformation of the UK economy which includes the energy market. In addition energy costs need to be kept down for both businesses and consumers as well as to maintain competitiveness.

A key element of the Government’s approach to decarbonising energy is the implementation of policies designed to incentivise generation of electricity from renewable sources. Specifically the Government has put in place the Renewables Obligation (RO) and the micro generation Feed-in-Tariff (FITs) schemes to incentivise the production and utilisation of renewable energy supplied through the National Grid.

However, the Government recognises, that in the short to medium term, the resulting increase in retail electricity prices risks reducing the competitiveness of the UK’s most electricity-intensive businesses where they are operating in internationally competitive markets. As a result of this the Government has committed to implement a regime to compensate for the impact of this renewables policy on the costs of electricity for the most electricity intensive industries. This compensation scheme is in line with the European Commission’s published guidelines.

Full details can be found on the GOV.UK website.

Will my business be eligible for compensation under the scheme?

There are two steps to assessing whether a business is eligible to claim compensation for the indirect costs of RO/FITs: 

  1. The business must manufacture a product in the UK within an eligible sector (defined by 4-digit NACE code. Note these codes do include some codes relevant to the natural resources sector
  2. The business must pass the 20% electricity intensity test.

A breakdown of the eligible sectors can be found on the GOV.UK website. 

How does my company make a claim?

Companies have to complete the application forms including a supplement spreadsheet summarising EBITDA, staff costs and electricity usage over the last 3 years, and this requires an Independent Accountant’s Report to go with the submission – Application form part 1/Spreadsheet form part 2. We are currently working with companies on their submissions under the scheme and have teams in place to complete the work on the Independent Accountant’s Reports as required.

Time is of the essence to get applications in place for a claim as there is a real hard cash benefit to companies who are identified as eligible.