How the EII exemption schemes supports energy-intensive businesses
The Energy Intensive Industries (EII) Exemption Schemes supports energy-intensive businesses by exempting them from the indirect costs of renewable energy policies (like Contracts for Difference, Renewables Obligation, and Feed-in Tariffs), helping them remain competitive in a global market.
The CFD and RO schemes together with the Small-Scale Feed-In-Tariff (FIT) incentivise low carbon and renewable electricity deployment. The government has also placed additional policy costs on bill payers to cover the costs of operating the GB Capacity Market (CM).
Costs of funding the schemes are recovered through levies or an obligation on suppliers and these are ultimately passed on to domestic and non-domestic electricity consumers’ bills.
However, the government understands that in the short to medium term, the resulting increase in retail electricity prices may risk putting some electricity-intensive businesses at a significant competitive disadvantage when they are operating in international markets.
UK industrial electricity prices are higher than those of other countries including in Europe. To address this risk, the government has developed the EII support schemes which have been reviewed by the UK Competition and Markets Authority and have been assessed by the Government as being compatible with the new UK Subsidy Control regime. (1)
The exemption schemes can provide a discount of up to 100% of the indirect costs of CfD, RO and FIT.
How EII works
Eligible businesses can apply for an EII certificate, which allows them to claim an exemption from a portion of the indirect costs of funding renewable energy schemes.
The schemes can help to reduce electricity costs by exempting businesses from the indirect costs of renewable policies, so lowering their electricity bills. The scheme can support business growth by reducing overhead costs allowing for further investment in innovation and expansion.
EII can support UK manufacturers in staying competitive in the global market by mitigating the impact of renewable energy policies on their energy costs, helping them to compete with international firms that may not face similar renewable energy levies.
A further advantage is that by supporting energy-intensive industries, the scheme helps to prevent companies from relocating operations to countries with less stringent environmental policies, which could lead to a rise in carbon emissions - “carbon leakage”.
Eligibility
To qualify for the EII exemption, businesses must:
Manufacture a product in the UK within an eligible sector
Pass a 20% electricity intensity test
Not be an "Ailing or Insolvent Economic Actor"
Have at least two quarters of financial data
Show evidence of the last three months' electricity consumption used to manufacture the products.
To ensure that support is targeted at those most at risk, the government limited eligibility to those sectors which are electricity intensive and subject to international competitive pressures using UK specific data from the Annual Business Survey, specifically, those found to have a trade intensity of at least 4% and an electricity-intensity of at least 7%. (1)
Eligible sectors are those carrying out “specified activities” set out in the Electricity Supplier Obligations (Amendment & Excluded Electricity) Regulations 2015, including mining, quarrying, and manufacturing of specific products. The government intends to review the criteria data by 2026 and will consult on this.
In April 2024, the percentage of indirect costs that eligible businesses can secure compensation for through the EII Exemption Relief Scheme was increased from 85% to 100%.
SaveMoneyCutCarbon advises that companies which are successful in their application are granted an EII certificate that verifies eligibility for the CfD, RO and FIT exemption. This is then sent to the electricity supplier, who will take action. Companies have to reapply each year to continue receiving the benefits.
How to apply
Businesses will need to fill in application forms, provided by Department for Business & Industrial Strategy (BEIS). (2)
The CfD, RO and FIT exemption schemes do not apply to Northern Ireland but businesses based solely in Northern Ireland can apply for RO compensation.
Companies with a mix of business activities need to be aware that compensation is given only for electricity associated with manufacture of eligible products. If a manufacturer is producing both eligible and ineligible products, it would need to identify electricity usage associated with the eligible production.
This would be through sub-metered records, or on the amount of the product being made as a proportion of total production of all products, in tonnage.
Bibliography
1 “Energy Intensive Industries (EIIs)” (Accessed April 2025)
2 “Contracts for Difference, renewables obligation and small scale feed-in tariffs: apply for an exemption or compensation” (Accessed April 2025) https://www.gov.uk/government/publications/renewables-obligation-and-small-scale-feed-in-tariffs-apply-for-compensation