If you’re operating within Energy Intensive Industries (EII), it’s important to know what energy support is available to you.

This article provides EII scheme guidance by answering frequently asked questions about both the EII exemption scheme and the EII compensation scheme, helping your business to understand whether either (or both) of these are the right energy tax relief scheme for you.

What does EII mean?

EII stands for Energy Intensive Industries. The UK government defines Energy Intensive Industries as “industrial sectors – usually manufacturing industries – that are high users of energy”. Energy Intensive Industries have a high proportion of fuel energy costs over other costs such as labour, as part of their overall production costs.

What is the Energy Intensive Industries (EII) exemption scheme?

The UK government supports high energy usage business with their electricity costs through the Energy Intensive Industries (EII) exemption scheme. The scheme is a form of energy tax relief that allows eligible companies to reduce their energy bills through an exemption on taxes that fund low-carbon and renewable support schemes and up to a 60% on the transmission and distribution costs for electricity.

Why was the Energy Intensive Industries (EII) scheme created?

The UK government’s goal of achieving net zero greenhouse gas emissions by 2050 is driving a major shift in the nation’s economy – including the energy sector. This transition focuses on reducing emissions while ensuring affordable energy for businesses and consumers and preserving economic competitiveness.

To support this goal, there have been several policies introduced and developed to increase the renewable energy produced and lower carbon emissions, such as:

• Contracts for Difference (CFD)
• Renewable Obligation (RO)
• Small-Scale Feed-In-Tariff (FIT)

The costs associated with these policies and schemes are recaptured through various levies, or passed on to suppliers, who in turn forward on to electricity consumers.

These taxes can put UK businesses at a competitive disadvantage internationally, therefore increasing the risk of firms moving production abroad to countries with lower emission curbs. This is known as ‘carbon leakage’ and would defeat the point of trying to cut global greenhouse gas emissions. To lower the risk of carbon leakage, the UK government created the Energy Intensive Industries (EII) exemption scheme in 2016. The EII scheme mitigates the impact of renewables policies allowing businesses to stay competitive internationally.

Is the Energy Intensive Industries (EII) exemption scheme a compensation scheme?

The EII scheme is not technically a compensation scheme. Instead, it reduces renewable energy (electricity) related taxes by exempting eligible companies from having to pay, by providing them with an exemption certificate. There is a separate EII compensation scheme explained below.

What is an EII certificate?

The UK government offers relief for qualifying EII organisations in the form of an EII certificate. This provides confirmation that an organisation is eligible for exemptions from the indirect costs of renewable energy taxation schemes.

To receive the exemptions, businesses must pass the EII certificate to their electricity provider.

Applying for an EII certificate with Consultiv through the EII exemption scheme will mitigate the rising cost of energy bills for industries that are high energy users.

What are the eligibility requirements for the EII exemption scheme?

The UK government guidance lists two tests for determining whether a business is eligible for an EII certificate. These include:

The sector level test
Your business must manufacture a product in the UK within one of the eligible sectors that has a specific 4-digit NACE code (see the below section on qualifying sectors).

The business level test
Your business must pass a 20% electricity intensity test. This is being able to demonstrate that your business electricity costs amount to 20% or more of your Gross Value Added (GVA) over the period referenced.

What sectors qualify for the EII exemption scheme?

Most of the qualifying EII are from manufacturing industries, including:

• Wood
• Paper
• Rubber
• Glass
• Plastics
• Metal production
• Metal casting and processing
• Battery production
• Malts
• Grain milling
• Chemical production
• Fertiliser production
• Ceramics
• Cement
• Refectory products
• Animal feed
• Poultry processing

How much will my business receive through the EII exemption scheme?

Businesses eligible for the Energy Intensive Industries exemption scheme can claim up to 100% off the renewable tax costs, and up to 60% off other non-commodity electricity charges.

What is the Energy Intensive Industries (EII) compensation scheme?

Introduced by the UK government in 2016, the compensation scheme provides support to businesses that have high energy demands within their manufacturing processes.

As long as your business has met the government’s requirements of expenditure on GVA, and your organisation holds an EII certificate, you will be able to apply for support through the Network Charging Compensation (NCC) scheme. You will need to have held this certificate for the entirety of any month of which you’re wishing to claim compensation on for network costs.

What sectors quality for the EII compensation scheme?

The manufacturing industries that qualify include:

• Textiles
• Wood
• Steel
• Aluminium
• Pulp and paper
• Lead
• Glass fibres
• Zinc
• Fertilisers
• Tin
• Chemicals
• Copper
• Iron
• Battery production

How much EII compensation can I get?

Energy Intensive Industries can get 60% compensation on network charges for the electricity used to produce eligible products. The percentage of network charges covered matches the proportion of electricity that qualifies for exemption or compensation, as stated in the EII’s certificate.

From 1 April 2024, any EII eligible for a full (100%) exemption can also apply for 60% compensation on network charges for all electricity recorded by the relevant meter.

How can my business apply for EII exemption or compensation?

Our corporate energy team has a wealth of experience in successfully helping eligible businesses unlock the maximum amount of exemption and compensation that they can receive. We offer an end-to-end service: we’ll put together your entire claim, handle all the administration and submit your completed application to the government.

Get in touch with the Consultiv Utilities team to arrange your free consultation today.