Cornwall Insight: Levy exemptions could slash bills by 25% for small manufacturersCornwall Insight: Levy exemptions could slash bills by 25% for small manufacturers

New analysis by Cornwall Insight has shown that plans to expand exemptions from low-carbon levies could save small businesses over £100,000 annually.

Under the government’s British Industrial Competitiveness Scheme, which was announced earlier this week as part of the government’s Industrial Strategy, up to 7,000 electricity-intensive businesses in manufacturing sectors are now exempt from decarbonisation levies normally attached to energy bills, including the Renewables Obligation, Feed-in Tariffs and the Capacity Market.

According to Cornwall Insight, this could save small industrial businesses up to £48 per MWh, which for the average small industrial business could add up to savings of £113,000 each year. This figure represents 25% of the average overall energy spend of such businesses, which averages around £470,000 per site per year.

Dr Craig Lowrey, principal consultant at Cornwall Insight, said that the expansion of levy exemptions offers “a significant financial lifeline to smaller industrial businesses”, but noted that it is key to ensure that future policy changes continue to support small businesses.

He added: “this support doesn’t exist in a vacuum. We’re expecting a whole host of new charges to come in over the next few years, to support low carbon generation, infrastructure investment and the net zero transition. The real test will be how fairly the costs and benefits of the transition are distributed across the energy system.”

These exemptions and eligibility criteria will come after a two-year consultation on the plans. The government’s Industrial Strategy also brought in a number of other new policies set to support industrial manufacturers with rising energy costs, including plans to increase the discount that energy-intensive industrial operators, including the steel, chemicals, and glass industries, get on electricity network charges from 60% to 90% from next year.

The exemption from levies has been widely welcomed by the energy sector. Laith Whitwham, senior policy advisor at the climate think tank E3G, described the policy announcement as “a landmark moment” and added: “This strategy cuts the sky-high electricity prices driven by gas dependency and gives British industry the shot in the arm it needs to lead the charge to a clean economy.” 

Rising energy costs have been an increasing concern for the UK’s heavy industry sector, with a recent report by the Energy and Climate Intelligence Unit (ECIU) noting that in the four years since the energy crisis began, British industrial producers have had to pay an additional £29 billion for its gas and electricity when compared to the four years before the pandemic.