Energy Live News explores recent Government proposals to reduce electricity prices and grid connection lead times for large energy users with Rosa Rotko, Project Director Energy Transformation at Mott MacDonald.
What reforms have been announced this summer and why?
The Government’s new Industrial Strategy, launched earlier in the summer, looked at the blockers which currently undermine business confidence and stop investment. High on the list were concerns regarding high industrial electricity costs and slow grid connections.
Some of the recent proposals which large energy users should pay attention to include:
The British Industrial Competitiveness Scheme.
This scheme is planned from 2027, with the aim of reducing electricity costs by c. £35-40/MWh up to 2030. Eligible businesses will be exempt from paying the costs of the Renewables Obligation, Feed-in Tariffs and the Capacity Market.
The source of funding for the scheme is currently unclear, with Government stating it will be funded “through reforms to the energy system”, “without raising household bills or taxes” and “using additional funds from the strengthening of UK carbon pricing”. It is possible that this policy will cause other businesses who are not beneficiaries of the scheme to pick up the bill, and face even higher energy costs.
Improved British Industry Supercharger and Network Charging Compensation scheme
Energy-intensive companies (like steel, chemicals and glass) are already supported by the British Industry Supercharger scheme which contributes towards their electricity network charges. These businesses currently get a 60% discount, but from 2026 that will increase to 90%.
Again, the scheme is to be delivered at “no additional cost to the taxpayer” – which could mean that other businesses or households will pick up the cost via increased bills.
Connections Acceleration Service
A new service is planned to provide support for connecting demand projects such as data centres or manufacturing industries to the grid. The aim is to streamline grid access for major investment projects with a priority for those which “create high-quality jobs and bring the greatest economic value”. The Government hopes the service to be operational at the end of 2025.
New legislative powers could also allow the Government to reserve grid capacity for strategically important projects to unlock growth in key sectors.
Which sectors are likely to benefit?
The Government is still determining eligibility for the schemes, but there are some indications of focus.
The Industrial Competitiveness Scheme is stated to benefit over 7,000 electricity-intensive businesses in manufacturing sectors like automotive, aerospace and chemicals.
The British Industry Supercharger and Network Charging Compensation schemes are for around 500 energy intensive manufacturers such as steels, ceramics and glass.
Do you think there are any omissions or potential unintended consequences?
There is a risk of “picking winners” who get extra discounts which increase the costs to “losers” who don’t benefit. The rationale for eligible sectors and companies is relatively generic – for example based on the Government’s top-down assessment of which sectors might be best placed to create jobs. It is not clear there has been an assessment of distributional impacts for other sectors.
The UK has high electricity prices in absolute terms, but also relative to our gas price. Increasing electricity prices further for non-eligible businesses and households is going to deter electrification of heating, transport and industrial processes.
Is it still possible to influence the outcome?
I think it is important that any large organisations with major energy consumption and significant plans for electrification review these proposals when the details are consulted on. The Government has also set up bodies such as the Industrial Strategy Advisory Council and the Clean Energy Sector Council which might be worth engaging with, in addition to the usual Government departments.
What else can organisations do to reduce electricity costs or speed up their grid connection?
Many organisations are literally taking the power in their own hands and increasing on-site generation and storage to minimise energy costs. This also allows them to avoid the policy and redistributed costs which are arising from Government policy choices.
To be on the safe side regarding grid connections, it is important to assess the current and future demand profile, and what the available capacity in the area might be. It is better to know the position, so realistic plans can be made for applications, upgrades and funding.
Government reforms target lower electricity costs and faster grid connections for UK industry appeared first on Energy Live News.