Beond engages with regulators on compensation for the Renewables Obligation and Feed-in-Tariff costs.

The European Commission has now approved the UK Government’s plan to provide financial relief to major energy consumers. Relief involves compensation of 85% of the Renewables Obligation and small-scale Feed-in-Tariff, from 2016.

The UK Government is committed to reducing carbon emissions in a way which is consistent with meeting legally binding targets – by reducing greenhouse gas emissions by 80%, by 2050.

A key part of this approach to decarbonising the energy sector is to create policies and mechanisms to incentivise the building and generation of electricity from renewable sources. The key mechanisms put in place by the UK Government are the Renewables Obligation (RO), the small-scale Feed-in-Tariff (FiT) and the recently introduced CfD FiT for larger generation, which offer financial security and incentives to renewable generators.

Whilst the RO will soon be closed to new entrants (2017), it will still continue to support eligible generation through to their expiry; being replaced by the CfD FiT mechanism. The small-scale FiT will continue to offer support to generators. Both of these schemes (alongside other schemes and mechanisms not covered under this support package) are passed through by suppliers into consumers bills and in 2016 averaged 23% of an average consumer’s electricity bill. This is forecast by Beond to remain static (as a percentage) through to 2020 but will continue to increase in cost – relative to other charges which will increase by greater amounts.

A consultation was held between 31st July and 24th October 2014 to assess the impact of rising non-commodity charges and levies on the energy consuming sector and a response to this consultation was published on the 19th January 2015. As of January 2016 this consultation has been approved and eligible industry sectors can now apply for a refund in the indirect costs to their business on these two major mechanisms.

Scheme overview

  1. The current scheme offers eligible consumers compensation to the RO and small-scale FiT to the level of 85% of the total cost paid to suppliers.
  2. Currently the scheme offers compensation but from 2017 the compensation will be removed and replaced with an exemption scheme – likely to be similar to the exemptions process under a CCA.
  3. Exemption from the CfD FiT is not written into the current scheme but is written into regulation. No date has been provided for the inclusion of CfD FiT into the scheme and this is subject to an amendment of regulation following the outcome of the state aid case. We anticipate this will be in late 2016.
  4. There are two levels of sector participation and all participants must be able to demonstrate that they manufacture a product in one of these sectors:
    1. Those defined as Energy Intensive Industries (EII’s)
    2. Those defined as not energy intensive but have been recognised as competitively disadvantaged by the increasing cost of energy
  5. Participation is based on a detailed set of requirements to provide corporate, financial and energy data – including clarification on the energy utilisation into product manufacturing.

Eligibility

Beond can support your organisation in understanding the four main steps to assessing whether your business is eligible to claim compensation for the indirect costs of RO/FiTs:

  1. Your organisation must manufacture a product in the UK within an eligible sector (as defined by your 4-digit NACE code and 8 digit Prodcom level). Beond can advise your organisation whether you currently occupy one of these sectors.
  2. Your organisation must pass the 20% electricity intensity test.
  3. Two application forms must be completed, supported by corporate, financial and energy data and clearly audited to ensure accurate submission.

All organisations must have a UK registered company at Companies House – although a process exists for those companies not currently UK incorporated.

How can Beond help?

  1. Beond has actively engaged with the Government department to understand this legislation on behalf of our clients and can guide you through the necessary steps to maximise your chances of success.
  2. Our team of experts can undertake analysis to understand whether you occupy the energy intensive industry sectors or the non-intensive but applicable secondary sectors.
  3. We can conduct data collection and validation to understand the business electricity intensity test and whether there is sufficient data and supporting evidence to comply with their rules as to what constitutes a significant competitive disadvantage.
  4. Our experts can ensure that each stage of the application process is carefully considered, support information collection from other areas of the business and provide fulfilment of all paperwork.
  5. This service can be absorbed into a procurement contract service, ensuring that you don’t have to pay additional costs for the evaluation of this opportunity.

Beond Services

Beond are a privately owned specialist energy market consultancy – offering innovative and bespoke services to a wide range of energy and carbon consumers. Our business is built on offering tailored energy management and purchasing solutions, supported by our proprietary software and managed by our dedicated team of experts.

Our 5th generation eAuction software platform and bespoke consultancy service delivers significant results to our clients:

  • Averaging 7.67% spread on all tenders, with an average of 7 competing suppliers with 9 bids – our maximum participation in 2015 was 27 separate offers for 1 client.
  • Our market analysis and key insights into market risks and opportunities alongside our client partnership model helps to deliver significantly improved value over and above the traditional procurement consultancy approach.
  • A recent client study in 2015 identified a zero cost option to reduce specific non-commodity charges by 60% – netting off future increases in the regulatory cost increases to 2020.
  • Our UK based risk desk can advise on all energy and carbon related matters, offering a single risk management approach to the total energy & carbon exposure of your business.
  • Our innovative approach to ESOS delivered zero cost compliance to our clients with 700GWh of energy audited with 102GWh of energy efficiency opportunities identified and pursued.

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