UK Energy Bill to Cost £110bn, Exempt Some Industries

The UK’s long-awaited Energy Bill allows energy companies to increase the levy for low-carbon electricity from £2.35 billion in 2012-13 to £7.6 billion in in 2020-21.

Energy-intensive industries, however, may be exempt from these additional costs.

In addition to introducing the Energy Bill on Nov. 29, UK Energy and Climate Change Secretary Edward Davey announced the government’s intent to exempt some companies such as steel and cement producers from the energy-cost increases arising from new subsidies for wind farms, nuclear power stations and other forms of low carbon energy.

The scope of the exemption is currently being considered by the Department of Energy and Climate Change and the Department for Business, which will consult in 2013 after the proposal has been further developed. The exemption will also require approval from the European Union.

A separate £250 million scheme to compensate certain energy-intensive industries for additional costs associated with the Carbon Price Floor and EU Emissions Trading System is already the subject of a current consultation.

The Energy Bill, intended to move the UK to a “low-carbon economy,” will cost £110 billion over 10 years, Davey told Parliament. He said the investment is needed to replace current generating capacity, upgrade the grid by 2020, and meet the rising demand for electricity.

A consultation published alongside the proposed Energy Bill includes a series of financial incentives to encourage businesses to reduce energy consumption. These include paying companies for each kilowatt-hour they save from low-energy lighting, appliances, pumps and other appliances and other energy-cutting initiatives.

The DECC says a 10 percent cut in electricity demand could save the UK £4 billion by 2030.

In its first Energy Efficiency Strategy, published earlier this month, the DECC said investing in energy efficiency could save the UK 196 TWh by 2020.