What is the EII Renewable Levy Exemption Scheme?

The EII Exemption Scheme is a government backed scheme to provide energy intensive businesses with some relief for the costs associated with the Contracts for Difference (CfD), Renewable Obligation (RO), and Feed-in-Tariff (FiT) schemes. While the schemes are great for increasing development in renewable and low carbon technologies, the costs are often high for supplier who will pass them on to their customer’s bills. The government then brought in the EII Renewable Levy Exemption Scheme to provide a discount on these tariffs to ensure that energy intensive businesses keep their production in the UK instead of moving offshore where production costs and energy bills might be cheaper.

Under the current EII Renewable Levy Exemption Scheme, businesses can receive up to 85% of the indirect costs of CfD, RO and FiT schemes. The Government is considering boosting the exemption to 100% but this has not yet been confirmed.

The UK Government extended the scheme recently. It will now run until at least March 31^st, 2025. You are also able to receive backdated payments from as far back as April 1^st 2022.

In order to be eligible for the scheme, there are two ‘tests’ your business will need to ‘pass’. These include:

• The sector level test: Your business will need to manufacture a product in the UK within an eligible sector. The product needs to have a specific 4-digit NCE code too.
• The business level test: Your business will need to pass a 20% electricity intensity test. You’ll need to show that you use more than 20% of their total site cost and are not under any financial strain.

In addition to these your business must also:

• Not be an Ailing or Insolvent Economic Actor (AIEA)
• Have at least two quarters of financial data
• Have at least three months’ worth of evidence of how much electricity it takes to manufacture their product.

The main sector that qualifies for the scheme is the manufacturing sector. This includes manufacturers in wood, paper, rubber, glass, and plastics as well as any business involved in chemical or fertiliser production. Cement and ceramics are included too alongside animal feed producers and poultry processing. To see the full list of eligible sectors and their 4-digit NACE codes, see the full Government guidance here.

If your business is successful in its application for the exemption, you’ll receive an ‘EII certificate’ to confirm your eligibility. This certificate will then need to be passed on to your energy supplier. Once you’ve done this, you’ll be able to benefit from a reduction on the CfD, RO and FiT. In order to continue receiving the reduction, your business will need to reapply for the exemption each year.

The exemption only applies to any activities you carry out that fall under the categories of eligible products. So, if you produce a mix of eligible and non-eligible products, you’ll need to isolate the energy you use to make the eligible products. The discount will then be applied to the relevant products.

If you’re unable to do this, you can estimate the electricity usage associated to the manufacturing process using the proportion of the different products made. This will need to be in either tonnage, m2 or another justified metric.