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General information

Why we are consulting

This consultation seeks views on the proposed uplift in compensation for the charges paid by eligible Energy Intensive Industries (EIIs) for using Great Britain’s electricity grid through the EII Network Charging Compensation Scheme from 60% to 90%.

Consultation details

Opened: 18 July 2025

Closing date: 15 August 2025

How to respond

You can respond to the consultation:

• online
• by emailing: eii.correspondence@businessandtrade.gov.uk

Audiences

We are seeking views from a wide range of audiences, including energy intensive industries (whether currently benefitting or not from the existing British Industry Supercharger Scheme), other electricity consumers, trade bodies, consumer associations, the devolved governments and other interested parties.

Territorial intent

This consultation covers Great Britain (England, Scotland and Wales) and does not apply to Northern Ireland.

Confidentiality and publishing responses

The Department for Business and Trade (DBT) may be required to publish responses to this consultation in response to Freedom of Information requests under the Freedom of Information Act 2000.

For more information, see the Department for Business and Trade’sÌýpublic consultations privacy notice.

Introduction

Since 1 April 2024, eligible Energy Intensive Industries (EIIs) have benefited from the British Industry Supercharger (BIS): a decisive set of measures to make Britain’s strategic EIIs more competitive and tackle the challenge of carbon leakage. The scheme addresses areas of the domestic energy system which together contribute to higher electricity costs for EIIs than comparable countries. The measures are as follows:

• a 100% exemption from Contracts for Difference, Renewables Obligation, and Feed-in Tariffs – this came into effect from 1 April 2024

• a 100% exemption from the costs associated with the Capacity Market, which came into effect in October 2024

• compensation for the charges paid for using the Great British electricity grid through the EII Network Charging Compensation (NCC) Scheme. This has been running since April 2025, with compensation backdated to April 2024 – eligible businesses are entitled to apply for compensation for 60% of these costs

A number of businesses and trade organisations have recommended that a higher level of compensation would be needed if the government’s objective was to bring electricity costs for EIIs in Great Britain closer in line with those charged in competitor countries where up to 90% compensation is offered.

As part of the government’s modern Industrial Strategy, we announced a proposed increase in support for our most energy-intensive industries eligible for the British Industry Supercharger package, with an uplift of the NCC scheme from 60% to 90%, and this consultation seeks views on this proposal. It also seeks views on amending the NCC scheme application timescales.

Any policy change informed by this consultation will be subject to the completion of a subsidy control assessment.

Network Charging Costs

Overview of Great Britain’s network charging costs

Electricity network charging costs are costs paid by electricity network users (households and businesses, through their electricity suppliers, and to a lesser extent electricity generators) for their connection to and use of the transmission and distribution networks. EIIs pay a portion of network charging costs which are designed to reflect the level of demand they place on the network.

Great Britain’s network charges are categorised into:

• ‘cost reflective’ charges, which are intended to reflect the forward-looking marginal cost network users place on the system, and therefore users will take these charges into account when deciding how to use the system, minimising overall system costsÌý
• ‘cost recovery’ or ‘residual’ charges, which ensure network companies such as National Grid Electricity Transmission can recover their full costs, but which do not reflect costs attributable to any individual network user, and therefore typically are levied in a manner that minimises changes to behaviourÌýÌý

The implication of this charging structure is that charges for Great Britain’s EIIs are not uniform and the cost reflective charges reflect to some degree the relative costs and benefits that they impose or bring to the system compared to other network users. In other words, EIIs will pay lower charging costs where they consume less in peak hours, or are more favourably located (for example, closer to sources of generation). EIIs will also face significant residual charging costs, which typically are uniform and by design are more difficult to avoid.

In Great Britain, electricity network charges are paid by electricity network users and are split into 3 separate sets of charges:

• Transmission Network Use of System (TNUoS) charges cover use of the transmission system, which carries electricity at a high voltage from where it is generated to where it is distributed
• Distribution Use of System (DUoS) charges cover use of the distribution system, which carries electricity to its end users
• Balancing Services Use of System (BSUoS) charges cover the cost of day-to-day operation of the transmission system

Within these individual charges, there are elements that are either cost reflective or cost residual.

Context

Great Britain-based EIIs face a higher cost of electricity than comparator countries across Europe, which is why the UK Industrial Strategy set out plans to solve this issue for good. For most electricity-intensive EIIs, the cost of power is an acute issue, made more so by the significant discounts provided to rival businesses in countries such as Germany, France and the Netherlands. These countries offer significant exemptions on network charging costs for EIIs, with discounts in those countries ranging from between 55% to 90% for EIIs that meet certain eligibility criteria regarding electricity consumption and off-peak grid use.

In Germany, discounts are provided to large users and to non-peak users. Large users, defined based on exceeding a certain consumption threshold, are able to qualify for a maximum discount of up to 90% of their network charges while non-peak users can qualify for a maximum discount of up to 80% of their network charges. For non-peak users the discounted tariff is based on adjusting the calculation of the grid charge such that it is based on capacity used during peak load windows instead of contracted capacity (which is used in the calculation of the general tariff). For large users the available discounted tariff is based on the cost of a hypothetical network link that connects the customer directly to the nearest suitable power station.Ìý

In France, discounted rates are not applied individually for each site. Instead, an average for each type of site (sites with stable consumption, large consumer sites) is applied to all sites of that type. This currently results in a reduction in network charges of between 74 to 81% for eligible end user sites.Ìý

In the Netherlands, discounts are provided to large users with a flat load profile (pattern of electricity usage by day and by year). The level of the discount is calculated formulaically based on measures of the size of the consumer and measures of the load factor (the actual amount of kilowatt-hours (kWh) delivered on a system in a designated period of time) of the plant in off-peak periods (reflecting the flatness of the overall load profile without discouraging demand flexibility at times of system peak demand). While the maximum possible discount is 90%, the reality is that in 2013 the average discount for the 10 largest users was estimated to be 55%.Ìý

In Spain, an 80% discount on the element of network charges that related to the cost of the network itself was justified on the grounds of industrial competitiveness. However, this measure was implemented in response to the Ukraine energy crisis and is only a temporary measure.

When this policy was first consulted on in 2023, the government committed to providing 60% compensation for costs relating to network charges for Great Britain-based EIIs.

Overview of the proposal

As part of the Supercharger package to reduce electricity costs, EIIs have been compensated for 60% of their network charging costs from April 2025, with compensation backdated to April 2024. To achieve that, the following has been established:

• the NCC scheme which compensates eligible EIIs for a portion of their network charging costs
• an EII Support Levy (ESL) raised on all licensed Great Britain-based electricity suppliers, which will raise revenue that will be used to fund the support

As part of this government’s Industrial Strategy, this consultation is proposing to raise the level of compensation from 60%, which the government has consulted on previously, to 90% to better meet the objective of bringing electricity costs closer in line with those in competitor countries to increase industrial competitiveness, while averting carbon leakage and the movement of production overseas. We have outlined in the following section of this consultation why the government is considering this and what has changed in terms of evidence to support increasing the level of support to 90% compensation.

The rationale for the uplift

UK electricity prices for large industrial consumers are significantly higher than in most other countries. This is a particular issue for strategically important energy intensive industries, who being particularly exposed to international trade are less able to increase prices to reflect increased electricity costs, The resulting cost differential in electricity prices puts them at an international competitive disadvantage. It also increases the risk of having to rely on import markets, sourcing goods from territories with less stringent climate policies. This would come with associated job losses and a loss of investment, and also increases the risk of carbon leakage.

Carbon leakage is defined as the movement of production and associated emissions from one country to another due to different levels of decarbonisation effort through carbon pricing and climate regulation. As a result of carbon leakage, the objective of decarbonisation efforts – to reduce global emissions – would be undermined.

In recent years, Great Britain-based EIIs have faced among the highest industrial electricity prices in Europe, even with existing government support schemes applied, primarily due to a long-term disparity in the underlying costs of the electricity system. These costs include greater exposure to international gas prices and how those costs are recovered across different consumers, whereby overseas competitors benefited from lower-cost systems or deeper discounts.

In 2024, the Department for Business and Trade (DBT) and the Department for
Energy Security and Net Zero (DESNZ) commissioned Baringa to complete analysis forecasting industrial electricity prices and their components for Great Britain, the USA and competitor European countries. Figures from this analysis are used within this consultation and differ from figures used in previous Supercharger consultations and impact assessments, which were sourced from a 2020 Ofgem report.

At the time, figures from the Ofgem report were the most appropriate to use as it was the latest available data for international comparisons of network and policy costs and had the latest wholesale price data before the volatility in electricity prices seen since the reopening of economies after the COVID-19 pandemic and Russia’s invasion of Ukraine.

Figure 1 shows how the Supercharger results in Great Britain’s industrial electricity prices falling to around the average among European competitors but above prices in France and Germany. An increase in the Network Charges Compensation from 60% to 90% reduces Great Britain’s industrial electricity prices from £93 per MWh to £86 per MWh.

Views from industry

High energy costs are a critical factor in decision-making for inward investment and this is particularly the case for nascent, internationally mobile EII sectors such as gigafactories. The same can be said for the UK steel industry, particularly given the expectation on companies to decarbonise and transition to electrification in the coming years, in line with the UK’s climate ambitions.

We know from sector engagement and market intelligence that the UK is competitive in several areas. However, almost all EIIs say that this issue damages profitability, potential to invest or, in the case of multinationals, their ability to make the case for capital investment.

Firms have told us that the disparity between UK and EU electricity prices have led to them disinvesting. Without any changes to the competitiveness landscape for these firms, or any increase government support, we should expect this trend of job losses and losses of firms to continue. Without action, the UK risks production and jobs shifting overseas, and there is evidence of a loss of about 20% of jobs in EII manufacturing sectors since 2008. Overall, employment in EII manufacturing declined twice as fast as non-EII manufacturing sectors over this period.

Not only is this bad for UK industry, but it also increases the risk of carbon leakage and firms relocating to countries with less ambitious climate policies than the UK which could undermine the objective of decarbonisation efforts to reduce global emissions. Our proposed measures would help safeguard jobs in strategic sectors, as well as encouraging decarbonisation in the longer-term through greater electrification made possible through lower electricity costs.

Figure 1: industrial electricity prices for various countries inclusive of industrial energy price relief schemes, (2024, £ per MWh)

Figure 1 shows Great Britain’s industrial electricity prices without Supercharger support are £168 per MWh, while with Supercharger support and the NCC scheme offering 60% relief, industrial electricity prices are £93 per MWh. The chart also shows the price of Supercharger support with 90% NCC relief, where industrial prices are assessed to drop to £86 per MWh.

The chart shows the industrial electricity prices of a number of EU countries. Czech industrial electricity prices are £142 per MWh. Italian industrial electricity prices are £119 per MWh. Dutch industrial electricity prices are £102 per MWh. French industrial electricity prices are £69 per MWh. German industrial electricity prices are £60 per MWh. Spanish industrial electricity prices are £94 per MWh. Finally, the US state of Texas’ industrial electricity prices are £38 per MWh.

Impact on other electricity users

This measure will be funded by bearing down on costs in the energy system, so requires no taxpayer subsidy and means that the bills of other users will not go up as a result.

Support is necessarily limited to those energy intensive industries most at risk of high electricity prices, and therefore impact on other electricity users will be limited to what is necessary to mitigate the risk of carbon leakage, safeguard jobs in strategic sectors and enable decarbonisation through electrification longer term.

The cost of not acting is far greater, as eligible EII sectors employ approximately 400,000 workers and have gross value added of £32.8 billion (3.6% of the UK economy). Their turnover is around £155 billion and in 2019 their exports totalled around 28% of total UK exports. They also support thousands of additional indirect jobs as part of the wider supply chain, with many providing higher than average wages in more economically vulnerable areas.

Direct costs of the measures on suppliers and eligible EIIs

Direct impacts are those impacts that are considered to be immediate and unavoidable first round effects which occur as a direct result of the implementation of the EII support levy and compensation scheme.

Direct impact on suppliers

There are 64 domestic and non-domestic electricity suppliers in Great Britain’s energy market with a further 38 suppliers which serve non-domestic consumers only. All 112 licensed suppliers are expected to be in scope for the EII network charge levy and so will face familiarisation costs associated with the change of policy.

The familiarisation cost will be faced by each supplier when an employee must read and comprehend the secondary legislation to determine any action that will need to be taken. The direct cost will be the lost output from the firm’s labour due to the time spent on familiarisation.

Suppliers incur administrative costs each time they change prices, whether as a result of government intervention or otherwise. These costs include:

• obligations under the Supply Licence Conditions (SLCs) to provide notice to all customers who will be impacted by the change, leading to suppliers sending out notifications (physical and electronic) to customers to inform them of a price change
• increases in the volume of calls from customers wanting to understand the changes to their tariff, resulting in the requirement for additional call centre resource to respond to increased customer requests including training and amendments of response scripts
• costs associated with reflecting changes in prices or discounts in suppliers’ billing systems and on their websites

The energy market regulator, Ofgem, consulted in May 2018^{[footnote 1]} on the introduction of the default tariff cap and sought evidence from suppliers on these costs. In the final impact assessment,^{[footnote 2]} they estimated that the administrative cost of a price change was 87 pence per customer. The cost estimate was taken as a weighted average of responses submitted by suppliers ranging from 20 pence to £1.80 per customer.

Direct costs on eligible EIIs

The proposed uplift from 60% to 90% compensation does not come with any additional familiarisation or administrative burden costs beyond those already estimated in the previous consultation.

Applications

Under the current design of the NCC scheme, EIIs are required to submit applications for compensation on a quarterly basis during the application window. These application windows are one month long. However, following the rollout of the NCC scheme, the UK government has come to recognise that this limited time window can create challenges for EIIs in submitting their application if they do not receive evidence of costs from their supplier in time.

The UK government proposes extending each application window from 1 to 2 months. This would provide EIIs with additional time to submit applications with the required information from their suppliers, reducing their need to make future corrections. With more accurate data going into initial applications, it also improves the accuracy of the levy total claims estimates Elexon will publish 6 months prior to each levy month, providing greater assurance to suppliers of future costs.

Summary of questions

On the proposed uplift:

1. Do you agree with the proposal to raise the level of compensation from 60% to 90%?

2. Do you have any further evidence from your sector to support raising the level of compensation above 60%?

On applications:

3. Do you agree with the proposal to extend each application window to 2 months?