Department for Energy Security and Net Zero (DESNZ) and the Department for Business and Trade (DBT), Energy Intensive Industry Exemption from the Nuclear Regulated Asset Base policy costs scheme

  • The proposed subsidy is a grant to Energy Intensive Industry businesses in Great Britain (GB), to reduce electricity costs, encouraging EII decarbonisation and electrification and minimising the risk of carbon leakage.
  • The Assessment does not set out a cap for the Scheme in terms of amount of subsidy that could be paid, but DESNZ and DBT estimate that the annual value of the subsidy granted under the Scheme may be in the tens of millions in 2025. Because of the uncapped design, the Scheme is capable of allowing subsidies to be granted over the value of £10 million.
  • Our key takeaways from the Subsidy Advice Unit (SAU) report are:
    • The Assessment would have benefited from describing in detail:
      • The market failure it seeks to remedy, providing more evidence and a detailed explanations of the link between the market failure and the policy objectives.
      • How the Scheme would address carbon leakage. The Assessment’s electricity price analysis was based on certain European countries, whereas anecdotal evidence was based on countries outside of Europe.
      • How exempting EIIs from 100% of the costs of the nuclear RAB is appropriate to achieve the policy objectives.
    • The Assessment should have explained why the more limited increase to electricity costs from the nuclear RAB could not be absorbed as day-to-day costs in the absence of the Scheme.
    • The Assessment references public evidence as regards to differing national carbon footprints in terms of electricity grid greenhouse gas emissions, but this could have been strengthened by demonstrating that the price gap between the UK and EU countries would result in carbon leakage.
    • The Assessment could be improved by showing evidence of how, absent the subsidy, EII firms are a risk.
    • Assessments should expressly set out the likely change in economic behaviour that this subsidy scheme is designed to bring about.

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Posted in Subsidy Advice Report Tracker.