Non-commodity charges have hit the headlines recently with talk of the British Supercharger package and its potential impact on consumers as the UK sets out plans to boost businesses and provide exemptions for electricity costs. Government also announced changes to the proposed hydrogen levy which was set to impact household bills along with other potential changes to charges. While there’s political appetite for more costs to bills versus the necessary steps to achieve Net Zero by 2050, this makes this a very uncertain area for our customers, so we’ve summarised a few changes which may be on the way.
In this blog, Louise Hellyer, our Commercial Risk Manager, takes a brief look at what these non-commodity changes may be if they are likely to happen and when.
Non-commodity charges have hit the headlines recently with talk of the British Supercharger package and its potential impact on non-domestic user, along with government announcements of changes to the hydrogen levy which was set to impact households. While there’s political appetite for more costs to bills versus the necessary steps to achieve Net Zero by 2050, this makes this a very uncertain area for our customers, so we’ve summarised a few changes which may be on the way.
In this blog, Louise Hellyer, our Commercial Risk Manager, takes a brief look at what these non-commodity changes may be if they are likely to happen and when.
Louise also joined the team at Future Net Zero on their Net Hero Podcast – to chat through all things non-commodity!
Energy Intensive Industry (EII) Exemption and Network Compensation Scheme (Power) – EII Support Levy
In early 2023, The UK Government announced the British Industry Supercharger (BIS), a set of measures aimed at making energy intensive industries more competitive, reduce their energy costs and tackle carbon leakage and associated emissions.
Energy Intensive Industry Exempt customers will have 100% exemption for RO (renewables obligation), CFD (contracts for difference), FiTS (feed in tariffs) and Capacity Market costs. They will also get 60% exemption of costs for Distribution, Transmission and BSUoS costs.
Status: This is happening.
When: Expanded exemptions begin April 2024. New Supplier charge ‘EII Support Levy’ will be effective from April 2025 and charged to demand users.
Size: Approximately £1/MWh.
Nuclear Regulated Asset Base (RAB) (Power)
The Nuclear Energy Bill which came into effect in 2022 set out new funding for the nuclear industry in the UK to tackle challenges around net zero and with this came the RAB model – a new funding method. This economic regulation adds a new supplier charge to provide a reliable revenue stream from consumers for the construction and operation of new nuclear projects.
Status: Very likely. Awaiting approval from Parliament and commercial discussions ongoing around the Sizewell C project.
When: Not known.
Size: Less than £0.5/MWh for the first few years. Charge will increase significantly in later years, depending on budgets and number of nuclear projects in the scheme.
Hydrogen levy (Gas)
The Energy Act 2023 passed through parliament in 2023, and with this bought bout the Hydrogen levy, designed to support the development of hydrogen in the UK with a new charge to subsidise and provide long term funding to produce low carbon hydrogen.
Status: This will happen and will be a charge passed through via Shipper charges.
When: It will go live at the end of 2026, with the Treasury picking up the bill in the meantime.
Size: Not known. There are no previous examples of subsidising low carbon hydrogen production and costs will depend on the scale and how many projects are attracted to the scheme.
Carbon Capture Subsidy (Power/Gas TBC)
A subsidy to support Carbon Capture, Usage and Storage (CCUS) projects to reduce CO2 emissions. It’s the governments ambition to capture 20-30 megatons of carbon dioxide by 2030. CCUS has the potential to decarbonise the economy and facilitate economic growth in the UK.
Status: Likely but it requires further government consultations and impact assessments.
When: Not known, estimated late 2020’s.
Size: Not known at this stage.
Keep an eye on our blog pages for further updates as we’ll be bringing you more industry insights and regulatory updates as we get them.
Make sure you check out the latest Net Hero Podcast episode:
Net zero is a way to cut your costs and help the planet, so what’s stopping you? Often, it’s just the right help and advice. That’s what we will provide at the Big Zero Show this July. Workshops, expert speakers, case studies and exhibitions. Plus, networking with 1500 peers and potential customers. Register for free now.
