New 10-Year Industrial Strategy: how will it impact business energy costs?

Last year, energy-intensive firms in the UK paid twice the European average in electricity costs. Coupled with the challenge of long grid connection wait-times, these are highly significant barriers to the energy transition.

In response, the UK government has unveiled a comprehensive 10-year industrial strategy that’s designed to foster innovation, drive sustainable growth, and enhance the competitiveness of UK businesses on the global stage. Tackling business energy costs is a critical focus area within this strategy.

The Government has outlined several initiatives:

• Reduce electricity costs: From 2027 to 2030, a new British Industrial Competitiveness Scheme will reduce electricity costs by c.£35-40/MWh for thousands of businesses. This will be achieved by giving eligible businesses an exception from paying the costs of the Renewables Obligation, Feed-In Tariffs and the Capacity Market. Eligibility criteria will be determined following an upcoming consultation.
   
• Introduce a UK Carbon Border Adjustment Mechanism (CBAM) from January 2027: There is also ongoing work towards linking respective Emissions Trading Schemes with the EU, which would create the conditions for CBAM exemptions.
   
• Review of the Energy-Intensive Industries Compensation Scheme: this review is expected by the end of the year, and will set out how support will continue when the UK CBAM is implemented in 2027. These measures will be funded by bearing down on levies and other costs in the energy system. The Government also intends to use additional funds from the strengthening of UK carbon pricing, including as a result of linking with the EU carbon market.
   
• Support the development of the Corporate Power Purchase Agreements (CPPA) market: A call for evidence will be launched on how a market for CPPAs can be developed.
   
• Reduce grid connection waiting times: A new ‘Connections Accelerator Service’ will provide support connecting to the grid for demand projects, including prioritising those that create high-quality jobs and bring the greatest economic value. This will begin operation at the end of 2025. 
   
• Continue to consider zonal pricing: A decision on this is expected shortly. 

By focusing on renewable energy, energy efficiency, and innovation, the strategy aims to create a more sustainable and competitive business environment. While there may be some short-term adjustments, the long-term benefits of reduced energy costs and enhanced competitiveness are expected to outweigh any initial challenges.

Need help navigating the changing energy landscape? We can help you to plan, design, build, finance and maintain behind-the-meter energy projects that can deliver significant cost and carbon savings, as well as safeguarding you can a volatile energy market. Get in touch with the team for a confidential conversation.