Business Energy Glossary
What is the EII Scheme?
The Energy Intensive Industries (EII) Scheme is the UK government programme compensating energy-intensive businesses for the indirect cost impact of certain policy costs on their electricity bills. The scheme covers a defined list of sectors with high electricity intensity and international competition exposure. Costs covered include up to 100 per cent of the indirect costs of the Renewables Obligation, Contracts for Difference, Capacity Market, and Feed-in Tariff costs passed through to the customer in the unit rate. The scheme aims to maintain UK competitiveness in trade-exposed industrial sectors that would otherwise face higher costs than international competitors.
The EII Scheme is a major UK industrial policy tool affecting energy-intensive manufacturing competitiveness. Understanding eligibility, compensation levels, and the relationship to other schemes matters for any large industrial energy user.
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What the EII Scheme covers
The Energy Intensive Industries (EII) scheme exempts eligible electricity-intensive manufacturers from most of the cost of the Renewables Obligation, Feed-in Tariffs, Contracts for Difference and Capacity Market. Certified businesses pass their certificate to their supplier, which reduces those policy costs in their electricity charges.
For the full explanation, see How business electricity prices are calculated.
The EII Scheme provides compensation for the cost impact of:
- Renewables Obligation (RO). Up to 85 per cent of pass-through cost.
- Contracts for Difference (CfD). Up to 85 per cent of pass-through cost.
- Capacity Market. Up to 85 per cent of pass-through cost.
- Feed-in Tariff (FiT) levy. Up to 85 per cent of pass-through cost.
The exemption is applied through the business’s supplier once it holds a certificate following annual application and verification. Certificate holders give the certificate to their supplier, which applies the exemption to their electricity charges.
Eligibility criteria
To qualify for EII, a business must:
- Operate in one of the listed eligible sector codes (NACE codes covering steel, chemicals, cement, glass, paper, ceramics, etc.).
- Have electricity costs above 7 per cent of Gross Value Added (GVA), and
- Have trade intensity above 4 per cent.
The eligibility test must be passed at the business level, not just the sector level. Some businesses in eligible sectors do not qualify because their specific operations do not meet the intensity thresholds.
Compensation calculation
EII compensation is calculated annually:
- Business eligible electricity consumption is measured.
- The pass-through cost of compensated levies is calculated (in p/kWh).
- Compensation = eligible consumption × pass-through cost × compensation rate (up to 100 per cent).
For a large steel mill consuming 200 GWh per year with pass-through levy costs of 3 p/kWh, compensation could be around £5.1 million per year (200,000 MWh × 30 £/MWh × 0.85).
British Industry Supercharger
The British Industry Supercharger announced in 2023 (and being implemented through 2024-25) expands EII support:
- Network charging exemption. Reduced or zero network charges for qualifying EII sites.
- RO exemption. Direct exemption from Renewables Obligation costs (replacing partial compensation).
- CfD exemption. Direct exemption from CfD costs (replacing partial compensation).
- Capacity Market exemption. Direct exemption from CM costs (replacing partial compensation).
The Supercharger applies the support upstream (removing cost from the bill) rather than downstream (compensating after the cost is incurred). This is operationally simpler for businesses and reduces working capital requirements.
How to apply
The application process:
- Apply for an EII Certificate from DESNZ demonstrating eligibility.
- Certificates run to 30 June each year and are renewed annually.
- Submit annual compensation claims with supporting consumption and cost data.
- DESNZ verifies and pays compensation (typically with a several-month lag from the claim period).
For the Supercharger, the certificate also enables upstream exemption arrangements with suppliers and network operators, with the cost reduction appearing directly on the bill rather than as a separate compensation payment.
Related schemes
EII complements other UK industrial energy schemes:
- Climate Change Agreement (CCA). CCL reduction (up to 92 per cent on electricity, 89 per cent on gas) for energy-intensive sectors meeting efficiency targets.
- UK ETS allocations. Free emission allowances for trade-exposed sectors.
- Industrial Energy Transformation Fund (IETF). Capital grants for industrial decarbonisation.
- Energy Security Investment Mechanism. Tax-based windfall support.
The combined effect of these schemes can be substantial for qualifying industrial sites, often amounting to 20 to 30 per cent reduction in delivered electricity cost compared to a non-qualifying customer of the same size.
the EII Scheme FAQs
What is the EII Scheme?
The UK government programme compensating energy-intensive businesses for the indirect cost impact of certain policy costs on their electricity bills, covering up to 85 per cent of RO, CfD, Capacity Market, and FiT pass-through costs.
Who qualifies for the EII Scheme?
Businesses operating in listed eligible sector codes (NACE codes including steel, chemicals, cement, glass, paper, ceramics) with electricity costs above 7 per cent of GVA and trade intensity above 4 per cent.
What costs does EII compensate?
Renewables Obligation, Contracts for Difference, Capacity Market, and Feed-in Tariff levy costs passed through to the customer in the electricity unit rate, at up to 85 per cent of the pass-through amount.
How much does EII compensation reduce costs?
Highly variable. For a typical EII-qualifying steel or chemicals plant, EII compensation can amount to several million pounds per year, reducing delivered electricity cost by 1 to 3 p/kWh against an equivalent non-qualifying customer.
What is the British Industry Supercharger?
A 2023 expansion of EII support introducing upstream exemption (rather than downstream compensation) for RO, CfD, and Capacity Market costs, plus reduced network charges. Implemented through 2024-25.
How do I apply for EII?
Apply for an EII Certificate from DESNZ demonstrating eligibility. The certificate is valid for two years and supports annual compensation claims (or, under the Supercharger, upstream exemption arrangements with suppliers and network operators).
How is EII different from CCA?
EII compensates for indirect policy costs (renewable subsidies, capacity market) passed through in the electricity unit rate. CCA reduces the Climate Change Levy directly. The two schemes are complementary; many energy-intensive businesses qualify for both.
Can SMEs apply for EII?
EII has no formal SME exclusion, but the eligibility test (sector code, electricity intensity, trade intensity) tends to apply mainly to mid-size and larger industrial businesses. Most SMEs do not meet the intensity thresholds.