Contracts for Difference (CfD) exemption: electricity supply estimates - technical note, 2017
Published 28 March 2017
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This note sets out the latest estimates of electricity supplied to Energy Intensive Industries (EIIs) who will be eligible for the exemption from the indirect costs of Contracts-for-Difference (CFD).
Forecasts of potential electricity eligible for exemption from CFD costs are uncertain. The amount of electricity used by EIIs fluctuates each year and is influenced by how much output the business produces and their energy efficiency. Businesses may also make decisions between using grid (eligible for exemption) and non-grid sources (not eligible). Furthermore, it will not be clear how many businesses will enter or leave the scheme in the future, though the major EIIs that government is aware of have applied to the Renewables Obligation (RO) and Feed-in Tariff (FiT) compensation schemes.
The table below shows the estimates of eligible electricity as currently permissible under the European Commission’s state aid decision based on the applications received for the RO/FIT relief schemes by the end of November 2016 (the eligibility criteria for the RO/FiT and CFD relief schemes are the same with the exception of Northern Ireland where only the RO applies). The table does not include the volume of electricity of those EIIs that might become eligible under the second state aid notification that the government has submitted to the European Commission.
| Year | Estimated Eligible Electricity Consumption (TWh) |
|---|---|
| 2017/18 | 11.8 |
| 2018/19 | 11.7 |
| 2019/20 | 11.7 |
| 2020/21 | 11.7 |
| 2021/22 | 11.7 |
| 2022/23 | 11.6 |
| 2023/24 | 11.6 |
| 2024/25 | 11.6 |
| 2025/26 | 11.6 |
| 2026/27 | 11.6 |
The estimate uses the following assumptions:
- the majority of existing RO/FiT applicants have been processed, but for the remainder BEIS analysts have made a judgement of likely eligibility to estimate eligible electricity as of November 2016
- total eligible electricity consumption for each individual business will fall by 0.7% per year. This is obtained by extrapolating the change in electricity consumption over time for the central estimate of a large EII receiving support in the supplementary tables of DECC’s 2014 estimated impacts of energy and climate change policies on energy prices and bills
- there will be a net increase of 2 applicants every 3 years (businesses of average size). This is based on the number of businesses joining and leaving the ETS/CPS scheme upscaled to account for the difference in size of the 2 schemes
- the cost of the Contracts-for-Difference scheme will increase in line with BEIS forecasts