Will the energy support scheme continue?

Introduced on 1 April 2023 by the Department for Energy Security and Net Zero (DESNZ) as a replacement for the Energy Bill Relief Scheme (EBRS), the Energy Bills Discount Scheme (EBDS) was the next phase in the government’s financial support to help businesses with their energy costs during a time of unprecedented wholesale market volatility.

While it provided most businesses with a much lower level of support than the EBRS, the EBDS still offered some economic benefits to more energy intensive industries. With it ending on 31 March 2024, and with no more direct financial support from DESNZ in the government’s plans, what does this mean for businesses?

The good news is that wholesale prices have been dropping since their peak during the energy crisis. However, we know that costs are still high, market liquidity is still a major issue, and that many companies are still facing other ongoing financial challenges.

This means it is more important than ever for businesses to look at ways they can take control of their energy consumption.

Firstly, where eligible, businesses should take advantage of any of the government’s current funding schemes. For example, energy intensive industries could investigate the Industrial Energy Transformation Fund (IETF) and public sector organisations will be pleased to learn that Phase 4 of the Public Sector Decarbonisation Scheme (PSDS) was recently announced. In addition, a consultation to extend the Climate Change Agreement (CCA) scheme recently closed, so we will await the outcome of that.

What else is there for UK businesses?

The second phase of the Review of Electricity Market Arrangements (REMA) consultation was recently published and saw DESNZ unveil its proposals for a more responsive energy system with the aim of reducing costs for businesses and consumers. 

For businesses, we know that they will want reassurance that the future energy system supports them by keeping costs stable and manageable, that it enables them to reduce demand, and that it provides a reliable supply of clean energy to support their own decarbonisation strategies. 

However, these changes will take time, and businesses need support now to enable them to invest in measures that will help them both in the short term and prepare them for a more stable future.

In the Spring Budget, the announcement that the government is intending to extend full expensing - where businesses get tax breaks when investing in major assets, such as plant and machinery that reduce emissions - to leased assets, was welcome. That said, crucially, the Chancellor caveated this, by saying that it would only be possible ‘when it is affordable to do so’. With no concrete timeline, it will be difficult for businesses to plan.

At the time, we said that business energy users who had been asking for measures such as a reduction in VAT for public electric vehicle (EV) charging, increased incentives for energy efficiency, and sector roadmaps for net zero, will have been left disappointed.

But, that’s not to say that businesses can’t take action now. Investing in energy efficiency is a no regrets action that will both reduce energy costs and carbon emissions, with a direct impact on the bottom line. 

Similarly, there are ways to fund bigger measures such as on-site generation without upfront costs. A Power Purchase Agreement (PPA) can help finance a project and enable businesses to sell any excess power to other corporate energy users.

However, in this crucial election year, it is vital that the voice of business is heard. And, while some measures announced recently will be welcome, there is still the feeling that more could be done to support businesses, particularly when it comes to helping them proactively reduce energy consumption, and make the necessary investments to support net zero.