The below guidance is in conjunction with the Guidance published by the Department for Business, Energy and Industrial Strategy which can be read here.

Are you defined as Energy Intensive?

There are two steps to determine if a company is eligible to claim compensation for the costs of RO and FiTs:

1) Your business must manufacture a product in the UK within an eligible sector (see the guidance document for details)

AND

2) Your business must pass the 20% electricity intensity test.

Passing the 20% electricity intensity test

So your business manufactures products within an eligible sector, but what is the 20% electricity intensity test?

It is defined in the guidance as mean electricity costs amounting to 20% or more of your Gross Value Added (GVA).

GVA is defined as "earnings before interest, taxes, depreciation and amortisation (EBITDA) and staff costs including employer’s pension and NI contributions."

So a quick calculation to determine if you are likely to be energy intensive is as follows:

Pick a 12 month period (ideally an accounting period).

A – What is your EBITDA for that period? Your accountant or Finance Director should be able to help.

B – What were your staff costs for that period (including pension and NI contributions)?

Add A and B together

C – What were your electricity costs for that period? (We can help calculate this if you need us to).

Does C represent 20% or more of (A + B)? If so, you COULD be eligible for the compensation. There are a lot of other rules surrounding the compensation arrangements, but the calculation above should give you a good idea of whether you might qualify.

Do Cost Advice already know if we are Energy Intensive?

While we might know your electricity costs, as the intensity test relies on knowing profit levels and staff costs, we can’t know upfront whether you are defined as energy intensive, even if you are a manufacturing business operating in one of the eligible sectors.

What if we think we are Energy Intensive after performing the test?

Please get in contact with you account manager as soon as possible, giving them as much information as you can. There are numerous other qualification criteria, but we can help establish your position.

If you have any other queries, please don’t hesitate to contact your account manager or call the office on 0800 040 70 90.