Energy-Intensive Industry Electricity Support Payments and Levy (Amendment) Regulations 2026

Lord Sharpe of Epsom Excerpts

Wednesday 25th February 2026 Grand Committee

[Lord Sharpe of Epsom (Con)]

My Lords, I am very grateful to the Minister for his detailed explanation, but it is difficult to consider this statutory instrument without reflecting on the circumstances that have made it necessary. The Government have presented these regulations as a modest and technical adjustment—an increase in the network charge compensation from 60% to 90%—but the scale of that increase speaks volumes. We are not dealing with marginal fine-tuning; we are witnessing the expansion of an emergency support mechanism designed to shield our most electricity-intensive industries from energy costs that have become structurally uncompetitive. If our electricity market were delivering affordable power to the productive economy, such levels of compensation should not be required.

The Government’s own impact assessment, and my noble friend Lady McIntosh of Pickering, have acknowledged that, even after the British industry supercharger package, UK electricity-intensive industries will still face costs of around £93 per megawatt hour, compared with roughly £60 per megawatt hour in France and Germany. I go back to the impact assessment, because the first sentence is also extremely instructive:

“Great Britain’s energy-intensive industries … continue to face some of the highest electricity prices in Europe, even after existing relief measures, due to higher network charges and policy costs compared to competitor countries”.


Those two words, “policy costs”, are extremely instructive. These charges are the result of policy choices.

A recent study by the Adam Smith Institute underlined the scale of the challenge. It showed that British businesses are paying nearly double the price of power paid by their French counterparts. The report identified as the most important factor in that disparity the United Kingdom’s reliance on what it described as

“a combination of expensive renewables and a gas backstop”.

The chief executive of the trade body Ceramics UK has said:

“The relentless drive towards net zero is moving far faster than either kiln or fuel technology. Despite massive investment by the industry, achieving decarbonisation is extremely challenging and will lead to further deindustrialisation”.


Of course, the impact assessment also refers to the decarbonisation issue.

The Confederation of British Industry has warned that high energy prices threaten the United Kingdom’s standing as a manufacturing nation. Pointing to the competitive disadvantage faced by British firms—

--- Later in debate ---

[Lord Sharpe of Epsom (Con)]

I do not imagine there is much clamour for me to start my speech again, so I will go back to where I got to; I made a note.

The Confederation of British Industry has warned that high energy prices threaten the United Kingdom’s standing as a manufacturing nation. It points to the competitive disadvantage faced by British firms relative to their continental counterparts. These are not the words of ideological opponents of decarbonisation; they are the considered assessments of employers who are attempting to maintain operations, jobs and investment in this country.

We have already seen troubling signals across energy-intensive sectors, including investment decisions delayed, production lines scaled back and uncertainty weighing heavily on the industries that form the backbone of our industrial base: chemicals, glass, ceramics and, most importantly, steel. Steel is vital for our construction, transport, defence and infrastructure, yet our steel producers have faced a combination of high electricity prices and carbon costs and political and policy uncertainty, which has left them at a clear disadvantage compared with their European competitors.

It is in that context that the continuing absence of a comprehensive steel strategy is so concerning. We were told that such a strategy would be forthcoming last year and then to expect it in spring this year. Spring has nearly run out, so where is it? We are still waiting. Businesses making multi-million-pound investment decisions cannot operate on the basis of repeated assurances and shifting timetables. I know that the Minister will not be able to answer the question of where the steel strategy is but perhaps he could write to us and let us know what is causing the hold-up.

The Government will say that the additional £100 million or so in relief and the estimated £131 million in annual savings for around 320 businesses demonstrate their commitment to protecting our industry. They will note that, as my noble friend Lady McIntosh of Pickering pointed out, the cost to households is forecast at no more than £1.50 per year. Yet the broader point remains: we are redistributing costs in order to compensate for a system that has produced persistently high electricity prices. Relief mechanisms may alleviate the immediate pressure but they do not address the underlying drivers of those costs or close the gap in competitiveness with Europe and our other competitors, particularly the USA.

As it stands, we will of course not oppose this instrument; the country and our strategic industries need this relief. However, we oppose the policy choices that have led to this most regrettable state of affairs.

[Lord Leong (Lab)]

My Lords, I thank all noble Lords for their valuable contributions to this debate. As I said in my opening speech, the increased relief offered through the network charging compensation scheme will provide critical support for foundation sectors across Great Britain, including steel, chemicals, cement, battery and semiconductor manufacturing, helping ensure delivery of the Government’s modern industrial strategy. These EIIs are located right across the country and provide thousands of well-paid jobs, both directly and in the wider supply chain. The Government intend to carry out a review of the data underpinning the British industry supercharger this year in order to assess how the scheme continues to meet the needs of EIIs and to ensure that support continues to be directed at those sectors most in need of the aid.

I will address some of the questions posed by noble Lords but, before I start, I pay tribute to the noble Baroness, Lady McIntosh, for all the work that she has done in National Energy Action, especially the action for warm homes. I acknowledge her expertise in this area. To address the point made by the noble Lord, Lord Sharpe, historic reliance on fossil fuels has left the UK exposed to volatile global energy markets, a vulnerability obviously highlighted by Putin’s invasion of Ukraine.

[Lord Sharpe of Epsom (Con)]

Yes, but of course we could have exploited our own reserves in the North Sea, and that was another policy choice. So that is not strictly a fair argument.

[Lord Leong (Lab)]

Well, it is one of the arguments, I will accept that. At the same time, I accept the point that this is a policy decision that was taken. But the mission is to make Britain a clean energy superpower, whereby we will reduce this dependency by transitioning to a diverse energy system based on renewables and nuclear.

At the end of the day, we also need to address—as the noble Baroness, Lady McIntosh, asked—the cost to consumers. The Government will continue to fund the NCC scheme through the EII support levy, which is charged on all licensed electricity suppliers to Great Britain, as the noble Baroness mentioned. To offset this, the Government will bear down costs across the energy system to ensure that domestic and non-domestic energy consumers do not see a net increase in their electricity bills as a result of the uplift of the NCC scheme. We are also taking action to reduce costs across the energy system, helping to ensure that the British industry supercharger and the British industrial competitiveness scheme are delivered in line with our wider priority of providing affordable power for businesses and households. The Government’s clean energy superpower mission sets out a long-term plan to strengthen energy security and reduce electricity prices by expanding clean energy and improving interconnections with EU markets.

The noble Lord, Lord Fox, asked about the broken energy market. This is precisely why the Government have the clean energy superpower mission, which is, as I have just said, to strengthen energy security and reduce electricity bills by expanding clean energy and improving the interconnection with EU markets. The noble Lord, Lord Fox, also made a point about other businesses. The supercharger is currently targeted at the EIIs most prone to carbon leakage. However, the Government will undertake a review of the eligibility criteria for the supercharger this year—we are undergoing a review of the various sectors.

[Lord Fox (LD)]

I thank the noble Lord for his response. The supercharger is in itself a good thing, but unless it is combined with a real understanding of the financial mechanisms by which the market is organised, it will not deliver energy at a price that will be less than our competitors around the world. So there is a second part; it is not just the generation and the distribution but the financial engineering behind that which will make it work.

On the second point on other businesses, I am very glad that the Government are having a review, but could they hurry up? If you sit down with any manufacturing business, anywhere in the country—not the ones that are benefiting from this scheme but those that are not—it will list energy costs as its number one or number two major concern. If this review does not get on with it, some of those businesses—hopefully not too many—will not be there to benefit from whatever the review comes up with.

[Lord Sharpe of Epsom (Con)]

Before the Minister comes back in, can I add to the noble Lord’s question? Of course, it is not just the manufacturing businesses that we are interested in; we need to attract data centres, which have enormous power requirements. That is partly for sovereign security reasons, as regards how we maintain our own data and the integrity of that data. What is being done to attract those businesses here? What sort of financial mechanisms are in place? Are there any plans to expand this sort of scheme to businesses that are not yet located here but that we so urgently need?

[Lord Leong (Lab)]

I acknowledge all the points made by the noble Lords, Lord Fox and Lord Sharpe. I am aware of the increased energy costs. I congratulate the previous Government on actually setting up the supercharger scheme and building it up. Yes, we need to look at the financial scheme and everything else, but we have what we have now, and we are increasing the relief from 60% to 90% as a stopgap—if I can use that word—to help businesses now. We are going to undertake the review to look at what we need to do, as a whole—especially on the SME point mentioned by the noble Lord, Lord Fox.

The supercharger is open to SMEs as well as larger businesses, provided they produce an eligible product. Currently, of the 550 businesses eligible for the scheme, 60% of them are SMEs, so SMEs are not being disadvantaged and can access the scheme. The key criterion is that the business, regardless of its size, is in an eligible sector—one that is highly traded and electricity intensive—and meets the business test for the relevant scheme.

I turn to the point that the noble Lord, Lord Sharpe, made about net zero. As I said earlier, this is a policy decision. Our clean energy superpower mission is a long-term plan to increase our energy security and reduce electricity bills. This includes investing in clean energy and strengthening our connections to the EU energy market, capitalising on the economic opportunities of the net-zero transition.

The other point to make is that these changes support our mission to bring down bills down for good, with homegrown clean energy or clean power that we control, ensuring that industry reaps the rewards of lower energy costs. We are developing further policies to narrow the electricity price gaps for non-domestic users. We intend to consult on options to reduce electricity costs and make low-carbon heat the economically natural choice. This will give stakeholders a clear opportunity to shape the next phase of electrification policy.

The noble Lord, Lord Fox, mentioned data centres. I must admit that I am kicking myself, because I know the answer to this: we are aware that data centres use massive energy and water, and we have a plan. I will write to the noble Lord setting out what we are doing as far as data centres are concerned. He also asked about our steel strategy. I had a quick check on BBC Online and, according to the BBC, spring is in March, April and May, so we are still getting into it. I hope to share our strategy with the noble Lord then.

As I said earlier, we are building on what the previous Government have done as far as the supercharger is concerned. We are supporting energy-intensive industries by uplifting the relief, and these regulations go some way to supporting that. I commend them to the Committee.