On the 1st of April 2023, the Energy Bill Discount Scheme (EBDS) replaces the Energy Bill Relief Scheme which currently provides a discount on wholesale gas and electricity prices for all non-domestic consumers. This includes public sector organisations, voluntary sector organisations like charities, and businesses.
So how is the EBDS changed from the Energy Bill Relief Scheme (EBRS)?
The Treasury has announced the replacement for the EBRS, the EBDS an initiative that offers a discount on wholesale prices based on thresholds rather than a fixed price which adds a layer of confusion for business owners.
To help make this easier to follow we’ve put together a quick run-down.
Let’s start with the fact previous support capped wholesale prices at £211 per MWh for electricity and £75 per MWh for gas. The new scheme outlines that the maximum discount a non- ETIIs category business user can achieve is 1.9p per kWh, that’s on the proviso that your wholesale costs are above £302 per MWh, a huge reduction from the previous maximum discount of 34.5p per kWh. ETIIs can look at a new maximum discount of 8.9p per kWh also down from 34.5p per kWh starting at a lower wholesale threshold of £185 per MWh.
So what does that mean and how did we get to this point?
From April 1, 2023 businesses with wholesale energy costs below £302 per MWh for electricity and £107 per MWh for gas will receive no support at all, with those in the ETIIs category having lower thresholds of £185 per MWh and £99 per MWh respectively.
Maximum discounts have now also been revised, but to simplify this for you, previously discount caps were £345 per MWh for electricity and £91 per MWh for gas. These have been significantly reduced to £19.61 per MWh and £6.97 per MWh. For ETIIs category businesses this will be £89 per MWh and £40 per MWh respectively.
Using this information in the real world
Looking at electricity, we can surmise that a customer’s actual price per MWh would be around £419 per MWh, or 41.94p per kWh (assuming wholesale price attributes around 72% of what a customer pays total) before a discount begins to take effect. Using the same logic on the old EBRS discounts would kick in much earlier at around £293 per MWh or 29.31p per kWh.
We can then also use the same assumptions on the discount amount, the scheme suggests that the discount is capped at £19.61 per MWh or 1.96p per kWh when previously this was £345 per MWH or 34.5p per kWh. To put this in perspective, the reduction in the support offered is £325.39 per MWH or 32.54p less than the previous support offered.
Taking this one step further we can then surmise, that up to a wholesale price of £301.99 per MWh or 30.2p customers will receive no discount. A customer would have to be paying a wholesale price of £321.61 per MWh or 32.16p to hit the maximum discount per kWh of £0.019p, reducing the bill by £19.61 per MWh.
If we take this wholesale consideration and make it an actual price a customer would need to be paying to achieve maximum discount it would equate to approximately 44.66p per kWh.
If that customer used 1,000 kWh a month the bill would be reduced from £446.60 to £426.99. An annual discount of just £235.32.
Previously on the EBRS, this customer would have seen a bill of £446.66 reduced to £293.05. A much higher annual discount of £1,843.32.
What are ETIIs and what’s different for them?
The Government has acknowledged that some non-domestic energy users in Great Britain and Northern Ireland are particularly vulnerable to high energy prices due to their energy-intensive and trade exposure, these are being referred to as Energy and Trade Intensive Industries or ETIIs, please see a list here), these sectors will receive a higher level of support with their pricing.
With a lower threshold for entry in qualification for discount and a higher maximum discount, if we were to use the same customer as the previous example using 1000 kWh a month at 44.6p, that customers bill would be reduced from £446.66 down to £256.94, as the discount hasn’t yet reached the maximum threshold amount. This would result in a reduction of £2276.64 annually.
Expanding on this, we could presume that ETIIs are more likely to be using energy north of 100,000 kWh a month, resulting in a bill of £46,660 reduced to £37,760 or an annual reduction of £106,800 as this user would hit the £89 maximum discount per MWh.
Previously on the EBRS, this customer would have seen a bill of £46,660 reduced to £29,300 or an annual reduction of £208,320.
How the Government has explained it in their words…
The Energy Bill Discount Scheme will replace the current scheme and will come into effect from April 1, 2023 and will run until 31 March, 2024.
What has been announced:
- Eligible non-domestic consumers will now receive a per-unit discount to their energy bills during the 12-month period from April 2023 to March 2024, subject to a maximum discount.
- The relative discount will be applied if wholesale prices are above a certain price threshold. For most non-domestic energy users in Great Britain and Northern Ireland these maximum discounts have been set at:
£19.61 per megawatt hour (MWh) with a price threshold of £302 per MWh.
£6.97 per MWh with a price threshold of £107 per MWh
- The discount is calculated as the difference between the wholesale price associated with an energy contract and the price threshold. The discount is phased in when the contract’s wholesale price exceeds the floor price, until the total discount per MWh reaches the maximum discount for that fuel.
- Recognising that some non-domestic energy users in Great Britain and Northern Ireland are particularly vulnerable to high energy prices due to their energy-intensive and trade exposure, (referred to as Energy and Trade Intensive Industries or ETIIs, please see a list here), these sectors will receive a higher level of support, subject to a maximum discount. The maximum discounts and price threshold for these sectors are:
£89 per MWh with a price threshold of £185 per MWh
£40 per MWh with a price threshold of £99 per MWh
The level of support for each organisation will vary depending on type and date of contract.
These are illustrative examples only, based on recent averages of forward wholesale prices. Prices may differ from those experienced in practice.
Example 1: A pub
A typical pub uses 16 MWh of gas and 4 MWh of electricity each month. Under the new scheme, it could receive up to £2,280 of taxpayer funded support in the 23/24 financial year.
Example 2: A small retail shop
A typical small retail store uses 2 MWh of gas and 1 MWh of electricity each month. Under the new scheme, it could receive up to £403 of taxpayer funded support in the 23/24 financial year.
Example 3: A medium-sized manufacturing business
A medium sized manufacturer uses 1,600 MWh of gas and 200 MWh of electricity each month. Under the new ETII scheme, it could receive up to £687,120 of taxpayer funded support in the 23/24 financial year.
Reference Link – https://www.gov.uk/guidance/energy-bills-discount-scheme
So where does Green Shield Group come into the conversation?
Simply put, these Government changes are going to hit a multitude of businesses, extremely hard. Even those falling into the higher support categories are having support slashed by over 60%. Businesses need to act to protect themselves as best as they possibly can. A Solar installation can offer businesses a very valuable and immediate lifeline, providing a much-needed pressure release on energy costs and it seems that getting an installation in place before the 1st of April is more important than ever. Energy costs are still going to rise back to similar levels of that before the announcements of earlier Government support, without similar levels of support in place. Solar provides energy to your business at significantly lower prices than those that consumers will see once the Energy Bill Relief Scheme expires.
For reference, our average PPA agreement sits between 12-18p kWh, which supplies your business with a tier one solar system, tailored to your usage with no investment costs… to even qualify for support on the new EBDS, it’s looking likely that the lowest out of contract price could be around 42p per kWh.
On average our solar systems can provide enough energy to cover approximately 30-40% of your overall usage (roof/ground space permitting). This reduction in grid reliance will equate to an average saving of 25-50% on your total bill.
If you’d like to know more about buying a considered and tailored solar PV system for your business, leave us a message here and one of our sustainability consultants will be in touch.