Understanding EII support: A guide for UK manufacturers

03/02/26

The UK Government’s Energy Intensive Industries (EII) compensation scheme has been designed to ensure that the UK’s most energy intensive businesses remain competitive within global markets. As an energy consultancy working closely with many industrial and manufacturing clients, we are regularly asked about business eligibility for EII support. With rising electricity costs and increased carbon related charges, understanding your eligibility has never been more important.

What is the EII compensation scheme?

The EII compensation scheme is a government initiative designed to offset some of the energy related costs that disproportionately affect industries with high electricity use. These costs come largely from renewable policy mechanisms such as Renewable Obligations (RO), Feed in Tariffs (FITs), Contracts for Difference (CfDs), and other non-commodity elements that contribute to the overall electricity price. Eligible businesses can receive significant compensation, in some cases up to 100% of certain charges.

Understanding eligibility: SIC codes

A core requirement of the EII compensation scheme is that a business must operate within an eligible sector, which is defined by a four-digit Standard Industrial Classification (SIC) code. SIC codes are used to categorise a business’ activities, and they are used as the primary filter to determine which industries are energy and trade intensive enough to warrant support. The government publishes a detailed list of eligible SIC codes, many of which fall within manufacturing, chemicals and food production. Examples of eligible sectors include:

• 10.11 – Processing and preserving of meat
• 10.61 – Manufacture of grain mill products
• 10.81 – Manufacture of sugar

Understanding eligibility: Electricity Intensity Test

It is not only a business SIC classification which is taken into consideration, businesses must also pass the electricity intensity test, demonstrating that their electricity costs amount to at least 20% of their Gross Value Added (GVA), based on data from the three most recent financial years. This ensures support only goes to firms genuinely affected by high electricity prices.

Network Charging Compensation (NCC) Scheme

The NCC Scheme is a UK government program providing all organisations who hold an Energy Intensive Industries certificate (EIIs) with additional financial support by compensating them for a significant portion of their electricity grid network charges.  The NCC Scheme is funded by a levy paid by all electricity suppliers and administered by Elexon.  Currently EIIs receive a 60% reduction on their network charges, however this will increase to a 90% reduction, from the 1^st April 2026.  EII’s are required to make quarterly applications to Elexon for rebates on the Transmission, Distribution, and Balancing Services Use of System charges they have incurred. 

Next steps

If you believe your SIC code is eligible – or if your activities span multiple codes – it’s worth carrying out an eligibility assessment. We can help you by reviewing your SIC classification and perform the electricity intensity test to check your eligibility.  We can also support your organisation through the EII compensation scheme application process and if you are approved, can assist with the ongoing management of both the EII and the NCC Schemes.  This is to ensure that your business receives the full support it’s entitled to, while remaining compliant with all scheme requirements.

The EII and the NCC Schemes have ongoing reporting obligations, which require participants to liaise with their electricity suppliers on a regular basis, to obtain specific data which must be included on quarterly and annual returns to Elexon and the Department of Business & Trade.   These data returns have strict submission deadlines, which if aren’t adhered to, will result in eligible organisations not receiving the full level of relief they qualify for. 

If you are interested in finding out more about these schemes, your eligibility or navigating the application process, please contact IEC on 01244 571830 or email admin@innovativeenergy.co.uk