EII Levy Explained: A chat with a former Ofgem insider on what companies should know in 2025 Energy bills are already complicated, but in December 2025, one of the more obscure line items on electricity bills – the EII levy – is increasing costs for hundreds of businesses in the UK. To demystify this energy intensive industry levy and look at what businesses can do to defer or mitigate these costs, we spoke to Alan Cooper, a retired Ofgem employee with 27 years of experience working with industrial energy policy.
Alan:
That’s a great question. EII Levy is the Energy Intensive Industries Levy. It was introduced to help fund the UK’s renewables schemes, specifically the Contracts for Difference (CfD) scheme that funds renewable electricity generators. The idea was that high consuming businesses should pay more towards the cost of the transition to clean energy. But not all businesses need to pay the EII Levy, in fact, some businesses can apply for exemption.
Alan: Green levies tariffs are fees added to the energy bill of businesses in the UK to support renewable energy. In 2025, many businesses in the UK will be able to reduce these fees by utilizing exemptions if they know how to claim them.
Alan: It was introduced in about 2015, but the conversation is building because of the expansion, and stricter enforcement that has taken place recently. The levy was extended and recalibrated after 2022 to coincide with the increased CfD payments, and the HM Government has reduced the threshold for qualifying for exemption in 2025 and made the process of applying for exemption completely new.
As a result, many more companies, particularly SMEs from manufacturing, storage and IT are feeling the squeeze for the first time.
Alan: The usual suspects are heavy energy users: steelworks, ceramic manufacturers, glass manufacturers, paper mills. But increasingly there are also non-traditional sectors like data centres, refrigerated warehouses, and some food processors who have plugged the levy into their bills.
Essentially, if electricity costs are more than 20% of your GVA (Gross Value Added) you are probably liable.
Alan: It’s a little bit of both:
1. your sector, as identified by SIC (Standard Industry Classification codes)
2. your energy intensity, measured as a percentage of your revenue or GVA
DESNZ (the Department for Energy Security & Net Zero, formerly BEIS) provide a list of qualifying sectors, so, if you do fall into one of these and you have electricity bills in excess of 20% of your GVA, you can apply for 85% industrial energy relief from the levy.
The tricky part is: It’s application based and most businesses do not even know that are paying the levy in the first place.
Alan: I won’t lie; it is thorough. You will require:
• 12 months of electricity usage;
• Financials to evaluate GVA;
• SIC codes for eligibility;
• A qualified accountant’s attestation, or audit,
No it is not impossible – it is easy to get wrong. There are businesses I have seen who have lost the exemptions or industrial energy relief because they didn’t tick a box or got stuck on a filing timeline.
Alan: Definitely. I worked with a plastics manufacturer based in Yorkshire. They were unknowingly paying around £38,000 per annum in EII levies. A broker raised this and then helped them submit an industrial energy relief form, and their bill reduced by more than £30,000 per annum. That’s not immaterial.
Even in some medium sized companies I’ve seen five figure savings once the EII exemption scheme kicks in. And in certain circumstances they are backdated.
Alan: I’ve worked with a number of brokers in my career, but brokers like E for Energy are special for a number of reasons:
• They review your existing energy contract to find out if you are currently charged, or on a contract with, the levy
• They review your consumption, and SIC codes, and can tell whether you can apply for exemption
• If you are eligible for EII exemption scheme, they will prepare and submit your exemption paperwork with your utmost permission
• If you are not eligible, they will consider potential options for ways to lessen your energy intensity, or, consider restructuring your operations to meet the required thresholds, in the future
• They can also negotiate better supply tariffs for exempt customers
They are like a personal energy compliance department.
Alan: More than you would think. A lot, especially those who inherited contracts from previous tenants during a Change of Tenancy (COT). Many suppliers, as default, use standard charges which include the EII Levy. I did find a vehicle parts supplier in Birmingham who didn’t realise they had been paying it for 3 years. They did manage to claim some back but not all of it.
Alan: Yes, quite a few:
1. “We’re small – this won’t apply to us.”
o Some of the small electricity bills, if they are a high percentage of the consumers’ other costs, might make a Company level EII Levy apply even to small volumes.
2. “Supplying change will remove it.”
o It shouldn’t because this is a government applied Levy, it is not a supplier charge. There is no such thing as getting rid of the EII Levy – unless you apply for exemption.
3. “Our accountant will sort it.”
o Most accountants aren’t trained energy evidence and compliance specialists. You must ensure you get someone who understands the requirements of Ofgem and DESNZ before sending anything to NHBC, or considered written public document, that you cannot retract.
Alan:
The levy will probably have increased values as the government progressively increases their renewable energy commitments. EII contributions will increase in value as the CfD fund does also. There may also be pressure to widen eligibility criteria so more businesses can apply for exemptions.
The Net Zero targets have generated rapid changes within the energy environment. Smart businesses will now review their energy profile each year and treat levies like this as significant cost areas, rather than incidental amounts that are only found on their bills.
Alan: Get your bill reviewed and don’t wait for your supplier to turn them up! Even if you don’t qualify today, E for Energy can help you put a plan in place to get you there next year.
Ask yourself this: If we could reduce our energy expenses by between £20K-300K per year (assuming that financing is available), would we? If yes, then pick up the phone and call someone who knows this space inside out.
The EII Levy may appear to be just another superfluous line on your energy bill, but for many businesses it’s an unknown impact on their profits. With energy prices going up in 2025 and more sectors being pulled into the levy, knowing whether you are eligible for exemption is no longer a choice but a necessity. Whether you are a manufacturer, a warehouse or high energy SME, a simple review could drive huge savings. Don’t let bureaucracy cost you thousands! Allow experts like E for Energy to demystify the complexity and file your schwa-contents exemption. Because with regards to levis, ignorance is always going to be costly.