British Industrial Competitiveness Scheme (BICS): Renewables Obligation - business regulatory impact assessment

Section 3: Assessment of Impact on Business, Investment and the Economy

3. Costs to businesses

Exempting eligible business from paying 100% of their share of ROS costs does displace costs onto non eligible businesses. However, BICS is designed so that costs can be fully covered as mentioned at the end of Section 1.2.

There may also be some increased costs to electricity suppliers through making the necessary system changes to allow for BICS implementation. However these have not been quantified.

Eligible businesses are expected to experience some costs associated with familiarising themselves with the operation of the scheme along with the costs associated with making an application. There may also be some ongoing costs associated with scheme compliance. Due to the reserved nature of BICS, application and compliance arrangements along with any specific mitigations are the responsibility of BIST.

3.1 Other potential impacts on business or the wider economy

None identified.

3.2 Benefits to business

The amendment will enable eligible Scottish businesses to benefit from BICS savings from 1 April 2027, ensuring they are not placed at a competitive disadvantage relative to their counterparts in England and Wales.

Eligible businesses in Scotland are expected to see a reduction in their electricity costs of between £35 and £40 per megawatt hour, representing a significant reduction in their overall energy costs. This is expected to reduce their overall operating costs, thus increasing efficiency and profitability. BIST estimate that there are approximately 825 businesses in Scotland that will be eligible to benefit from BICS.

As high energy costs have consistently been cited as a significant barrier to investment in energy intensive industries, we expect the amendment to result in increased investment and growth in eligible sectors.

3.3 Specific Small business impacts

This amendment is not expected to result in any major impacts specific to small businesses. However, BICS as a whole may result in some minor differential impacts on small and medium sized businesses who may not have the same capacity as larger ones to prepare and submit applications and/or ensure compliance with scheme requirements.

3.4 Impact on Scottish firms’ competitiveness

The amendment is consistent with the amendment being made to RO legislation covering England and Wales. It is designed to maintain fairness and predictability rather than create domestic competitive advantage or disadvantage and as such, it is unlikely to affect the competitiveness of businesses relative to those elsewhere in GB.

3.5 Impact on Scottish firms’ ability to Trade Internationally

BICS reduces electricity costs for eligible frontier and foundational manufacturing businesses by exempting them from selected electricity policy costs, improving the competitiveness of GB manufacturing relative to international peers

3.6 Impact on Investment opportunities for Scotland and

Scottish’ Firms

Lower electricity costs are expected to improve business confidence, profitability and the attractiveness of investing in Scotland, supporting higher levels of investment, increased capacity utilisation and reducing the risk of business closure..

3.7 Impact on Employees

While there are no quantifiable, direct impacts on employees, there may be benefits to employees at eligible businesses. These are expected to be increased job security, higher value employment opportunities and upward wage pressure resulting indirectly from increased investment and profitability.

3.8 Impact on Consumers – The Consumer Duty

The consumer Duty was considered as part of the policy development process. As the amendment represents a technical change to a support scheme for renewable energy generators, with the effect of exempting eligible businesses from paying the costs of the Renewables Obligation, it is not defined as strategic.

Additionally, while the amendment does displace ROS costs onto non eligible businesses and domestic consumers, BICS is designed so that these costs will be offset through a combination of UK Government changes within the energy system (such as those recently made to inflation indexation of RO/FITs), removal of Carbon Price Support from April 2028 along with Exchequer funding. This will help to ensure domestic and non-domestic electricity consumers do not see an increase in their electricity bills from this scheme. In addition the amendment and subsequent implementation of BICS will not require any action on the part of any non-eligible consumer. As such the amendment is not considered to have any impact on consumers.

3.9 Impact on Regulators

The regulation of licensed electricity generators and suppliers, as well as RO/ROS compliance and enforcement activity is the responsibility of Ofgem. As this amendment will have no material impact on the way in which generators or suppliers interact with the RO, there is no impact on regulation.

The operation and management of BICS are reserved to Westminster. Therefore, all enforcement and compliance activity will be the responsibility of BIST.