British Industrial Competitiveness Scheme (BICS): Renewables Obligation - island communities impact assessment

British Industrial Competitiveness Scheme: Islands Communities Impact Assessment (ICIA) – August 2026

1. Aims and Objectives

The British Industrial Competitiveness Scheme (BICS) is a UK Government scheme intended to reduce electricity costs for eligible electricity-intensive manufacturing businesses. BICS will exempt eligible businesses from the indirect costs of the Renewables Obligation (RO), Feed-in Tariffs and Capacity Market.

Three separate but complimentary RO schemes cover Great Britain. The RO in

England and Wales, the Renewables Obligation Scotland (ROS) in Scotland, and the Northern Ireland Renewables Obligation (NIRO) in Northern Ireland. BICS will apply to the RO and ROS only.

The Scottish Government is responsible for the legislation governing the ROS. To implement BICS in Scotland, an amendment is required to the Renewables Obligation (Scotland) Order 2009. The amendments will exempt eligible businesses from up to 100% (subject to pro-rating) of the ROS costs passed on by electricity suppliers.

The objective of the amendments is to ensure that eligible Scottish businesses benefit from BICS from April 2027 and they are not placed at a competitive disadvantage compared to their counterparts elsewhere in Great Britain.

Initial assessment suggests there is no evidence that the amendments will have a significantly different impact on island communities compared with other communities in Scotland. The amendments represent a technical change to a legacy support scheme for renewable energy generators, and do not introduce place-based measures, infrastructure projects or location-specific funding.

2. Data and Stakeholders

The Scottish Government considered evidence gathered through development of the policy, including engagement with the UK Government, Ofgem, electricity suppliers and stakeholders responding to the public consultation on proposed changes to the Renewables Obligation (Scotland) Order 2009.

The consultation sought views from (but not limited to) electricity suppliers, Consumer Scotland, Citizens Advice Scotland, consumer groups, generators, businesses and other interested parties. Nine valid responses were received.

3. Consultation and Engagement

Following a UK Government consultation on the approach to, and eligibility for BICS (published November 2025), UKG launched a second consultation on BICS scheme delivery on 16 April 2026. As decisions on scheme operation and eligibility are reserved to Westminster, a separate consultation was launched by the Scottish Government which sought views on the regulatory changes required for the ROS only.

The Scottish Government consultation ran for two weeks between 16 June and 30 June 2026 giving stakeholders an opportunity to offer their views on the proposals as well as provide appropriate evidence. The consultation was made available on the Scottish Government website and a total of nine valid responses were received.

The consultation asked two questions of stakeholders:

1. Do you agree with the proposal to amend the ROS order to exempt BICS eligible businesses from up to 100% (subject to pro-rating) of ROS costs passed onto them by electricity suppliers?

2. Do you agree with the proposed changes to the arrangements for setting the obligation level for Scotland for 2027 to 2028, including the proposal to publish an adjusted obligation level, which accounts for the BICS exemption before 1 April 2027?

On the first question, while the majority of the respondents agreed with the proposals to amend the ROS Order to allow for the implementation of BICS, some raised concerns around the potential redistributive impact of change which could see ROS costs displaced onto non-eligible businesses and consumers. However, these are expected to be offset through a combination of wider energy system changes discussed in more detail in Section 7 below.

On the second question, the majority agreed that publishing an adjusted obligation level was necessary to avoid risk premiums being priced into electricity tariffs by suppliers. However, concerns were raised that suppliers would not be able to reflect the changes in customer tariffs until BICS eligibility was clear. To mitigate, the Scottish Government has worked closely with the UK Government to ensure the criteria was available as soon as possible and can now be accessed via the following link: British Industrial Competitiveness Scheme

In relation to this ICIA, no consultation responses identified any impacts specific to Scotland’s island communities.

Following conclusion of the consultation and analysis of the responses received, the Scottish Government intends, subject to parliamentary approval, to proceed with the proposed regulatory changes to existing secondary legislation relating to the ROS. A full response to the consultation responses received was published on the Scottish Government website and can be found: Scottish Government Response to British

Industrial Competitiveness Scheme: Consultation on Regulatory Changes and Scheme Delivery

4. Assessment

No unique or disproportionate impacts on island communities have been identified. The amendments represent a technical change to a support scheme for renewable energy generators. They will not introduce island-specific measures, alter access to public services, affect transport connectivity, housing, digital infrastructure or community sustainability.

While island communities, both individuals and businesses, can face higher living and operating costs than many mainland communities, the Scottish Government does not expect island households or businesses to experience increased electricity costs as a result of this amendment. This is because the redistribution of costs associated with the exemption are expected to be offset as mentioned above.

The amendments do not alter support available to renewable energy generators, affect network infrastructure or change planning arrangements. No impacts on Gaelic language, culture or heritage have been identified.

The amendments may provide benefits to any BICS eligible businesses located within island communities in the same way as eligible businesses located elsewhere in Scotland. Eligibility is determined by reserved criteria and not by location so the policy therefore applies consistently across Scotland.

5. Is a full Island Communities Impact Assessment required?

Based on the evidence gathered, no policy issues were identified during development of the proposed amendment which would have an effect on an island community that is significantly different from its effect on other communities in Scotland (including other island communities).

It was therefore not considered necessary to conduct a full Island Communities Impact Assessment.

6. A full Islands Community Impact Assessment is NOT required

In preparing this ICIA, we have formed the opinion that the proposed amendments to the Renewables Obligation (Scotland) Order 2009 are not likely to have an effect on an island community which is significantly different from the effect on other communities (including other island communities).

7. Reason for not completing a full Islands Communities Impact Assessment

The proposed amendments are a technical change to a legacy support scheme for renewable energy generators which are necessary to implement BICS. They do not introduce place-based interventions, infrastructure projects, location-specific investment decisions or policies which would directly affect island communities differently from communities elsewhere in Scotland.

While the amendments exempt eligible businesses from ROS costs, eligibility is based on industrial sector with no geographic element. The amendments therefore apply consistently across Scotland, including island communities.

Although the exemption redistributes costs across electricity consumers, these costs are expected to be offset through a combination of wider energy system changes, removal of the Carbon Price Support from April 2028 and Exchequer funding. This will help minimise the risk that domestic and non-domestic electricity consumers experience increased electricity bills as a consequence of the scheme.

The amendments and subsequent implementation of the British Industrial Competitiveness Scheme will not require any action on the part of individuals or communities. No evidence has been identified to suggest that island communities will experience impacts that are significantly different from those experienced elsewhere in Scotland. Accordingly, a full Island Communities Impact Assessment is not required.

8. Sign Off

ICIA completed by: Saleem Hassan

Position: Team Leader, Electricity Markets

ICIA approved by: Catherine Williams

Position: Deputy Director, Directorate for Energy and Climate Change