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Business

Ofgem review could affect high energy paper firms

UK electricity regulator Ofgem is currently carrying out a Targeted Charging Review (TCR) of the UK’s electricity grid, which could threaten energy intensive businesses including the paper sector.

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The recently installed biomass boiler at Iggesund in Workington could cost the firm an extra £5000 a year per employee

Energy intensive industries, which includes paper production, could be facing additional costs following the results of the review. Ofgem is concerned with a shortfall in the charging base of the network, because of increasing numbers of both domestic and industrial users operating partly off-grid.

The proposals are due to be released at the end of November, but many energy intensive users are fearful that they will not be proportionate, or fully consider the way they interact with the grid.

Combined heat and power (CPH) systems, which utilise heat as a by-product of electricity, have been backed by the UK Government as a drive towards more environmentally-friendly energy production, which also included biomass.

The TCR will mean the business case for investing in CHP will be badly hit with mills facing significant additional costs that they can scarce afford

Andrew Large, director general of the Confederation of Paper Industries (CPI) says that the review could damage paper mills: “The TCR will mean the business case for investing in CHP will be badly hit with mills facing significant additional costs that they can scarce afford.”

The review aims to redistribute the increasing cost burden between users. The estimated increase in cost for some businesses could be as much as £6.9m a year, according to analysis by the Energy Intensive Users Group.

Iggesund Paper is a member of the CPI and is concerned that its recent biomass investments could be undermined as a result of the review. The firm has invested £110m in environmentally sustainable biomass at its Workington mill.

Ulf Löfgren, managing director of Iggesund, comments: “Our investment into the UK, on the back of government-led incentives, has allowed us to reduce our environmental footprint and move towards a sustainable future for UK energy.

“However, the sector is high cost and any major changes could jeopardise our existing work. As they stand, Ofgem’s proposals would, at the very least, force our parent company to reconsider any future investment in the UK.”

Energy intensive industries are worth £15bn to the UK economy each year.

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