NEWS COMMENT
ARE BUSINESSES PAYING FOR CLEAN POWER? WHY NON-COMMODITY CHARGES COULD MAKE OR BREAK UK INDUSTRY
Anthony Ainsworth,
by Anthony Ainsworth, Chief Operating Officer, npower Business Solutions For the fourth consecutive year, UK businesses have identified energy as their most significant business risk. That headline finding from our latest Business Energy Tracker reflects an uncomfortable truth: the transition to net zero is accelerating, but the costs involved are increasingly affecting how businesses operate and invest. Businesses recognise the benefits of the clean power transition, with
41% telling us that it will have a positive impact. Many also understand that business energy users will bear some of the costs of upgrading the UK’s energy infrastructure. Yet almost all respondents (97%) are concerned about the cost impact of the low-carbon transition, with rising non-commodity charges driving much of this concern.
A RISING SHARE OF ENERGY INVOICES Non-commodity costs already account for around 65% of a typical electricity invoice, and our analysis shows this could rise to 75% by 2030. These non- commodity charges fund network upgrades, system balancing and low-carbon policy support, and are essential to enabling the UK’s energy transition. Almost half of respondents (49%) expect their non-commodity charges to increase by at least 25%. At the same time, 50% believe these charges are not fair. However, they are increasing faster than many businesses had expected.
New analysis from organisations that have tested our Energy Cost Calculator shows an average projected increase of 84.2% in non-commodity costs. In our experience, this lack of clarity often results in uncertainty rather than opposition. Most large energy users accept the principle of contributing to the transition to a greener energy system. Their concern is how to plan when a growing share of their bill is out of their control.
WHY ARE COSTS RISING? Infrastructure investment is the most significant driver. The UK requires approximately 5,500 kilometres of new grid capacity over the next five years. Policy-linked non-commodity costs are rising as more clean power capacity is supported through schemes such as Contracts for Difference (CfD), and the costs of existing support commitments continue. Balancing costs are also rising. With renewable output expanding faster than the grid, payments to generators who cannot export power add to system cost.
THE IMPACT ON BUSINESS CONFIDENCE The Business Energy Tracker showed that 54% of businesses report that energy costs are negatively affecting their confidence, while 79% expect costs to rise over the next 12 months. Senior leadership concerns remain high, with 87% reporting that their boards are worried about energy prices.
While sustainability budgets are
increasing, 22% of organisations report that cost remains the main barrier to energy and carbon- reduction projects. For mid-market organisations, this rises to 26%. If non-commodity costs continue
to rise without clearer visibility, they risk becoming a decisive factor in UK competitiveness. For energy-intensive and multi-site organisations, they are now material enough to influence whether investment happens in Britain or elsewhere. That is why these charges could ultimately make or break UK industry.
TAKING ACTION TO TAKE CONTROL OF ENERGY COSTS There are four practical ways businesses can reduce their energy risk. • Reduce consumption: while it doesn’t impact non-commodity costs, every unit of energy saved impacts the bottom line. That is why energy efficiency remains the top strategy for managing risk, with 71% prioritising this measure.
• Consider on-site generation: generating power on-site enables businesses to reduce their exposure to certain policy and system charges associated with grid electricity. The Business Energy Tracker showed that this is a key priority, with 40% of higher energy users planning to invest in their own generation assets. • Review network capacity requirements: rightsizing can lower Distribution Use of System (DNUoS) and Transmission Use of System (TNUoS) charges.
• Manage load more actively: reducing demand during peak periods can reduce capacity-linked costs.
WORKING TOGETHER ON THE TRANSITION While the clean power transition does present challenges, it is also a real opportunity. It will help deliver a more stable and resilient supply, supporting long-term competitiveness. Our insight shows that businesses support this direction of travel.
What they are asking for is clarity. Visibility into how costs will evolve and where support applies will allow organisations to plan with confidence. Non-commodity costs will continue to rise as the energy system
evolves. Understanding them and acting early to manage exposure will be the difference between being shaped by the transition and staying ahead of it.
https://npowerbusinesssolutions.com/
Construction has started on what will be the UK’s third Community Heat Hub – a low carbon heat solution that provides heat and hot water to residential communities via a heat network designed especially for low-rise, low-density sites. Taylor Wimpey Yorkshire contracted the solution
CONSTRUCTION BEGINS ON NEW COMMUNITY HEAT HUB IN WETHERBY A GTC spokesperson, said: “We’re delighted
to once again be working with Taylor Wimpey, delivering our zero-carbon, heat network at Swinnow Park. Our Community Heat Hubs answer the eagerly anticipated Future
from GTC for its Swinnow Park development in Wetherby. This is the second Community Heat Hub that Taylor Wimpey has contracted nationally from GTC, with the flagship site already delivering sustainable, low-carbon heat and hotwater at Chilton Woods, in Sudbury, Suffolk. The third development boasting a Community Heat Hub can be found at Vistry’s, The Gateway in Bexhill. Taylor Wimpey’s Swinnow Park will deliver
762 homes, a mix of two, three, four and five- bedroom properties, which will all be connected to the Community Heat Hub.
www.essmag.co.uk
Homes Standard by reducing carbon emissions by 75-80% from day one. “The Future Homes Standard contains two
notional specifications – heat pumps and heat networks. The Community Heat Hub combines these two specifications in one future-proofed, net-zero solution. It’s a privilege to be working with Taylor Wimpey to start creating cleaner, greener communities around the country.” Sam Evans, sales and marketing director at
Taylor Wimpey Yorkshire, said: “In working with GTC, we believe this efficient solution is an innovative step forward by providing a single, large air source heat pump to deliver heat to our new homes through individual heat interface units, with no need for a gas boiler.”
www.gtc-uk.co.uk ENERGY & SUSTAINABILITY SOLUTIONS - Winter 2025 5
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