Climate Change Levy (CCL)

What is the Feed-in Tariff (FiT)? The Feed-in Tariff (FiT) scheme was introduced in 2010 to support small-scale, low-carbon electricity generation. Unlike the Renewables Obligation -- which targeted large generators -- FiT was designed to encourage households, communities and small businesses to install technologies such as solar PV, wind, and hydro. Under the scheme, eligible generators receive a fixed payment for each unit of electricity they generate, regardless of whether it is consumed on-site or exported to the grid. In addition, an export tariff is paid for electricity exported to the network. The FiT scheme closed to new applicants in March 2019, but existing installations continue to receive payments for the duration of their support term (typically 20–25 years), meaning FiT costs will remain on electricity bills into the 2040s. How does the FiT scheme work in practice? FiT payments are made up of two components: Generation tariff – a fixed p/kWh payment for every unit of electricity generated by an accredited installation. Export tariff – a separate payment for electricity exported to the grid. Tariff levels were set at the point of accreditation and are linked to inflation for the lifetime of the installation. Payments are made by licensed electricity suppliers, who are required to participate in the scheme. Suppliers recover the cost of FiT payments through the FiT levelisation process, which redistributes costs across all suppliers based on market share. These costs are then passed through to electricity consumers and will appear on invoices as a Feed in Tariff (or FiT) charge. Who pays the Feed in Tariff? The cost of FiT is ultimately paid by electricity consumers, including business users, via pass-through charges on electricity bills. Both the British Industrial Competitive Scheme and The British Industry Supercharge r offer the ability for eligible businesses to receive exemptions from paying this charge. For most businesses, FiT appears as a non-commodity policy charge, separate from energy costs and network charges. How much is the FiT? FiT costs are calculated annually through the levelisation process, which reconciles actual payments made to generators against forecast collections. In p/kWh terms, FiT charges are typically around 8.5 p/kWh for business electricity customers, although this varies slightly year to year depending on inflation, total accredited capacity and supplier market shares. Final FiT levelisation amounts are confirmed after the end of each scheme year, with any discrepancy corrected in future charges. While FiT costs are smaller than RO charges , it remains a persistent and unavoidable component of UK electricity policy costs. If you would like to ensure your FiT charges have been invoiced correctly, contact us today and we can review your recent invoices to make sure you aren't paying more than necessary.

What are Contracts for Difference (CfDs)? Contracts for Difference (CfDs) are the UK government’s primary mechanism for funding new low-carbon electricity generation. Introduced in 2014 under Electricity Market Reform, CfDs replaced the Renewables Obligation for new projects and are designed to provide price certainty for renewable and nuclear generators while protecting consumers from volatile wholesale prices. A CfD is a contract between a low-carbon generator and the Low Carbon Contracts Company (LCCC), a government-owned entity. Under the contract, the generator is guaranteed a fixed price for the electricity it produces over a set period (typically 15 years). How do CfDs work in practice? CfDs operate through a payment mechanism linked to the wholesale electricity price, known as the reference price: If the reference price is below the guaranteed price, the generator receives a top-up payment funded by electricity suppliers. If the reference price is above the guaranteed price, the generator pays the difference back to the LCCC. This structure adds stability for generators while ensuring consumers benefit from the extra revenue when wholesale prices are high. During the 2022–23 energy crisis, CfDs resulted in net payments flowing back to suppliers, significantly reducing policy costs on bills. Suppliers fund CfD payments via a levy, which is then passed through to electricity customers. Who pays the CfD levy? The CfD levy is paid by licensed electricity suppliers and recovered from consumers as a non-commodity charge on electricity bills. All business customers contribute unless they qualify for an exemption. Certain Energy Intensive Industries (EIIs) may be eligible for partial or full relief, depending on whether a business can meet the qualifying criteria and have their application approved. Unlike wholesale costs, CfD charges are not influenced by site demand patterns and are therefore unavoidable for most customers. How much is the CfD levy (and when is it revised)? CfD charges are set on a forecast basis and reconciled after the delivery period. Once aquarter has finished and actual data is finalised, the LCCC calculates the true cost or surplus for that period. If suppliers overpaid , a surplus is carried forward and future levy rates are reduced. If suppliers underpaid , the shortfall is recovered in subsequent levy periods. In p/kWh terms, CfD costs have historically ranged from around 0.3 to 1.0 p/kWh for non-domestic customers. However, this figure can fluctuate significantly depending on wholesale market conditions. In periods of high power prices, the levy can fall close to zero or even become net negative, reducing overall electricity costs. Because CfDs are still expanding through successive allocation rounds, they will remain a material and evolving component of UK electricity policy costs for decades to come. If you would like to ensure your CfD charges have been invoiced correctly, contact us today and we can review your recent invoices to make sure you aren't paying more than necessary.

What is the Renewables Obligation (RO)? The Renewables Obligation (RO) is a UK government policy introduced in 2002 to support renewable electricity generation. Its objective was to increase the proportion of electricity supplied from renewable sources by placing a legal obligation on electricity suppliers. Under the scheme, suppliers must present a set number of Renewables Obligation Certificates (ROCs) to Ofgem each year, based on the volume of electricity they supply to customers. ROCs are issued to operators of renewable electricity generating facilities, based on the amount of renewable energy generated. The RO closed to new generation in March 2017, but it remains in force because accredited renewable generators continue to receive ROCs for up to 20 years. As a result, the scheme will continue to impact electricity bills well into the 2030s. How do ROCs work in practice? Renewable generators earn ROCs for the electricity they produce and sell those ROCs to suppliers, either bundled with power or separately. Suppliers then use ROCs to meet their annual obligation. If a supplier does not present enough ROCs, it must instead pay a buy-out price per missing ROC to Ofgem. These buy-out payments are collected into a central fund and recycled back to suppliers that did present sufficient ROCs. This recycling mechanism increases the cost of non-compliance and underpins the value of ROCs. Ultimately, suppliers recover these costs from customers through electricity bills. Who pays the RO? The RO is charged to all electricity consumers, with the cost passed through by suppliers as a non-commodity levy. For most business customers, it appears as a separate line item rather than being included in the wholesale unit rate. Certain Energy Intensive Industries (EIIs) may qualify for partial or full exemptions , subject to meeting eligibility thresholds and submitting approved applications. How much is the RO ? RO charges are revised annually for each obligation year , which runs from 1 April to 31 March . The buy-out price is linked to inflation , meaning RO costs generally rise over time. In p/kWh terms, the RO typically equates to around 2.5–3.5 p/kWh for business electricity customers in recent years, depending on the obligation level, recycling outcome and supplier methodology. This makes it one of the largest policy costs on a UK electricity bill. Because the final cost is only confirmed after the obligation year ends, suppliers must forecast RO charges in advance. This makes transparency and reconciliation particularly important for larger energy users. If you would like to ensure your RO charges have been invoiced correctly. Contact us today and we can review your recent invoices to make sure you aren't paying more than necessary.

The British Industrial Competitiveness Scheme (BICS): What manufacturers need to know before signing their next contract and how we can help By Adam Novakovic For many energy-intensive UK businesses, rising gas and electricity costs have been an increasingly uncomfortable thorn in their side. Even as wholesale prices have dropped, new line items to fund green-initiatives and ever-increasing standing charges have harmed the competitiveness of British businesses. What is the British Industrial Competitiveness Scheme? As a response to these rising costs, the government is now consulting on the British Industrial Competitiveness Scheme (BICS). The aim of this scheme is to support eligible manufacturing businesses by exempting them from the indirect costs of three charges that suppliers typically pass through to end users: Renewables Obligation (RO) Feed-in Tariffs (FiTs) Capacity Market (CM) The expectation is that this should reduce electricity costs by approximately 4p/kWh , saving many mid sized manufacturers between £150,000-£300,000 per year . While consultation is on-going, the plan is for this scheme to be introduced in April 2027.  Who is likely to be eligible? The BICS is currently in the consultation stage and awaiting confirmation of details. However, the scheme is expected to be available to business that are: v Manufacturing frontier businesses within an IS-8 sector v Manufacturing foundational industries supplying important inputs into those frontier sectors v Electricity Intensive Manufacturers Eligibility is expected to be assessed using a combination of SIC codes (what the business is registered as) and HS codes (the goods/products manufactured). The consultation also acknowledges that many businesses produce a combination of eligible and non-eligible goods. For these businesses, it is planned that the discount will be pro-rated based on what percentage of production is related to eligible products.

In a year where news coverage was dominated by Israel’s genocide in Gaza and the on-going conflict between Russia and Ukraine, geopolitical events played a key role in dictating the movements of the energy markets. In this article we take a look back at 2025, revisiting the stories that impacted energy prices, and look at what is likely to shape the gas and electricity markets in 2026.

By Adam Novakovic With the frenetic pace of the Christmas season and thoughts about whether the presents have been wrapped, if all of the Amazon parcels have arrived, and concerns over the turkey being sufficiently sized for the entire family, you may be forgiven for not having taken the time to track the energy markets this December. In our final monthly review of 2025, we will aim to bring you up to speed with how the energy markets are developing and what impact this is likely to have on British businesses.

Ever since the Summer of 2021, energy prices have been above their historical levels. Whilst the initial spike created by the Russia/Ukraine conflict was short-lived, prices never fully returned to their pre-conflict levels. More recently, the first quarter of 2024 saw some reprieve as wholesale prices dropped, but prices rose by over 150% between February of 2024 and February 2025.

By Adam Novakovic Whilst November’s budget may have disappointed businesses hoping for governmental assistance in the battle against high energy prices, the wholesale market offered some hope. With the mandated need for EU nations to replenish their reserves now in the rear-view mirror, buying pressure dissipated, and there were many positive stories that helped send prices downwards. The first half of the month saw small rises and drops that largely cancelled each other out, but from November 18 th through to the 28 th , wholesale gas prices fell approximately 12% and reached their lowest levels since July’24. There is normally a slight delay before the wholesale price drops are passed on to the end user, but for those with contract expiry dates in the next 6 months, the coming weeks may present opportunities to obtain quotes at rates more favourable than at any other point in 2025. One of the main reasons for optimism regarding future gas supplies is the peace talks being held between Russia and Ukraine. Any formal deal will almost certainly include a lifting of sanctions on Russian gas sales and provide a significant supply boost to the global market. However, there may still be obstacles to overcome before any peace plan is finalised with Ukraine and Russia both unwilling to concede territory.

By Adam Novakovic With many British businesses struggling to navigate the challenges that soaring energy costs have had on their ability to compete internationally, there was a sense of optimism that the government would introduce measures designed to alleviate the pressure that many companies have been burdened with. As we close out 2025, Energy costs are typically within the top 3 overheads for any business operating from commercial property & rising costs are fast becoming the most significant risk to sustainability, which has far wider impacts to the UK economy. Unfortunately, no such measures were forthcoming and the announcement fell flat for those that need it most. Hopes of expanding the NCC or EII discounts to further sectors, or reducing VAT levels on gas and electricity, turned to disappointment, as only minor changes were announced. One such change was the government’s decision to abolish the Energy Company Obligation (ECO) and to fund a substantial portion of Renewables Obligation costs through general taxation. Although these measures are aimed at easing pressures on domestic consumers, they also remove some of the cost drivers within the wider energy system. With fewer policy-driven levies feeding into wholesale and supplier operating costs, businesses may experience a modest dampening effect on future price rises, although this is unlikely to translate into immediate or substantial reductions in commercial tariffs. The Budget did reinforce the government’s commitment to green investment through its updated Green Financing Framework, which will fund green expenditures that tackle climate change, rebuild natural ecosystems and support jobs in green sectors. While this is unlikely to have any short-term impact on energy costs, one small positive -- when compared to previous green schemes -- is that this programme will be funded by the issuance of gilts and bonds, rather than passing the cost on to suppliers who invariably pass the cost on to the end users.  Despite the need for assistance with rising energy costs, small and medium-sized enterprises (SMEs), many of which remain exposed to fixed-term contracts negotiated during the recent price spikes, are not going to see any immediate relief, and the accountability seems to remain solely at the door of the business owners to find their own ways to minimise costs.