October 2024 Review

With government-imposed charges making up an increasing percentage of business energy bills, it is becoming difficult for many UK industries to remain competitive in international markets. This led to the introduction of the British Industry Supercharger (BIS). A scheme for energy-intensive businesses that aims to counteract many of the government-imposed environmental levies and the rising transmission charges. In this article, we cover how it works and what your business needs to know to benefit from it. What is the British Industry Supercharger? Launched on the 1st April 2024, the British Industry Supercharger is a strategic package of relief measures aimed at energy‐intensive industries (EIIs) such as steel, metals, chemicals, cement, glass and paper. The aim is to reduce electricity non‐commodity costs so UK foundational industries can compete with businesses in nations with lower energy costs. The BIS is comprised of 3 sections: 1. Relief from Renewable Levies This provides businesses with exemptions from paying Renewables Obligation (RO), Feed-in Tariff (FiT), and Contracts for Difference (CfD). These charges were added to invoices in order to fund green-power generation. Under the Supercharger, eligible EIIs can receive up to 100% exemption from these charges. 2. Network Charging Cost Compensation This offers discounts on electricity network charges - including Transmission Network Use of System (TNUoS) and Distribution Use of System (DUoS) fees. These fees cover the cost of maintaining the national grid and distribution networks, but can represent a large proportion of industrial energy bills. The BIS introduces a Network Charging Compensation (NCC) mechanism, reimbursing eligible firms for around 60% of these costs. 3. Capacity Market Exemption The scheme offers eligible business a full exemption from Capacity Market charges. The Capacity Market is funded through indirect charges on electricity bills with the aim of funding generators to ensure they are available during supply-peaks.

Why UK Energy Prices Keep On Rising… And what it means to manufacturing and engineering companies over the next few years Over the past decade, UK energy prices have changed dramatically. Not only in terms of overall cost but also in how those costs are made up. Ten years ago, the largest part of a business electricity bill came from the commodity element: the wholesale price of electricity. Non-commodity charges -- often used to support the infrastructure of the electricity grid or government energy policies -- were relatively modest. In 2013, the typical breakdown of electricity costs for a business user was around 60–65% commodity and 35–40% non-commodity. Today, that picture has flipped. For many manufacturers, non-commodity charges now make up over 60% of the total bill, with the non-commodity percentage of the bill increasing each year. This shift explains why energy bills have remained stubbornly high, even during periods when wholesale prices fell. Grid reinforcement, renewable subsidies, and balancing costs have grown year on year, with these costs baked into every unit of power consumed, regardless of wholesale prices.

In the last decade, over 50 UK energy suppliers have gone out of business. With Tomato Energy being issued with a provisional order this week, it seems as though their name will be the latest to be added to the list of defunct suppliers including Bulb, Avro, and Spark Energy. For customers of a supplier that is on the brink of going out of business, this can be a scary time, but there is a process in place to ensure they are not at risk of losing their supply. Who is responsible? OFGEM (The Office of Gas and Electricity Markets) are a non-ministerial government department tasked with regulating the energy markets and networks. In cases where a supplier goes out of business, OFGEM provide a safety net to ensure that customers supply won’t be disrupted. What is the process? OFGEM may elect to appoint an administrator. If this is the path they choose, then no action is necessary from the supplier’s customers. At some point, the administrator may choose to shut down the supplier, at which point, all existing customers will be moved to a new supplier of the administrator’s choosing.

Market-Wide Half-Hourly Settlement (MHHS) What is MHHS? MHHS stands for Market-Wide Half-Hourly Settlement. Currently, most electricity is billed based on estimates or meter reads that can be provided monthly, quarterly, or sporadically. With MHHS, electricity consumption will be accounted for and billed in 30-minute blocks. The idea is that with more precise, time-based data, suppliers and networks can match supply and demand more accurately. This helps reduce waste and allow more flexibility in how electricity is used across the system. Who does it apply to? Previously, only large industrial and commercial users needed to have half-hourly meters, but MHHS is intended to apply across the whole electricity market in Great Britain. This includes domestic consumers, small businesses, large industrial users, and everything in between. That means most electricity users will be indirectly affected, even if they don’t see anything change in how their meter looks, the rules behind billing and settlement will shift behind the scenes.

September Review By Adam Novakovic We have reached the time of year where the summer months have started to fade and we begin to think about the colder seasons. This month saw the UK government recognise Palestine as a country, although they still seem unable to recognise the harm their energy policies are causing UK businesses. With further charges set to be added to UK energy bills and rising non-commodity costs, it was a relief that wholesale energy prices remained fairly flat throughout September. A recent report from independent analysts Cornwall Insights revealed that large energy users who aren’t covered by Government schemes could find that they are paying a further £450,000/year in non-commodity costs by 2030. With non-commodity costs such as DUOS and TUOS charges –which are used to fund the infrastructure responsible for the transmission of electricity – now accounting for over 2/3rds of total electricity costs for some businesses, it is of growing concern that these charges are set to continue rising. With the TUOS charges for 26/27 expected to increase significantly , the non-commodity charges are starting to have a negative impact on UK businesses ability to compete against foreign businesses with fewer governmental charges on their energy bills. This growing concern is yet to be addressed but could have a huge impact on many industries in the next year.

Following on from our previous article about rising TNuOS costs , we look at the reasons behind energy price rises, and which other items on your bill are likely to increase in the near future. What is RIIO – ET3? RIIO: “Revenue = Incentives + Innovation + Outputs” is Ofgem’s regulatory framework for setting how much network operators can recover from users while delivering value, efficiency and innovation. The current RIIO-2 period ends 31 March 2026, and RIIO-ET3 (also called RIIO-3) will run from 1 April 2026 through 31 March 2031.

How TNUoS costs are set to rise As the UK pushes towards a low-carbon energy system, there has been a sharp rise in costs for businesses connected to the grid. The National Energy System Operator (NESO) has released its latest five-year outlook on Transmission Network Use of System (TNUoS) charges, and -- from April 2026 – energy costs will rise significantly to fund the country’s energy transition. What Are TNUoS Charges? NESO uses the funds from TNUoS charges to build, operate, and maintain the high-voltage transmission network across Britain. The forecasts for 2026/27 have indicated that NESO will be looking to almost double the revenue generated in the previous year. While suppliers pass these charges on to both households and businesses, the scale of the increases ahead will be most acutely felt by large energy users.

ESOS Phase 4: What Businesses Need to Know The Energy Savings Opportunity Scheme (ESOS) Phase 4 is underway, starting on 6 December 2023, with a compliance deadline of 5 December 2027 . UK businesses must understand ESOS Phase 4 eligibility , key changes, and deadlines to ensure compliance and avoid penalties. This guide covers everything you need to know about ESOS Phase 4 for UK businesses . Who needs to comply with ESOS Phase 4? The ESOS Phase 4 eligibility criteria remain consistent with Phase 3. Your organisation qualifies as a “large undertaking” if, on the qualification date of 31 December 2026 , it meets all of these requirements: Based and registered in the UK Employs 250 or more people Has an annual turnover above £44 million Has an annual balance sheet total over £38 million To confirm your ESOS Phase 4 eligibility , visit our site and answer the questions to see if your business should be participating. Even if you don’t currently meet these criteria, crossing the threshold by the qualification date means you must submit a compliance notification by the ESOS Phase 4 deadline of 5 December 2027 . If your business qualified for Phase 3 but no longer meets the criteria, you must submit a “Do Not Qualify” (DNQ) notification via the Environment Agency’s MESOS portal. Key requirements for Phase 4 Phase 3 introduced the requirement for organisations to create an Action Plan that set out how you intend to cut energy use and when. That same principle continues in Phase 4, along with mandatory progress reporting in the years that follow. However, there are some updates to note: Action plan progress must now be included within your ESOS assessment. If commitments aren’t met, your business will need to explain why. Display Energy Certificates (DECs) and Green Deal Assessments (GDAs) are no longer valid routes to compliance. While net zero reporting will not yet be mandatory, you can choose to adopt the new PAS 51215 standards for voluntary energy and decarbonisation reporting. This could give your organisation a head start before net zero requirements arrive in Phase 5. These ESOS Phase 4 key changes ensure businesses focus on actionable energy efficiency measures and transparent reporting.

August Review By Adam Novakovic August was a month that saw the return of domestic football and the return of one of the most prolific energy narratives of the last 5 years, as the conflict between Russia and Ukraine once again dominated the headlines.