Why electricity prices keep going up

21 August 2025

Why electricity prices keep going up

By Adam Novakovic

Electricity has always been more than just a utility it is an essential component in every part of UK business. Yet in recent years, costs have been climbing steadily, and today’s bills are weighed down by more than just wholesale market prices. There can be long periods of time where wholesale prices remain stable or decrease, yet the amount businesses are paying for their electricity continues to rise. A large part of the increase comes from policy decisions. Most notably the way the UK has chosen to fund decarbonisation, its reliance on renewables, and its failure to make a serious commitment to nuclear energy.

The transition from fossil fuels to renewables has been a defining change in the energy system. The focus was shifted towards renewables seemingly without fully considering how they would impact energy costs. They have helped cut emissions, but the trade-off is unpredictability. Weather-dependent generation cannot replace the reliability of coal or nuclear, so the grid must work harder and spend more to keep supply and demand in balance. Every time the wind drops or demand spikes, businesses end up paying for the back-up capacity and balancing services that keep electricity flowing.


Instead of funding renewable subsidies and system upgrades through general taxation, successive governments have embedded these costs in electricity invoices as non-commodity charges. For many businesses, these costs now make up more than half the total cost of electricity. This means that investments in green energy are then passed on to end users. For companies competing internationally, this means operating with higher energy costs than rivals in countries where policy has taken a different path.


          Source: Trading Economics

 

One of the biggest reasons for prices increasing comes from the expansion of the grid itself. Many of the UK’s largest wind projects are located hundreds of miles from the major centres of demand, often offshore. Transporting that power requires billions in new network infrastructure. Current estimates suggest around £60 billion will be spent on reinforcement and expansion over the next decade, and once again these costs are incorporated into business energy bills.


This is where the comparison with France becomes unavoidable. France generates around 70% of its electricity from nuclear power. This gives it a stable, low-carbon baseload supply at predictable cost, insulating businesses and households alike from some of the volatility that impacts the UK system.

Britain, by contrast, allowed its nuclear fleet to decline without adequate replacement. Projects like Hinkley Point C are years late and billions over budget, leaving a gap that has been filled with more expensive measures: subsidies, balancing payments, and LNG imports. 



 

The UK is pursuing one of the most ambitious decarbonisation programmes in the world through its Clean Power 2030 plan, but without nuclear providing a reliable carbon-free energy-production, the price of that ambition is paid by the consumers.

In many ways, it appears as though the focus on clean energy has come at the expense of both businesses and consumers with a lack of economic consideration being given throughout the goal-setting process.


The financial evidence is clear. In 2000, businesses paid approximately £40/MWh. Today, the average is closer to £200. Wholesale market volatility and global supply factors have played a role, but the long-term upward trend is driven far more by policy and environmental levies than by commodity markets.


For businesses, this means facing multiple challenges: absorbing higher costs today, while planning for even more in the years ahead. Flexibility and efficiency are now strategic necessities. It is essential that a business consider reviewing procurement strategies, adjusting operations to avoid peak pricing, or investing in on-site generation can all help offset some of the policy-driven costs.

However, these steps can still make it difficult to compete with foreign companies who are able to source cheaper energy.

Electricity in the UK is expensive, not because low-carbon energy is inherently costly, but because of how the transition has been handled. By ignoring nuclear and relying so heavily on environmental charges added directly to invoices, the government has turned business energy bills into a decarbonisation tax.


If your business requires help with energy procurement, management, or strategies, contact SeeMore Energy today to see how one of our specialists can help your business reduce energy costs. 

Contact Us

December 2025 Review

5 January 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.

Falling Wholesale Prices: The Time to Renew

10 December 2025
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.

November 2025 Review

1 December 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.

How the 2025 Budget Neglects the Concerns of Struggling UK Businesses

26 November 2025
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.

The Ever-Increasing Standing Charge

23 November 2025
The ever-increasing standing charge By Adam Novakovic For UK businesses, cutting energy consumption is no longer enough to keep bills under control. Even companies that have invested in LED lighting, insulation, or energy-efficient equipment are finding that a large part of their energy expenditure is the result of a different cost entirely: the ever-increasing standing charge. In some cases, businesses using under 150,000 kWh per year are now being charged £40–£50 per day in electricity standing charges alone. That’s £1,200–£1,500 per month, or £14,500–£18,000 a year, before a single unit of electricity is used. What are standing charges? A standing charge is the fixed daily fee you pay for your utilities before you’ve used a kWh of gas or electricity. The intention behind the standing charge is that it covers aspects of the energy network that require funds regardless of usage levels, such as: National Grid and local network costs Supplier operating costs and smart metering Some industry and government policy schemes A recent government consultation found that around half of the typical electricity standing charge is made up of network costs alone, with a further quarter linked to operating and industry costs.

October 2025 Review

3 November 2025
October Review By Adam Novakovic In the month of Halloween, October energy price movements were free of jump-scares. Whilst prices moved up slightly at the start of the month, they marginally decreased throughout the remainder of October. Ending the month slightly below the levels seen at the end of September. The expectation this month was that European gas reserves would be the key story impacting energy prices. The European Network for Transmission System Operators for Gas (ENTSOG) released their report on the Winter supply outlook. This confirmed that Europe is well prepared for the coming winter, with 83 % gas reserves recorded as of the 1 st of October, and infrastructure resilient enough to meet demand without Russian pipeline gas. Their projections had Europe ending the winter season with over 30% storage even in the most severe scenarios. There is also the expectation that any unforeseen supply disruptions can be mitigated through increased LNG imports -- supporting the EU’s goal of phasing out Russian gas while emphasising continually reducing demand. During the first week of October Russia launched a wave of drone attacks against Ukraine -- the largest since the war began. These strikes have damaged Ukrainian gas production and left storage at 42% of capacity. This has forced Ukraine to look at importing large quantities of LNG from Europe this winter. With the deal that brought Russian gas to Europe now expired, Europe faces added demand pressure. This comes despite Europe significantly reducing Russian gas imports and increasing LNG imports from other nations. With there currently being a large quantity of LNG available for importation, and with EU gas reserves being in a healthy position, it seems as though further conflict may not have a large impact on energy prices. This could change however if Europe were to experience a particularly cold winter.

The British Industry Supercharger

30 October 2025
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…

21 October 2025
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.

What happens when a supplier fails?

14 October 2025
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.

MHHS: Market-Wide Half-Hourly Settlements

6 October 2025
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.