From mixed reactions to recent Government announcements to notable investments in nuclear capacity and offshore wind, there are several critical developments currently shaping the energy sector.
Here are our top five need-to-know topics for businesses this quarter writes Michael Byrne, Head of Marketing and Insight at npower Business Solutions
A mixed report for the Government
While the Spring Budget failed to deliver the level of certainty and support many businesses were hoping for, it did include some positive announcements, including a commitment to investing in future nuclear capacity, as well as £1 billion committed to the Contracts for Difference (CfD) auction held in March. There was also good news for businesses around full expensing, which may help with future sustainability investments.
However, a poll of participants at our recent Energy Insight webinar – which is now available on demand – suggested businesses want the government to provide better incentives to help them become more energy efficient. This is something we are continually campaigning for, so it needs to be a priority.
Policy and network charges on energy invoices to rise
The non-commodity charges share of business electricity invoices is increasing, from 21% in Q1 2023 to 46% in Q1 2024. By Q4 2025, our Industry Charging team forecasts it will reach 60%.
We are also looking at six new costs due to hit invoices in the next few years – the nuclear ‘Regulated Asset Base’ (RAB) subsidy, the Green Hydrogen Levy, the Energy Intensive Industry (EII) subsidy, carbon capture subsidy, Data Integration Platform (DIP) charges and the Virtual Lead Party supplier (VLP) reconciliation.
A downward trend for wholesale energy costs
Prices for gas and electricity are coming down – and this trend looks to continue over the longer term.
But experts are not forecasting a return to pre-2020 levels of £50/MWh for some time, if ever. This can partly be attributed to lower than hoped for renewable capacity – especially offshore wind – replacing gas-fired generation. And while prices are reducing, volatility is very much expected to remain in the market.
When it comes to reaching net zero by 2050, the Climate Change Committee (CCC) recently reported the government has failed to make progress on any of the seven key areas the CCC identified as necessary to achieve this.
New trends in securing renewable supply
The UK may be generating more renewable energy – forecast to hit 47% of our power mix by 2025 – but demand still exceeds supply.
This is driving growth in two kinds of Power Purchase Agreements (PPAs). Firstly, those where businesses invest in on-site renewable generation, and secondly, the expanding area of third-party Corporate PPAs.
Major new initiative to impact all electricity consumers
Market-wide Half-Hourly Settlement (MHHS) will significantly reform how electricity is generated, used and stored in the UK. For energy consumers, this will bring changes to the way consumption data is calculated and managed.
The MHHS delivery deadline is December 2026 – and all industry parties are currently working on a plan of action, which will be communicated to consumers in the coming months.
You can put your questions to our MHHS experts here.
