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Northern Powerhouse European Union

What’s in your energy bill?

With research showing that network costs are more to blame for rising energy prices than green energy subsidies, businesses should start focusing on time of use to cut their energy bill.

With research showing that network costs are more to blame for rising energy prices than green energy subsidies, businesses should start focusing on time of use to cut their energy bill.

Research from the Committee on Climate Change (CCC), the government’s independent advisory on climate change, has revealed that green energy policies are only having a limited impact on increasing energy prices for the majority of businesses.

In 2016, these costs made up just 0.2 per cent of operating costs for companies in the commercial sector, 0.4 per cent for manufacturing, and 0.7 per cent for more energy-intensive industries.

Energy policy

In other words, the findings show that blaming rising prices on the taxpayer costs of supporting low carbon energy policy, such as the Climate Change Levy, is misplaced. 

Improvements in energy efficiency can more than cancel out these costs, according to the CCC.

Nevertheless, the research does show that UK electricity prices for businesses are higher than those in comparable countries, such as France and Germany.

Network costs

Although there is still some uncertainty about why this is the case, it is generally agreed that higher prices can be largely explained by higher wholesale and network costs in the UK. 

Many experts are encouraging businesses to focus in particular on reducing network costs, which cover the use of transmission (TUOS) and distribution (DUOS) networks operated by National Grid and Distributed Network Operators (DNOs) such as Electricity North West. 

These non-commodity charges vary depending on time of use – peaking when energy demand across the network is highest.

Currently, TUOS and DUOS costs make up nearly a quarter of a business’s energy bill. This is gradually increasing as network operators are forced to make significant investments to upgrade old infrastructure and transition to a smarter electricity system that can respond better to changing supply and demand.

Time of use

Businesses can avoid these rising costs by taking action to reduce their use of the electricity network during peak hours – in other words, by either moving energy-intensive processes to non-peak hours, reducing energy use altogether, or using energy that is generated or stored on-site. 

Engaging in demand-side response (DSR) schemes and investing in energy storage and on-site renewable energy solutions are therefore set to become more strategically important to managing energy costs in future years.