Adalta Energy Insights

Why your energy contract needs a rethink before BICS in 2027

Fri, 02 Jan 2026 09:59:07 GMT

Post updated 27/04/26

BICS: Why now is the moment to rethink your energy contract strategy

Against a backdrop of persistently high electricity costs, volatile wholesale markets and increasing policy intervention, many UK businesses are locked into energy contracts that no longer reflect the reality ahead. With the British Industrial Competitiveness Scheme (BICS) set to materially reduce policy‑driven electricity costs for thousands of manufacturers from April 2027, the assumptions that underpinned past procurement decisions are starting to fall away.

For qualifying electricity consumers, BICS is not just a future bill reduction — it represents a clear signal that now is the moment to reassess contract structure, flexibility and risk strategy, before opportunities are missed.

Here’s what you need to know.

What is the British Industrial Competitiveness Scheme (BICS)?

BICS is a new government scheme aimed at reducing industrial electricity costs from April 2027 . Its goal is simple: help UK industries compete on a global stage by removing a significant portion of non-commodity charges from eligible businesses’ electricity bills.

Eligible businesses could see up to a 25% reduction in their electricity bills as the planned savings are at least £35 - £40/MWh (3.5 – 4 p/kWh), obtained from the removal of Renewables Obligation (RO), Feed-in-Tariff (FiT) and Capacity Market (CM) charges. From April 2027, RO and FiT relief will begin, whilst CM discounts will commence from October 2027.

In addition, the government has confirme d a one‑off backdated payment in 2027, compensating eligible businesses for support they would have received from April 2026 .

Eligibility is determined on a combination of your SIC and Harmonised System (HS) codes and targets UK growth sectors, including advanced manufacturing, clean energy, life sciences and digital and technologies. A full list of eligible sectors and products can be found on the governments website.

Part of the Modern Industrial Strategy, it’s a structural change on a scale we don’t often see, and the businesses that prepare early will be best positioned to capture the value.

How will BICS support be calculated?

BICS operates on a site‑by‑site basis , meaning eligibility and support are assessed at individual meter level rather than being applied uniformly across an entire business group.

The level of support available depends on how electricity is used at each site:

Less than 25% of on‑site electricity used for eligible manufacturing activities: no exemption
25% to 50% of on‑site electricity used for eligible manufacturing activities: 50% exemption
50% or more of on‑site electricity used for eligible manufacturing activities: 100% exemption

For multi‑site businesses, this distinction is critical. Two facilities under the same ownership may receive very different levels of support depending on their operational activity and electricity usage profile.

What’s the impact of BICS on businesses?

The financial savings could be significant. For high-usage organisations, the removal of some non-commodity costs could deliver six or even seven-figure annual savings. But the impact isn’t just about reducing costs - it’s about the flexibility organisations gain to make better long-term decisions.

However, this opportunity comes with added complexity. Many businesses will understandably be considering energy contract renewals well ahead of 2027. The challenge is that committing to certain contract structures now, particularly those that fix or bundle non‑commodity charges, risks diluting the value of future BICS relief. As BICS discounts will be calculated against specific policy cost components, locking these elements into today’s contracts could make future savings harder to identify, reconcile, or fully realise.

We’re already seeing suppliers offering long-dated fixed contracts that extend beyond April 2027. For businesses without specialist support, it’s easy to assume a longer-term fixed deal provides certainty. But when it comes to BICS, that certainty could come at the expense of real value.

Why you should speak to a trusted energy partner now

The introduction of BICS changes the strategic picture. Businesses can’t rely on a one-size-fits-all contract and shouldn’t navigate this shift alone. Working with an experienced TPI or consultancy is the safest way to avoid costly mistakes and make sure your contract structure is fit for the future.

Here’s why:

1. You need a contract that protects your ability to access BICS savings

Fixed price contracts that include non-commodity charges beyond 2027 will make the calculation of BICS savings extremely difficult as the applicable cost elements are bundled into you unit rates.

A specialist partner can help you assess whether a more flexible approach, such as a pass-through contract, may offer better long-term value and avoid overpayment once the scheme goes live.

2. Invoicing will get more complex, expertise matters

Pass-through arrangements introduce more line-by-line detail, reconciliation and supplier-side interpretation. Without rigorous invoice validation and experienced oversight, errors can easily go unnoticed.

At Adalta Energy, our team has proven, industry-leading accuracy in this area and frequently challenges invoices that other consultants accept.

3. You need clarity on eligibility and a realistic savings forecast

The eligible business must be in a manufacturing frontier industry, as defined by a specific SIC4 code and HS6 code, or a foundational industry supplying those sectors. We provide a free eligibility check and model what your savings could look like under BICS, helping you plan ahead with confidence.

4. Suppliers will manage this change in different ways

Our long-standing, executive-level supplier relationships mean we understand how each supplier is likely to implement the scheme, and how to negotiate terms that protect your interests.

5. You need a partner fully aligned to your long-term goals

BICS is not a short-term tactical win; it will shape energy strategy for years. You need a partner who has the commercial, sustainability and credit expertise to support you through this transition and beyond.

Avoiding the common pitfalls

As with any major policy shift, we expect a rise in cold calling, overpromising and fee-driven opportunism.

Businesses should be particularly wary of:

Advisers pushing fixed deals beyond April 2027
Any consultancy charging additional fees for eligibility reviews
Any consultancy proposing a value share (%) approach for successful applications
A lack of transparency around how the savings will be applied to your contract
Broad claims about future exemptions without data-backed evidence

At Adalta Energy, our approach is different. There are no hidden fees, just clear, well-informed guidance that’s designed to protect your business and help you make the right decision at the right time.

How Adalta Energy can help you prepare for BICS

We’ve supported some of the largest and most complex energy users in the UK and we bring the same level of detail, diligence and care to every business we work with.

For BICS, we offer:

Free eligibility checks and saving forecasts
Contract reviews and renewal strategy support
Guidance on suitable contract types, including pass-through contracts, to take advantage of flexibility and manage the increased complexity of invoicing

You’ll gain a dedicated, expert partner who stays with you throughout your contract, ensuring you benefit from BICS from day one and avoid the risks that come with poorly structured deals.

It’s time to lock in long-term value

BICS could be one of the most important developments in UK industrial energy policy for a generation. The businesses that act early and seek the right expertise will be the ones that lock in long-term value.

If you want to ensure you’re prepared, protected and positioned to benefit fully from the scheme, now is the time to talk to a specialist.

We’re here to help you make sense of BICS and secure the right contract for your business. Speak to our team today.

The Continued March of Non-Commodity Costs

Thu, 01 May 2025 10:28:09 GMT

The Continued March of Non-Commodity Costs

An overview of the new electricity charge you will see itemised on your invoice from Apr-25, which new charge has been kicked down the road and what is happening to existing charges.

April 2025

The most famous quotation of Benjamin Franklin stated that “nothing is certain except death and taxes”, but every April, one contemplates that if he had been around in the UK today, he would perhaps add the inevitable rise of electricity non-commodity costs to his list!

New charge for April 2025

As highlighted last year in our British Industry Supercharger Scheme blog , a new charge will be added to your invoice from April 2025 onwards to reflect the costs of expanding the Energy Intensive Industries scheme, which now includes a subsidy of 60% of the network charging costs for qualifying companies. The cost of this subsidy will be paid by all non-qualifying consumers under a charge on invoices, coined the EII Support Levy (ESL) . Initial estimates suggest this charge will be in the region of 0.09p/kWh . Whilst it is never nice to see a new cost on the invoice, the cost of ESL is relatively small compared to the changes to other non-commodity costs highlighted later in the blog.

Delayed charge

In our previous Additional Government Energy Policy Subsidies blog we highlighted a new upcoming charge called Nuclear Regulated Asset Base (RAB). This charge would reflect the costs of financing new nuclear generation facilities, such as the £35bn+ construction cost for the new 3.3 GW Sizewell C reactor. This was expected to be introduced at the end of 2024, however, due to ongoing discussions with investors, the scheme may now not come in until mid-2026. Whilst this was only initially forecast to start at 0.05p/kWh, it would soon ramp up as construction costs start increasing, so a delay is welcomed for consumers.

Changes to existing non-commodity costs

Capacity Market (CM)

The Capacity Market ensures security of electricity supply by providing a payment (to generators) for reliable sources of capacity, alongside their electricity export revenues, to ensure generators deliver energy when needed most. The cost of this is recovered from consumers as Capacity Market charges on electricity invoices. This scheme encourages the investment needed to replace older power stations and provides backup for more intermittent and inflexible low-carbon generation sources. The rate paid is agreed during auctions, where generators and developers bid to secure payments.

Capacity Market costs are site specific as they relate to peak consumption between 16:00 to 19:00 on working days from November to February. As an indication, an average consumer might expect a notable increase in the order of 0.3p/kWh to support this scheme in 2025/26.

Balancing Services Use of System (BSUoS) Charge

The BSUoS charge recovers the cost of balancing the electricity transmission system in the UK. Example costs include running the national control room, frequency response arrangements, other ancillary services and constraint costs (paying generators to turn on or off to maintain system security, for example), all to ensure an effectively run transmission system that does not cut out.

With the increase of intermittent renewable generation, the task of balancing the system has become more and more complicated (and expensive) with each passing year. This was highlighted in 2024/5 with the appearance of ‘Dunkelflaute’ events, where solar and wind generation fell and the consequent need to shift to natural gas and battery storage to allow grid synchronisation effectively. The rise in associated costs will see an annual BSUoS increase of 0.33p/kWh in 2025/26.

Renewable obligation (RO)

Suppliers are legally obliged to secure and evidence an increasing percentage of their power from renewable sources. In the launch year (2002/3), this started at 3%, rising steadily to 24.5% by 2014/15, and it now stands at 49.3% for 2025/26. To evidence their purchases, a supplier needs to either purchase a Renewable Obligation Certificate (ROC) for each MWh they supply or pay a buy-out price for any shortfall. The associated cost of this requirement is passed through to customers in the RO charge found on electricity invoices. The buy-out price is inflated by RPI each year, so for 2025/26 the price of the buy-out has increased to £67.06 per ROC (RPI in 2024 was 3.6%). The impact on your invoice for 25/26 is an increase of 0.13p/kWh .

Contracts for Difference (CfD)

CfD was introduced in 2014 to replace the RO scheme as the main mechanism for incentivising new build renewable generation. Under this scheme, a developer agrees to a ‘strike price’ for each unit of electricity they generate so they can successfully achieve financing and deliver the proposed project. There is then a contract for difference between the strike price and the average market price for electricity in the GB market. If the strike price is above the market price, the generator will be paid a top-up for each unit of electricity generated, and it is this cost that forms the CfD charge found on invoices. This charge varies each year depending on the relationship between the various strike prices and the GB market price.

Industry parties have typically assumed higher market prices relative to 2024/25 when forecasting CFD costs for 2025/26 and therefore estimated costs have largely fallen across the board. In reality, a forecast 0.1p/kWh reduction will be driven by subsequent market developments in the next year.

Impact for 2025/26

So, what is the overall impact on your invoice for these changes? The total of all of the above changes is a not so insignificant 0.75p/kWh (£7.5/MWh). For a 1 GWh customer, this equates to £7,500 unavoidable extra costs for 2025/26.

Unfortunately that's not the complete story either. Distribution Use of System (DUoS) and Transmission Network Use of System (TNUoS) changes are excluded from this report due to the site specific nature of the costs and related increases. As a flat average, TNUoS residual costs are up by over 30% but there are notable extremes.

If you have a pass-through non-commodity contract, you will see an immediate increase on your invoice for all consumption from 1st April 2025. If you have fixed non-commodity costs, your supplier would have already built these expected costs into your agreed rates.

If you have any concerns on the impact of the changes on your contract, or would like more information, Adalta Energy are always on hand to support.

Great British Energy

Tue, 22 Oct 2024 16:24:19 GMT

Great British Energy

There has been much fanfair, but what is GB Energy really about?

At the 2022 Labour Party Conference, Sir Keir Starmer announced ambitious plans for creating Great British Energy; a company modelled on European state-owned companies such as EDF.

“A new company that takes advantage of the opportunities in clean British power and because it’s right for jobs, because it’s right for growth, because it’s right for energy independence from tyrants like [President Vladimir] Putin,” claimed Starmer.

As the dust settles on the Labour victory at the UK’s July General Election, Adalta Energy takes a closer look at how Labour's vision is taking shape.

What is Great British Energy?

It is a new, publicly-owned and operationally independent clean energy company that will be headquartered in Scotland and backed by £8.3 billion of new money.

Great British Energy is part of this Government’s mission to make the UK a clean-energy superpower and will be delivered through its 5 functions, helping to support the government’s aim to decarbonise the grid by 2030:

Project investment and ownership – investing in energy projects alongside the private sector, helping get them off the ground
Project development – leading projects through development stages to speed up their delivery, whilst capturing more value for the British public
Local Power Plan – supporting local energy generation projects through working with local authorities, combined authorities and communities across the UK
Supply chains – building supply chains across the UK, boosting energy independence and creating jobs
Great British Nuclear – exploring how Great British Energy and Great British Nuclear will work together, including considering how Great British Nuclear functions will fit with Great British Energy

In practice, the company will work as an investment vehicle, channelling funding – both public and private – into a series of renewable energy projects across the country. GB Energy will retain a stake in each project and will either return the proceeds to the government or invest them in other renewable energy projects.

Will Great British Energy be a new energy supplier?

It will not – contrary to some popular misunderstanding – replace existing energy suppliers. No consumer will be able to take out a new energy tariff from GB Energy and it will not reduce energy bills overnight, rather, it will be a long-term exercise to improve the UK’s energy security.

How Much will it cost and who will pay for it?

Initially, Labour planned to invest £28bn annually in the green transition, but after much debate, this plan has now been scaled back to a pledge to invest £8.3bn over a 5-year parliament (just £1.66bn per year)

For once, there will not be a new line item on your invoice to fund the cost, with Labour now saying "It will be funded by asking the big oil and gas companies to pay their fair share through a proper windfall tax".

Will this be enough to make a difference?

Only time will tell how successful Great British Energy is. Ed Miliband was quoted as saying “The only way to protect ourselves as a country for the long term is to deliver cleaner, cheap, homegrown energy – boosting our energy independence, creating jobs and tackling the climate crisis”.

One of the key opportunities for Great British Energy to make a real impact is through its planned collaboration with the Crown Estate – the £15.5bn portfolio of land owned by King Charles. The Government plans to make use of these royal assets – both on land and on the seabed – to accelerate offshore wind exploration, essentially renting the land from the Estate. The Estate will also benefit from new borrowing powers – announced in the King’s Speech – which the government hopes will help to increase investment in offshore wind.

Can Great British Energy replicate the success of other state backed energy companies?

Much reference has been made to the success of other state-owned companies, such as EDF in France and Statkraft in Norway, however, the size and scale of plans for Great Britain energy are much smaller at this stage and would be seen a phenomenal success if it ever achieved even a fraction of the value of such companies. As an example of the differences in scale, EDF operates a diverse portfolio of at least 120 GW of generation capacity in Europe, South America, North America, Asia, the Middle East, and Africa and it is forecast to spend £46bn alone on Hinkley C in the UK; over 5 times the planned initial cost of Great British Energy!

Adalta Energy understands this is still an uncertain time for UK business. If you have any questions or require any assistance, please contact enquiries@adaltaenergy.co.uk or call Ed Butler directly on 07989 431184. Alternatively, if you are an existing Adalta Energy client then please speak directly with your dedicated contact.

Market Wide Half Hourly Settlement Overview

Mon, 05 Aug 2024 15:50:06 GMT

Your Guide to Understanding Market Wide Half Hourly Settlement

August 2024

The Market Wide Half Hourly Settlement (MHHS) programme has been called the most significant change to how the wholesale electricity market is settled since the introduction of the non-half-hourly (NHH) market back in 1998. This article aims to provide an overview of what is happening and how the inevitable changes will impact your business.

What is MHHS?

MHHS will see all business customers move to half-hourly (HH) settlement of their electricity consumption, meaning every 30 minutes, your electricity consumption will be recorded and used to calculate your monthly invoice. Currently, around 400,000 non-domestic customers have half-hourly meters, whereas ~2.3 million customers are non-half-hourly settled, illustrating the sheer scale of the programme. The timescales for industry to deliver MHHS starts in April 2025 and runs through 2026. All Suppliers will be working on various delivery programmes before this time.

Why is it happening?

MHHS is deemed as a key enabler for a smarter, more flexible energy system and is vital in assisting the United Kingdom with its Net Zero ambitions. By providing half-hourly visibility of consumption, the programme aims to change consumer behaviour, by reducing demand on the grid at peak times when electricity is most expensive and polluting.

What will change?

There are a number of changes as a result of the programme, other than the obvious change that invoices will be calculated on HH data. As with any change within the industry, there will be a number of new classifications to learn and the corresponding abbreviations.

MHHS will reclassify the types of meter to either be called Advanced or Smart based on the below allocation:

Depending on whether you are Advanced or Smart, your meter will be subject to the new metering agent names and abbreviations shown below, moving away from the Meter Operator (MOP) and Data Collector (DC) that we are currently familiar with:

What will you have to do?

Nothing! MHHS is a programme that is Supplier led, therefore no mandated steps need to be taken by customers. However, where you have existing NHH ‘dumb’ meters it would be in your interest to move to a Smart or AMR meter so that you can gain the benefits of half-hourly settlement, especially when you will be paying for the associated MHHS Agent costs highlighted above.

What happens if I don’t get an AMR or a Smart Meter for my existing NHH Meter?

Changing to an AMR or Smart Meter is not mandatory under the programme. If you choose to stay on a ‘dumb’ NHH meter your meter will be allocated a site-specific half hourly load profile against which your consumption will be settled. This is different to the current NHH process, where you would be settled against a generic profile class.

What will it cost?

MHHS has three key cost components that will vary compared to the current market:

Time of use – you will now be invoiced the cost of your electricity based on the actual cost of each half-hour (HH) of consumption. This could lead to higher or lower costs initially, but by having the HH visibility of when you consume and how much it costs, it will allow you to amend consumption accordingly.
Metering Agents – Traditionally the cost of MOP and DC was not transparent for NHH customers and simply built into your unit rate. MHHS will align NHH meters to the way HH meters currently operate, with transparency of price and the ability to shop around for the best provider. At present, there is no guidance on the costs of the new MHHS Agents, although these are expected to increase inline with current HH metering charges.
NHH – Those who remain on "Dumb" NHH will now be settled on an allocated site-specific profile. There will be winners and losers from this change, but the costs should be more reflective of your site’s actual usage.

What is the benefit?

The ultimate benefit of MHHS to customers is the ability to reduce the amount of money spent on electricity, as well as reducing their carbon footprint of the consumption. Where a customer engages with the programme, they will have half-hourly visibility of what and when they consume. This is an extremely powerful tool, as once you can measure something, it is only then possible to begin your energy cost reduction journey.

How can Adalta Energy help?

Whilst the MHSS programme is led solely by Suppliers, Adalta Energy are able to provide you with advice, as and when you need it. When the programme goes live, Adalta Energy will be able to ensure you are on the most suitable product, MHHS Agent Agreement and data analysis tools so that you are best placed to take advantage of the changes and reduce your energy costs.

Commodity prices - where is the floor and why?

Fri, 02 Feb 2024 11:54:17 GMT

Commodity prices - where is the floor and why?

2nd February 2024

Since the peak of the energy crisis back in August 2022, barring the odd knee-jerk reaction to a short-lived bullish news story, the trend has very much been bearish, with prices falling both faster and further than any commentator had been predicting. As a result, the question has now moved to how much further prices could realistically fall and where the market will settle for a ‘new normal’ to be established.

Before the escalation in tensions between Ukraine and Russia, the market had ticked along steadily at an accepted annual norm around £50/MWh for some time. Since the turn of the year, the annual figure has traded as low as £71/MWh, still a £21/MWh premium when compared to pre-crisis levels, but certainly back to a level that is verging on acceptable for consumers following such a tumultuous period.

It is generally accepted that we will never fully return to pre-crisis levels with existing infrastructure. Firstly, because Europe is now dependent on LNG cargoes instead of pipeline gas from Russia, with LNG inherently more expensive than piped gas due to the high costs involved with liquefaction and re-gasification as well as the cost of shipping. Secondly, high levels of inflation have been present since the crisis, which inevitably led to commodity prices rising due to the increased costs involved in production and distribution.

Recent Contract for Difference (CfD) strike prices set by the government for offshore wind projects have been cited as a possible guide to a floor for the UK; with a strike price of £73/MWh being deemed to be an acceptable minimum price to encourage the further transition away from fossil fuels generation sources. Based on current spreads, this might broadly equate to a Summer contract of £65/MWh and a Winter contract of £81/MWh.

The outlook for 2024 continues to be generally bearish, driven by stagnant economic demand, strong storage levels, new renewable generation, and an ever-increasing number of secure LNG supplies and processing infrastructure developments across the continent. However, the ever-present geopolitical risks continue to add premiums to contracts, with recent painful lessons teaching us that prices have the potential to rise by a lot more than they can fall. As such, now is certainly a time when consumers can begin to consider whether they hedge prices further out than the short-term horizons that were successfully used to ride out the crisis.

COP28 - What were the key outcomes?

Fri, 22 Dec 2023 08:57:18 GMT

Summarising the key agreements from the 28th

Conference of Parties (COP)

COP 28 dominated column inches during early December as the great and good of the world gathered at the 28 ^th annual ‘Conference of Parties’ climate meeting of the United Nations. COP 28 was controversially held in the UAE, the world’s 7th largest oil producer, creating a juxtaposition of views between the summits goal of reducing reliance on fossil fuels and the gleaming skyline of petroleum enhanced Dubai.

Following two weeks of heated debate, the conference concluded with a positive agreement amongst the 200 nations involved to transition away from fossil fuels, which in turn will act as a guide for countries as they update their own commitments towards limiting the effects of climate change. A summary of the key outcomes is as follows:

Countries have agreed to contribute to the phasing out of inefficient fossil fuel subsidies and to take more action to address non-CO2 emissions, including methane.
An agreement to accelerate investment in transitional technologies, such as low-carbon hydrogen.
The tripling of renewable energy will see global installed capacity reach 11,000 GW by 2030 and the doubling of the global average annual rate of energy efficiency will reach 4% every year until 2030.
UK announcements included an £11 billion investment into Dogger Bank wind farm (planned to be the largest offshore wind farm in the world) and a £1.6 billion commitment to international climate finance projects.
A “loss and damage” fund has been established to support developing countries facing the worst impacts of climate change. Currently over $700m has been pledged to the fund.
Over 60 nations have signed a new voluntary “Global Cooling Pledge”, which aims to enhance the efficiency of cooling appliances and increase access to sustainable cooling.

Whilst providing positive news for the fight against global warming, the steps proposed will present the UK with a double-edged sword. On one hand, the investment in low carbon generation such as offshore wind and nuclear will bring jobs, investment and more importantly energy supply and price security to the UK as we transition away from the reliance on imported fossil fuels. On the other hand, questions will be raised about the funding of such policies, with costs inevitably passed on to consumers who already pay substantial environmental subsidies through their energy supply contracts (which are presently set to rise as highlighted in our previous blog ).

Additional Government Energy Policy Subsidies

Sun, 29 Oct 2023 17:26:13 GMT

Additional Government Energy Policy Subsidies

What are they and when could they be implemented?

If the news of non-commodity cost increases raised in our previous blog wasn’t already enough to bear, it looks like we will soon all be learning even more abbreviations and acronyms for our costing vocabulary as yet more Government policy subsidies are set to be added to your already stretched monthly invoice over the following years.

Whilst the evolution of the energy market in relation to low carbon generation and net zero technologies brings the UK many benefits, the inevitable financial reality is that funding implications of these developments are passed directly onto end users via your electricity or gas bill.

There are three new policies on the horizon, which in total could add an extra £3/MWh to the existing cost stack:

1) Nuclear Regulated Asset Base (RAB)

Following the cancellation of several proposed nuclear projects that would have used the Contracts for Difference funding mechanism, the UK Government has introduced a Regulated Asset Base (RAB) funding model which, unlike CfD, provides finance from the very start of construction. This policy aims to make investment more appealing and to ensure new nuclear generation facilities are developed as existing assets begin the decommissioning process.

The first RAB will be in relation to the £35bn+ construction cost for the new 3.3GW Sizewell C reactor where consumers will pay an up-front charge on invoices. Initial estimates suggest a charge on the invoice of around £0.50/MWh from as early as April 2024, rising in later years as construction costs increase.

2) Hydrogen Levy Scheme

The UK Government has proposed an incentive scheme to encourage hydrogen production by providing investors with a guaranteed return should the price of hydrogen fall below an agreed minimum level. Should the scheme go ahead (there has been talk of cancellation due to the multitude of increases faced by consumers) it would begin in 2025. The financial commitment could lead to a cost of £100m each year which would add a cost to bills (likely gas invoices) of around £0.50/MWh.

3) Carbon Capture Subsidy

Whilst still very much in the development stage, a new subsidy has been proposed to support Carbon Capture, Usage and Storage (CCUS) to reduce emissions in industries where other carbon saving measures are not feasible. Should this subsidy move forward, initial indications suggest the charge on the consumer invoice could be as much as £1/MWh and would likely be introduced toward the end of the decade.

Adalta Energy understands this is still an uncertain time for UK business. If you have any questions or require any assistance, then please contact enquiries@adaltaenergy.co.uk or call Ed Butler directly on 07989 431184. Alternatively, if you are an existing Adalta Energy client then please speak directly with your dedicated contact.

British Industry Supercharger Scheme

Sun, 29 Oct 2023 15:19:45 GMT

British Industry Supercharger Scheme

What is it and how could it impact your energy costs?

Plans to help super charge the economy moved a step closer following the conclusion of the UK Government’s consultation into their proposed British Industry Supercharger (BIS) scheme. If your company has or could qualify for Energy Intensive Industries (EII) status , you will likely now see a significant reduction in your electricity costs.

On 23 ^rd February 2023 the UK Government announced its plans for BIS, which aimed to further increase the competitiveness of British companies in Europe. The plan involved introducing the following 3 measures which address the areas of the UK energy system which currently contribute to higher energy costs for EIIs than comparable countries:

1. An increase in the subsidy under the existing EII Renewable Levy Exemption scheme from 85% to 100% aid intensity. This subsidy relates to the non-commodity cost of Feed-in-Tariff (FiT), Contracts for Difference (CfD) and Renewables Obligation (RO)

2. A new full exemption from the indirect costs associated with the GB Capacity Market

3. An EII Network Charging Compensation (NCC) Scheme that provides a 60% reduction in the charges paid for using the GB electricity grid. This would relate to the non-commodity costs of Balancing Services Use of System (BSUoS), Transmission Network Use of System (TNUoS) and Distribution Use of System (DUoS)

The increase in previous EII exemptions for RO, FiT and CfD resulted in a reduction of ~£5/MWh, the 100% exemption from Capacity Market charges resulted in a further reduction of ~£5/MWh and finally the introduction of exemptions for network charges further reduced costs by ~£14/MWh. This meant that firms who qualify are expected to see a reduction in their overall electricity price in the region of £24/MWh above and beyond the savings already available under the existing EII scheme.

There was a phased approach to the introduction of the new measures. The increase in the existing EII relief to 100% was introduced first in April 2024 as the provisions were already covered by existing legislation. The Capacity Market Exemption and NCC Scheme were both subject to secondary legislation and statutory approval, with the Capacity Market exemption coming into effect from October 2024 and finally, the NCC scheme launched on the 12th of July 2024, however, payments related to the scheme will not be seen by customer until April 2025.

As always, Adalta Energy is here to support your business through the ever-changing landscape. If you have, or think you would qualify for EII, please contact enquiries@adaltaenergy.co.uk or call Ed Butler directly on 07989 431184. Alternatively, if you are an existing Adalta Energy client then please speak directly with your dedicated contact.

What is happening to non-commodity costs?

Tue, 19 Sep 2023 14:35:39 GMT

Non-commodity costs forecast to exceed commodity costs from April 2024

As the wholesale electricity market returns to some form of normality (albeit at a higher level of price and volatility) now it is the turn of the less famous sibling, non-commodity costs, to take its spot in the limelight. With significant rises already coming through on invoices since April 23, more increases are fast approaching on the horizon from April 24 when non-commodity costs are forecast to outweigh commodity costs once again:

Balancing Services Use of System (BSUoS) Charges

BSUoS charges reflect the day-to-day operational costs of balancing the transmission system. The cost of BSUoS is largely influenced by the underlying wholesale cost of electricity, with National Grid required to pay market reflective rates to generators to be on standby to provide generation should the system require it. The high wholesale prices over the past year have seen a corresponding spike in balancing costs faced, which in turn are recovered from long suffering consumers via the BSUoS charge on your bill.

On top of the commodity led increase since the energy crisis inflated wholesale prices, BSUoS saw another increase from April 23 because Generators no longer contribute to the cost of BSUoS. The idea behind this change was that generators should be able to reduce the cost of the wholesale energy they produce, which will benefit consumers, but the impact was that BSUoS charged to consumers increased by around a third.

One minor benefit that came from change is that National Grid is now being asked to fix BSUoS costs for 6 month periods and to notify these costs 9 months in advance. This should provide much welcomed price transparency and budget certainty. However, if a modification is passed as proposed, this will be reversed to 3 month's notice, which much reduces the benefit of fixing this cost in the first instance.

Transmission Network Use of System Charges (TNUoS)

The Targeted Charging Review (TCR) was an OFGEM led initiative that assessed the way in which network charges are recovered and in turn led to changes to the methodologies used. The latest change to be implemented has impacted TNUoS charges from April 23.

TNUoS charges aim to recover the costs involved with operation, maintenance and development of the UK’s transmission networks. Previously, this charge was calculated using the Triad system, which saw half hourly (HH) metered customers charged for electricity transmission costs according to their consumption during the three half-hour periods in Winter when overall demand on the grid was at its peak. OFGEM was concerned that this system distorted the market by encouraging some businesses to shift their consumption to avoid Triad periods and not pay their share towards maintaining the grid year-round.

From April 23, the TNUoS charge recovery has been supplemented with a banding-based daily charging system that should ensure all businesses pay their share towards the upkeep of the grid. The banding for each meter will now be based on the Agreed Supply Capacity (ASC) or their Estimated Annual Consumption if an ASC is not in place e.g. for non half-hourly metered supplies.

The impact on your costs from these charges will depend on how flexible your business was at reducing / shifting consumption in the three peak hours to avoid TNUoS previously (Triad Avoidance). Triad avoidance will no longer be possible for many and, where it remains, the benefits will be significantly reduced. This means that businesses who used this method to reduce their TNUoS costs in the past might find their annual energy bill significantly increasing. Conversely, if you were unable to flex your consumption previously, you may have seen a reduction in your TNUoS charges since April 23, as per the aim of the review, as everyone will now contribute more evenly. On average, TNUoS represented £8.52/MWh from April 23 and this is forecast to increase to around £9.59/MWh from April 24.

Distribution Use of System (DUoS)

Refers to the infrastructure that transports electricity from the national transmission network onto the local distribution network (and therefore to the end user). Distribution Network Operators (DNOs) charge for the use of their distribution network in each region to recover the costs associated with running and upgrading their network. Due to the advancement in renewable generation installations, there are sizable network upgrades ongoing to support additional localised electricity generation.

The DNOs published their charges for the period April 24 – March 25 in December 2022. The figures show a significant increase of c. 50% in 2024 for some regions. These increases are a result of revenue under recovery in previous years (lower volumes across the network due to COVID), network upgrades and the high rate of inflation driving up costs. OFGEM approves any increases in network costs through its price control review.

Renewable Obligation (RO)

RO is one of the main support mechanisms for large-scale renewable electricity projects in the UK and places an obligation on licensed electricity suppliers to source a proportion of their supply to customers from eligible renewable sources each compliance year.

A supplier has two options to meet the obligation. Firstly, when a supplier buys power from an accredited generator, they receive Renewables Obligation Certificates (ROCs) which can then be presented to OFGEM at the end of the compliance period. Secondly, they can pay a Buy-Out Price to meet their obligation instead.

Suppliers opt to pass on the cost of this obligation to customers via the RO charge. This charge is calculated by multiplying the obligation percentage by the buy-out rate. For 2023/24 OFGEM has fixed the percentage of the obligation at 0.469 ROCS per MWh of electricity supplied and a buy-out rate of £59.01 per ROC. This creates an RO charge of £27.67/MWh from April 23.

The costs for this year’s RO charge increased because the scheme is drafted so that the Buy-Out price is inflated by the RPI level of the previous year. RPI for 2022 was an extremely high 11.6% because of the turmoil from the Russian invasion of Ukraine and the after effect on the economy from the COVID pandemic. On a positive note, part of this increase has been mitigated by OFGEM reducing the obligation level from 0.491 in 2022/23 to 0.469 in 2023/24.

A further RO impact to watch out for is RO Mutualisation. This is the difference between what has been paid and what is owed to OFGEM in relation to the submission of ROCs and Buy-Out payments. Due to the high number of energy supply company failures during the energy crisis, there will be a large shortfall in these payments and this shortfall still needs to be paid to OFGEM. This is achieved by splitting the balance across suppliers who have already paid their portion for the relevant period. This means suppliers must pay an additional amount, which most, if not all, suppliers pass through to end users. This means customers with pass through contracts will see an increase to the RO portion of their energy bill as suppliers apply one-off charges to those contracts during the obligation period. Customers looking to fix these costs will also see an increase as suppliers build in the additional cost in their forecast prices.

EU Gas Storage Levels 90% Full

Thu, 17 Aug 2023 16:14:05 GMT

EU gas storage levels now sit at over 90% full, however, market volatility endures due to inelastic supply/demand fundamentals

18th August 2023

In December we blogged about the world of gas storage (you can recap HERE ). That blog highlighted how critical the Summer 23 storage injection season would be as Europe faced the first summer without overland pipeline supplies of 35-60 bcm from Russia.

As of the 18 ^th of August, the great news is that EU storage levels now sit at over 90% full; a level that has been reached far in advance of the mandated November deadline set by the EU.

Whilst gas and electricity prices have remained high by historical levels, with suppressed industrial demand across the continent, demand has admirably been met by various LNG cargo ships that have replaced the Russian supplies whilst day-ahead gas prices have averaging just 86 p/th (2.93 p/kWh) since March.

The excess supply and low prices witnessed has allowed market participants to ardently inject surplus gas supplies into storage, backed by the comfort of likely gains to be made on price arbitrage from storage withdrawals this coming winter. Under the Customers Warehouse Rule, European gas traders are now even routing supplies to Ukrainian storage facilities, which could accommodate a further 3.75 bcm this summer. The risks associated with using Ukrainian gas storage facilities are considered relatively low given all facilities are located at depths of between 0.4 - 2 km below the surface and have multiple injection and withdrawal points; none of which can be damaged at the same time.

Whilst this is all very good news, the global gas market is still finely balanced. Recent European price rises on the back of possible strikes at LNG facilities in Australia keenly highlight the interconnected nature of the world market, with the European Title Transfer Facility (TTF) price comparisons with the Japan Korea Marker (JKM) regularly dictating the direction of travel for LNG cargoes at sea.

We head towards Winter 23 with the confidence of storage levels being higher than anyone could possibly have hoped for whilst the sun is still shining. However, we are still not out of the woods, as the market shows continued high levels of volatility. We will all be keeping our fingers crossed that El Nino doesn’t bring a severe winter and there are no unforeseen outages to supply infrastructure across the continent.

Enhanced Government Support for Energy & Trade Intensive Industries

Wed, 26 Apr 2023 11:09:54 GMT

The EBDS application process is now open for businesses eligible for the higher level of support offered to Energy and Trade Intensive Industries (ETIIs).

26th April 2023

Level of support

Full details can be found on our initial EBRS blog here but, at a high level, the additional support should your business qualify is as follows:

Electricity Price Threshold of £185 MWh (18.5 p/kWh), Maximum Discount of £89 MWh (8.9 p/kWh)

Gas Price Threshold of £99 MWh (9.9 p/kWh), Maximum Discount of £40 MWh (4 p/kWh)

Maximum Discounts are applicable to 70% of volume

Application process

Whilst the scheme runs from 1st April 2023 to 31st March 2024, the application window will run for a 90-day period from 26th April and suppliers will be able to apply the discounted rate retrospectively once eligibility has been confirmed by the Department for Energy Security and Net Zero.

In order to qualify, the business will need to be able to prove that at least 50% of its revenue is being generated from UK-based activity within   eligible SIC code sectors .

Should this test be passed, the following information needs to be provided for the application process:

Contact details
Registered company name and address
Company registration number
Up to 4 ETII eligible SIC codes
Gas and/or electricity supplier details
Gas and/or electricity meter point numbers (MPRN or MPAN) associated with the property, which are found on your invoice(s) from your energy supplier
Name of your organisation as it appears on your bill from your energy supplier(s)
Declaration letter signed by a named director or equivalent of your organisation or business

In addition to the above, you will be required to provide financial evidence to determine your eligibility, such as:

Most recent full set of end-of-year accounts. If you do not have these, upload evidence of your most recent company accounts, covering a minimum period of the most recent 6 months
Income Statement referring to the same time period as the accounts
Sample of 20 sales invoices, no older than 12 months from the date of the signed declaration, which demonstrates activity that falls within an eligible sector
License or trade body membership details for regulated industries (if applicable)
Any additional evidence you want to support your application

Further support

It is also advised that to help with the processing of your application, you could also upload a letter signed by an external auditor or chartered accountant. This should confirm that you are in an eligible sector and that 50% or more of your revenue generated from Great Britain and Northern Ireland are in an eligible sector.

Applicants can check eligibility and apply online here .

Adalta Energy is available to support your business in this application process. Businesses on fixed price contracts secured at levels above the supported price thresholds should apply. In addition, those businesses on flexible purchasing contracts with open positions can use the scheme to hedge any upside price risk as, despite current market prices being well below the supported price threshold, the scheme will provide a ceiling price against your budget.

Climate Change Agreement (CCA) Extension

Fri, 31 Mar 2023 15:59:07 GMT

Climate Change Agreement (CCA) Scheme will be extended for a further two years until March 2027

- 31st March 2023 -

Buried deep within the 2023 Spring Budget was the positive news that the Climate Change Agreement Scheme will be extended for a further two years until March 2027. Whilst this had been anticipated, confirmation will be a welcome relief for energy intensive companies at a time of what seems like never ending price increases.

The key points regarding the announcement to extend the scheme are as follows (these may be subject to change following a consultation period):

The scheme will re-open to new entrants and the application window will open on 1 May 2023 and close on 30 September 2023. Successful applications will be eligible to claim the reduced rates of CCL from 1 January 2024
Sector targets for the new Target Period 6 will continue to use 2018 as the base year
Target Period 6 would only require data to be reported from 1st January 2024 to 31st December 2024. 2023 will not be covered by a target, but data is likely to be requested for this period, so data should still be recorded
The current eligibility criteria will remain in place
Carbon buy-out price is proposed to increase to £25/tonne
Final sector targets will be agreed before the end of October 2023

Climate Change Agreements (CCAs) are voluntary agreements made between UK trade associations and the Environment Agency to reduce energy use and Carbon Dioxide (CO2) emissions. In return, companies receive a discount on the Climate Change Levy (CCL), which is a tax added to electricity and gas invoices.

A company that has a CCA must measure and report its energy use and carbon emissions against agreed targets over 2-year target periods. If the company meets its targets at the end of each reporting period, the facilities continue to be eligible for a CCL discount. If the company does not meet its target at the end of the period, the company may be required to pay a buy-out fee based on a £/CO2 rate to make good on its underperformance.

CCL charges from April 2023 are 0.775p/kWh for electricity and 0.672p/kWh for gas. Should a company hold a CCA this charge is reduced by 92% for electricity and 88% for gas, equating to a significant annual saving for participants.

Should you require any help or assistance in the process of applying for and/or maintaining your CCA, please contact our energy experts at enquiries@adaltaenergy.co.uk

Energy Bills Discount Scheme

Mon, 09 Jan 2023 22:14:25 GMT

Energy Bills Discount Scheme - UK Government details support available to business from 1st April 2023

9th January 2023 (last updated 20th January 2023)

The UK Government has released overdue details of the financial support available for business following the expiry of the current Energy Bill Relief Scheme (EBRS) on 31st March 2023.

The new Energy Bills Discount Scheme (EBDS) will run for 12 months from 1st April and be applicable to non-domestic customers as below;

Discounts will be applied to electricity and gas charges via supplier invoices (as per EBRS)
Discounts will only be applied where the wholesale cost of the associated energy contract exceeds a certain Price Threshold
Discounts will be calculated as the difference between the wholesale cost of the associated energy contract and the Price Threshold
Maximum Discounts cap the level of support available
While most businesses will be eligible for standard support levels, additional financial support is available to sectors defined as Energy and Trade Intensive Industries (ETII)

Standard support

Electricity Price Threshold of £302 MWh (30.2 p/kWh), Maximum Discount of £19.61 MWh (1.961 p/kWh)
Gas Price Threshold of £107 MWh (10.7 p/kWh), Maximum Discount of £6.97 MWh (0.697 p/kWh)

Energy and Trade Intensive Industries (ETII) support

Electricity Price Threshold of £185 MWh (18.5 p/kWh), Maximum Discount of £89 MWh (8.9 p/kWh)
Gas Price Threshold of £99 MWh (9.9 p/kWh), Maximum Discount of £40 MWh (4 p/kWh)
Maximum Discounts are applicable to 70% of volume *
Eligible ETII customers will have to apply for the higher level of support. Further details on how this will work will be published in due course

Inevitably UK business will be disappointed with the standard level of support offered through the EBDS. However, if your business has yet to contract in the impacted period then there remain opportunities to achieve/outperform the ETII Price Threshold levels.

Adalta Energy understands that this is an uncertain and extreme time for UK business. If you have any questions on the ongoing energy crisis or require any assistance, then please contact enquiries@adaltaenergy.co.uk or call Ed Butler directly on 07989 431184 . Alternatively, if you are an existing Adalta Energy client then please speak directly with your dedicated contact.

Updates

* 20th January 2023 - UK Government updated guidance on 17th January 2023 to include reference to the ETII Maximum Discount being applicable to 70% of volume only

All eyes on Gas storage

Tue, 06 Dec 2022 12:46:32 GMT

All eyes on Gas storage

Demand and storage levels this winter continue to set forward commodity prices

6th December 2022

The previously mundane world of gas storage has been grabbing headlines over the past few months, as energy analysts pore over capacity targets, daily injection levels and LNG cargo ship locations to assess Europe’s ability to avoid industry shutdowns and power rationing this winter.

Exceptionally high prices, energy conservation and warmer than normal temperatures since the middle of October have combined to cut consumption and attract large volumes of imported LNG to Europe. This has allowed Europe to far exceed all injection projections and, as of the 6th of December, Europe’s storage was 91.27% full.

This, in turn, has allowed many businesses with Flexible contracts to benefit from tumbling Day Ahead prices this winter, safe in the knowledge that a sustained increase in commodity costs would likely be protected by the UK Government’s Energy Bill Relief Scheme (EBRS). To date, Day Ahead contracts have significantly outperformed the EBRS supported prices and have averaged just £128.5 MWh for Power and 115 p/Therm for Gas through October and November.

In fact, should storage depletion follow central prediction levels, Europe's gas inventories are on course to end the winter at one of the highest levels on record; as long as prices stay high to erode demand and providing that the remaining pipeline deliveries from Russia continue. Attention now switches to Summer 23, when Europe will begin its preparations for the Winter 23 season through gas storage injections. Traditionally, the summer provides a sustained period of reduced heating demand that allows gas storage levels to be replenished at supressed price levels.

However, Summer 23 is looking anything but the norm, as Europe faces the first full summer without Russian flows of gas of 35-60 bcm. This, coupled with increased demand for LNG from China as it moves out of COVID restrictions, could see Europe facing a shortfall of gas required and a sustained peak in prices. Indeed it is those fears that are currently reflected in the UK wholesale market, with limited spread observed between Summer 23 and Winter 23 prices.

Without confirmation of UK Government support beyond March 2023, Flexible business customers with open positions will now be pondering hedging strategies for the summer; with an ongoing focus on key supply and demand metrics this winter. Day Ahead prices have been trending upwards as temperatures have dropped in the last few weeks which will undoubtedly raise more uncertainty on the optimal approach.

Some comfort has been provided through positive news surrounding the resumption of LNG production at Freeport from January, as well as a proposed agreement between the UK and the US for the shipment of 10bcm of LNG over the next year. However, for the foreseeable future, be prepared for more news from Adalta Energy through our monthly Market Updates as Europe continues the slow transition of the energy complex away from reliance on Russian supplies.

Energy Bill Relief Scheme - Fixed price contract update

Wed, 19 Oct 2022 11:56:43 GMT

Energy Bill Relief Scheme - Fixed Price contract update

19th October 2022

Fixed Price contract methodology - publication of methodology and initial discount levels

The UK government has now published additional detail to explain how suppliers will adjust fixed contract commodity costs that should theoretically deliver the Supported Prices for Winter 22 (announced in September through the Energy Bill Relief Scheme ).

The methodology has been provided alongside an initial set of data which confirms a p/kWh discount, specific to the contract acceptance date, that will be applied to any qualifying consumption. The discount is derived by calculating the difference between an assumed commodity cost and the Supported Price.

Understandably, energy suppliers requested a simple way to deliver the government’s supported prices but it's questionable whether the final solution truly delivers on the headlined numbers. What’s more, through its overly simplistic design there will inevitably be outlying contracts where resultant commodity costs will be well above the headlined numbers.

Assumed commodity cost limitations

While the government support is clearly welcomed, we've highlighted 3 limitations below that will ultimately mean your business may not receive the Supported Price levels this winter.

1. Weekly averaging

Contrary to the way Corporate fixed contracts are bespoke priced on a daily basis, assumed commodity costs have been derived by averaging values observed across a week. This average is then applied back to a daily level (i.e. each day within a given week will receive the same assumed commodity cost and therefore the same level of discount).

It’s difficult to understand the intention of applying a weekly average to a daily value but, considering the unprecedented volatility that has been observed during the energy crisis, there will inevitably be winners and losers through the simplification.

2. Baseload methodology (electricity only)

Commodity costs have been valued using baseload market prices only which naturally assumes consumption is the same for each half hour in Winter. The reality is typically much different.

While they are not transparent in fixed contracts, shape costs are included to account for the fact that both consumption and commodity costs vary significantly across the day. Along with other risk premium, the costs of managing shape have risen dramatically through the energy crisis.

A shaped commodity cost can be more than 20% higher than baseload.

3. Losses (electricity only)

Transmission and distribution losses are excluded from the commodity cost calculations. For a Low Voltage supply losses can exceed 10% of commodity cost.

Depending on your supply, losses will account for a significant commodity cost that is not supported.

Similar to the reduction of support for Flex contracts , it's disappointing to see that the published discounts don't deliver the on the initial headlines and that the reality is that Fixed Price contract commodity costs will likely be significantly higher than estimated by suppliers.

For those businesses that are large enough to access a Flexible Purchasing Product we would continue to recommend this as our preferred product choice due to the transparency and flexibility it offers. If your business is new to Flex and would like to know more then please contact us; Adalta Energy can support in all aspects of the process.

Likewise, if you have any questions on the ongoing energy crisis or require any assistance, then please contact enquiries@adaltaenergy.co.uk or call Ed Butler directly on 07989 431184 . Alternatively, if you are an existing Adalta Energy client then please speak directly with your dedicated contact.

UK Government reduces Maximum Discount support for business

Sat, 01 Oct 2022 13:05:37 GMT

UK Government reduces Maximum Discount support for business; impacting companies on flexible purchasing and variable rate products

1st October 2022

The UK Government has today, 1st October 2022, provided updated guidance on the Energy Bill Relief Scheme to confirm the Maximum Discount levels of support available for business. The update impacts companies on flexible purchasing, variable and deemed/default products.

The news will not be welcomed by UK business as support has been significantly reduced.

Maximum Discount levels are confirmed as below;

£345 MWh or 34.5 p/kWh for electricity (15% reduction of £60 MWh from initial guidance of £405 MWh)
£91 MWh or 9.1 p/kWh for gas (21% reduction of £24 MWh from initial guidance of £115 MWh)

Flexible contracts

The biggest impact will undoubtedly be on flexible purchasing customers who, in line with the initial Maximum Discount guidance from Government, have pro-actively looked to manage the risk to their business by closing out positions this winter.

As per the initial Government guidance, electricity wholesale trades below £616 MWh and gas trades below £190 MWh would have allowed businesses to be billed the Supported Price this winter. Now, only trades below £556 MWh and £166 MWh ensure that is possible.

For a 10 GWh consumer this could increase a winter power bill by circa £300k and a gas bill by circa £120k.

What will frustrate many in the industry is that the confirmation comes after businesses have been required to commit to a purchasing strategy ahead of the closure of the Win-22 contract. Many will have used the initial Government guidance to base decisions and will now be unable to capitalise on alternative strategies to save.

An initial summary of the Energy Bill Relief Scheme can be found here and has now been updated to reflect the confirmed Maximum Discount rates.

Adalta Energy understands that this continues to be an uncertain and extreme time for UK business. If you have any questions on the ongoing energy crisis or require any assistance, then please contact enquiries@adaltaenergy.co.uk or call Ed Butler directly on 07989 431184 . Alternatively, if you are an existing Adalta Energy client then please speak directly with your dedicated contact.

UK Government support package for businesses

Wed, 21 Sep 2022 09:23:30 GMT

UK Government support package for businesses

21st September 2022 (updated 1st October 2022 to reflect revised Maximum Discount levels)

Further details around the UK Government’s energy support package for business have been announced today, 21 ^st September 2022, ahead of winter.

Under the Energy Bill Relief Scheme the following support will be provided from 1st October 2022 to 31st March 2023 and such support (in the form of a p/kWh discount) will automatically be applied to bills;

Fixed contracts signed after 1st April 2022

Wholesale power prices are capped at 21.1 p/kWh (Supported Price of £211 MWh)
Wholesale gas prices are capped at 7.5 p/kWh (Supported Price of £75 MWh)
Wholesale price caps have been set at a level to remove green levy costs
Non-commodity costs, risk premium and supplier margins will be added to the wholesale costs (as per existing contract terms)

Flexible contracts (purchases after 1st April 2022)

Wholesale prices are capped in line with the Supported Price levels (see above), subject to a Maximum Discount
Price reductions will be applied as the difference between your monthly weighted average baseload price and the Supported Price level, again subject to a Maximum Discount
Maximum Discount is the maximum of the difference between the Supported Price and the average expected wholesale price over the period of the Scheme
The Maximum Discount is now confirmed as £345 MWh for electricity and £91 MWh for gas
Non-commodity costs, risk premium and supplier margins will be added to the wholesale costs (as per existing contract terms)

Default, deemed or variable tariffs

Default, deemed or variable tariffs will receive a per-unit discount on energy costs, subject to a Maximum Discount (see above)
Non-commodity costs, risk premium and supplier margins will be added to the wholesale costs (as per existing contract terms)
These 'out of contract' rates are likely to remain at high levels this winter as a significant component of the price is risk premium

Adalta Energy therefore encourages all businesses to ensure they have an appropriate contract in place prior to the 1 ^st October 22.

Full details, as released by the UK Government, can be found here . A review of the scheme will be published in 3 months to inform future support, including how the Government would identify most vulnerable businesses and continue to assist.

Updates

1st October 2022 - Maximum Discount has been set at £345 MWh for electricity and £91 MWh for gas (initially indicated at £405 MWh for electricity and £115 MWh for gas)

21st September 2022 - first published

State of the Union address: EU Energy Crisis announcement

Wed, 14 Sep 2022 13:48:10 GMT

State of the Union address: Energy Crisis announcement

All eyes were on Ursula von der Leyen’s State of the Union address in Strasbourg today as UK businesses hoped EU plans to address spiralling commodity prices might have wider reaching implications on UK markets.

As speculated in recent days, no immediate plans for a market price cap were released. Instead, the EU announced it will;

Limit the revenues of companies producing electricity at low cost (nuclear and renewable generators) and levy ‘windfall taxes’ on major oil, gas and coal companies
Use resultant revenue of circa €140bn to subsidise domestic and business support packages across member states
Target a reduction in peak energy demand of 5% to reduce costs
Improve longer term liquidity on electricity contracts by changing collateral requirements and limiting intra-day volatility

President von der Leyen repeated the view that the current market needed reform and that longer term action was required to remove the reliance on fossil fuels; pointing to Denmark as a visionary within the EU that understood the problem decades ago.

She also recognised that the announced actions were all emergency and temporary measures, including discussions on price caps , and insisted that the EU needed to keep working to lower gas prices.

As such, a number of additional ongoing objectives were referenced;

To decouple the dominant influence of gas on the price of electricity, starting with a deep and comprehensive reform of the electricity market
Establishment of a task force to ensure diversification away from Russia to reliable suppliers such as the US, Norway, Algeria and others
Continued financing of new wind turbines and solar parks, high-speed trains and energy-saving renovations through NextGenerationEU
Creation of a European support fund of €3bn to develop the hydrogen market

Gas markets gained circa 10% through the day on the apparent lack of an announced price cap. However, news that the required detail supporting the UK Government’s plan to support UK businesses this winter could be delayed until November will have inevitably helped drive wholesale prices upwards.

COP26 and the race to Net Zero

Sat, 27 Nov 2021 16:42:33 GMT

COP26 and the race to Net Zero - what does it mean for you and your business?

If it wasn’t transparent to business beforehand, recent coverage of COP26 should have made it abundantly clear that the impact of climate change requirements on the private sector will be significant in the coming years. While some of those requirements are currently clearer than others, we draw out some of our highlights for business and provide an Adalta Energy perspective below.

Progress post Paris and the context to COP26

At COP21, in Paris, in 2015 all countries at the United Nations Climate Change Conference agreed to work together to limit global warming to ' well below' 2 degrees and to make finance available to deliver that goal. That landmark agreement is known as the Paris Agreement.

Environmental activists and businesses alike have long pointed to the absence of credible frameworks or tangible plans from world leaders in the years following. As such, a priority of the UK’s COP presidency was to finalise the ‘Paris Rulebook’ which establishes the detailed systems required to facilitate the delivery of the headline commitments. That was finally completed at COP26 following agreement on transparency (reporting), common timeframes for emission reductions and on new standards for international carbon markets.

Under the Paris Agreement countries are also required to deliver increasingly more ambitious climate plans every 5 years and therefore were required to provide revised Nationally Determined Contributions (NDCs) for climate action at COP26. In short, these NDCs do not deliver the required result to limit climate change to the revised 1.5 degree target and following the fortnight of negotiations revised commitments have been formally agreed through the Glasgow Climate Pact .

Despite the many positives from the COP26, it was readily accepted that collective progress to reduce emissions had not been sufficient to date and there was universal recognition that momentum needed to build at a much greater rate following the UK event. Indeed, Alok Sharma (UK COP President) reflected that current commitments only keep the 1.5 degree target within reach and that concerted effort remained imperative to get "finance flowing and boost adaptation" .

"Marshall the strength of the global private sector" - HRH The Prince of Wales

The pivotal role of the private sector was regularly referenced by some of the most recognisable and respected guest speakers at the Glasgow event; both in terms of the development of and adaptation to new technologies.

Sir David Attenborough encouraged businesses to think of the bigger picture rather than short term goals and suggested a "new industrial revolution powered by millions of sustainable innovations" was essential (and already underway). That view has since been re-iterated by the Confederation of British Industry (CBI) who have also highlighted how the renewable energy industry could contribute to the ‘levelling up’ of Britain to address the North/South (East) divide.

Barack Obama took a slightly different tact and focussed on the way businesses are increasingly using a Net Zero agenda to their advantage. He suggested that more than a fifth of the world's largest companies had set emissions targets in recognition that this would improve their bottom line and, following the withdrawal of the US government from the Paris Agreement, highlighted that it was the agenda of American businesses that ultimately delivered on US climate targets.

Similarly Janet Yellen, the US Treasury Secretary, insisted that climate change is a huge opportunity for business; “The old notions of why the private sector should decarbonise because the planet must be put before profit are no longer universally true,” “Green technologies have cost curves that continue to plunge, in many cases it is simply cost effective to go green." "Addressing climate change is the greatest economic opportunity of our time.”

Prince Charles spoke in great length about the private sector and, more importantly, what it needed in order to deliver the required transformational change. He pleaded for "countries to come together to create the environment for every sector of industry to take the action required" re-enforcing that business required "clear market signals agreed globally" in order to invest. The Prince of Wales pointed to his Terra Carta (Earth Charter) , delivered at the beginning of the year to provide a roadmap to sustainability, and announced the inaugural presentation of the Terra Carta Seal to 45 businesses to recognise the efforts of those leading the way.

An Adalta perspective

It was perhaps the Finance ministry that unveiled the most concrete new universal requirement for UK businesses at COP26. On top of the Government’s earlier commitments, delivered through this year’s budget announcement, the ministry confirmed that new reporting requirements would be established for all UK listed companies to formalise net zero transition plans on which the markets could react.

At Adalta Energy we believe that there may also be a requirement for more companies to participate in the Streamlined Energy and Carbon Reporting (SECR) requirements that are currently only reserved for large organisations.

On the whole we think the new reporting requirements will ultimately be beneficial for the most pro-active and progressive in industry. While it may introduce new costs in the short term, the process itself will likely draw out new requirements, risks and issues for your business as the UK transitions to a carbon neutral economy.

Furthermore, Adalta believe that today’s global supply chains mean that, regardless of your individual perspective on climate change, it is imperative that you consider your approach to it to protect your business. While Net Zero may not be a priority for you, it may be for your customers who, under Scope 3 of the Greenhouse Gas Protocol, would be required to ensure a zero carbon supply chain.

Adalta Energy has always supported the widely adopted position that the most affordable energy will be the energy that is not used. To this point, we welcome the considerable financial provisions that have been agreed to fund investment into and support the uptake of new technologies to reduce carbon emissions.

Decisions around sustainable solutions need to be well considered given the lack of clarity on the market mechanisms and signals that will be used to bring about global change. We would therefore recommend appropriate and additional scrutiny to ensure investments stack up despite the current unknowns.

Final word

"Collectively, we have acknowledged that a gulf remains between short term targets, and what is needed to meet the Paris temperature goal". Alok Sharma's closing remarks at COP26 re-iterated some well versed concerns and repeated the need for immediate and concerted action.

However, at Adalta Energy, we take confidence from an ever growing view that the private sector is continuing to invest in Net Zero in spite of the lack of clarity from government. We continue to observe a growing interest in renewable energy procurement and would suggest if your business does have Net Zero ambitions that you explore this sooner rather than later. Ironically, renewable energy is currently finite (until 2035 that is!) so we encourage you not to get left behind.

Adalta Energy are industry experts and can guide you through the procurement process, offer risk management strategies, a path to Net Zero energy and ensure you are on the most suitable product. For more information contact enquiries@adaltaenergy.co.uk or call Tom Butler directly on 07795 354071.

If you'd like to know more about specific COP26 achievements then there is a range of information available on the official COP26 website . For a summary of outcomes please click here or for a more detailed explanation of negotiations please click here .

Adalta Energy Insights

Why your energy contract needs a rethink before BICS in 2027

BICS: Why now is the moment to rethink your energy contract strategy

What is the British Industrial Competitiveness Scheme (BICS)? ﻿

How will BICS support be calculated?

What’s the impact of BICS on businesses?

Why you should speak to a trusted energy partner now

1. You need a contract that protects your ability to access BICS savings

2. Invoicing will get more complex, expertise matters

3. You need clarity on eligibility and a realistic savings forecast

4. Suppliers will manage this change in different ways

5. You need a partner fully aligned to your long-term goals

Avoiding the common pitfalls

How Adalta Energy can help you prepare for BICS

It’s time to lock in long-term value

The Continued March of Non-Commodity Costs

The Continued March of Non-Commodity Costs

An overview of the new electricity charge you will see itemised on your invoice from Apr-25, which new charge has been kicked down the road and what is happening to existing charges.

Great British Energy

Great British Energy

There has been much fanfair, but what is GB Energy really about?

Market Wide Half Hourly Settlement Overview

Your Guide to Understanding Market Wide Half Hourly Settlement ﻿

Commodity prices - where is the floor and why?

Commodity prices - where is the floor and why?

2nd February 2024

COP28 - What were the key outcomes?

Summarising the key agreements from the 28th

Conference of Parties (COP)

Additional Government Energy Policy Subsidies

Additional Government Energy Policy Subsidies

What are they and when could they be implemented?

British Industry Supercharger Scheme

British Industry Supercharger Scheme

What is it and how could it impact your energy costs?

What is happening to non-commodity costs?

Non-commodity costs forecast to exceed commodity costs from April 2024

EU Gas Storage Levels 90% Full

EU gas storage levels now sit at over 90% full, however, market volatility endures due to inelastic supply/demand fundamentals

18th August 2023

Enhanced Government Support for Energy & Trade Intensive Industries

The EBDS application process is now open for businesses eligible for the higher level of support offered to Energy and Trade Intensive Industries (ETIIs).

26th April 2023

Climate Change Agreement (CCA) Extension

Climate Change Agreement (CCA) Scheme will be extended for a further two years until March 2027

- 31st March 2023 -

Energy Bills Discount Scheme

Energy Bills Discount Scheme - UK Government details support available to business from 1st April 2023

9th January 2023 (last updated 20th January 2023)

All eyes on Gas storage

All eyes on Gas storage

Demand and storage levels this winter continue to set forward commodity prices

Energy Bill Relief Scheme - Fixed price contract update

Energy Bill Relief Scheme - Fixed Price contract update

19th October 2022

UK Government reduces Maximum Discount support for business

UK Government reduces Maximum Discount support for business; impacting companies on flexible purchasing and variable rate products

UK Government support package for businesses

UK Government support package for businesses ﻿

State of the Union address: EU Energy Crisis announcement

State of the Union address: Energy Crisis announcement

COP26 and the race to Net Zero

COP26 and the race to Net Zero - what does it mean for you and your business?

What is the British Industrial Competitiveness Scheme (BICS)?

Your Guide to Understanding Market Wide Half Hourly Settlement

UK Government support package for businesses