Beyond wholesale prices: The changing reality of energy costs

For many organisations, energy procurement is no longer simply about securing the lowest possible unit rate. Decisions around when to contract, how much risk to take, and how exposed a business is to non-commodity charges are becoming increasingly important from both an operational and financial planning perspective.

These were some of the themes discussed during a recent ICAEW webinar, chaired by Rachel Eade, chair of UK Metals Council, and delivered by Greenfield Energy Group’s Co-Founder, Liam Conway where we looked at the practical realities manufacturers are dealing with today, from gas market volatility and rising network charges through to government support schemes and changing procurement models.

One thing that came through strongly during the session was that businesses are increasingly being forced to think about energy more strategically. The market has become more complex, and in many cases, the risks now sit far beyond wholesale pricing alone.

In this article, Greenfields Energy’s Co-Founder, Liam summarises the webinar takeaways and highlights key actions for any manufacturers reviewing their energy strategy over the next 12 months.

While both gas and electricity markets remain volatile, gas prices have seen significantly sharper movements in recent months due to geopolitical instability and global supply concerns.

One of the biggest risks we’re currently seeing is businesses leaving procurement decisions until the final few months before contract renewal. In volatile markets, short-term pricing movements can quickly leave businesses exposed with very few options available.

That doesn’t necessarily mean businesses should always be securing contracts years in advance. But it does mean they should be reviewing markets and understanding their options much earlier than many currently do.

For manufacturers in particular, energy procurement needs to sit alongside wider budgeting, operational planning, and risk management discussions, not operate separately from them.

What many businesses are ultimately looking for is stability. In our experience, manufacturers are often far more concerned with avoiding significant cost increases and protecting margin than they are with trying to perfectly time the market.

Another key discussion point during the webinar was the growing impact of non-commodity electricity costs.

While wholesale pricing attracts most attention, a growing proportion of electricity bills now comes from transmission, distribution, network, and policy-related charges. In many cases, these costs are increasing regardless of what happens in wholesale markets.

We discussed the impact of RIIO-ET3 and rising TNUoS charges, which are being introduced to fund investment into the UK electricity grid and support the transition towards net zero.

For larger manufacturers operating high-voltage supplies or multiple sites, the figures involved are significant. We shared examples during the webinar of network-related standing charges potentially increasing by tens of thousands of pounds per meter over the coming years.

This is where many businesses are starting to feel caught out. Even if wholesale electricity prices soften over time, overall delivered energy costs may not reduce at the same pace because network and infrastructure costs continue to rise.

For finance and operational teams reviewing long-term budgets, understanding the full cost stack, not just the unit rate, is becoming increasingly important.

We also looked at two developments manufacturers should keep on their radar over the next 12–24 months.

The first was P442, a relatively new mechanism designed to allow renewable electricity generation to be matched more directly with end users. While still developing, it may create opportunities for businesses to reduce some non-energy costs through alternative supply arrangements.

The second was the proposed British Industrial Competitiveness Scheme (BICS), which aims to reduce electricity-related costs for qualifying manufacturers.

Although the details are still emerging, sectors expected to benefit include automotive, aerospace, chemicals, pharmaceuticals, steel, and advanced manufacturing.

For qualifying businesses, the potential savings could be significant. However, as with most government schemes, the detail will ultimately determine how widely accessible the support becomes in practice.

What’s clear already is that businesses should be reviewing whether they may qualify and ensuring these developments are part of future procurement conversations.

Alongside market discussion and policy updates, we discussed a simpler but equally important point, reducing consumption remains one of the most effective ways to manage long-term energy costs.

We discussed examples where relatively straightforward operational improvements, including equipment upgrades and efficiency projects, had materially reduced energy consumption and exposure to market volatility.

In many cases, these types of projects can deliver more reliable long-term value than trying to outguess short-term market movements.

For businesses reviewing their energy strategy over the next 12 months, there were several practical takeaways from the session:

• Review energy contracts and renewal timelines earlier to avoid being forced into reactive decisions.
• Assess exposure to non-commodity electricity charges, particularly for businesses operating multiple or high-voltage sites.
• Understand whether current procurement strategies still reflect operational risk appetite and financial priorities.
• Review supply contracts for clauses around volume tolerances and flexibility.
• Explore whether the business may qualify for future support schemes such as BICS.
• Continue identifying operational efficiency opportunities that can reduce long-term consumption.

Businesses are still operating in a difficult and fast-changing market, and energy procurement is becoming increasingly tied to wider operational and financial planning.

For manufacturers, the challenge now isn’t simply finding the cheapest contract. It’s understanding where future cost pressures are likely to come from and making sure procurement decisions support wider business stability.

The full webinar explored these issues in greater detail, including market examples, supplier behaviour, and the practical implications of upcoming charging reforms for UK manufacturers.

• Watch the webinar on demand

If you’d like to discuss any of the topics covered, or better understand how market changes could affect your business, we’re always happy to have a conversation.

Liam Conway
Co-Founder, Greenfields Energy Group
T: 07570 539 251
E:liam@greenfieldsenergygroup.co.uk
W: greenfieldsenergygroup.co.uk