BRC Energy Costs Working Group – June Meeting Summary

Overview

The latest meeting of the BRC energy costs working group covered:

1. A market update from SQE Energy on current energy market trends, risks and opportunities for large energy users.
2. Review of the BRC Energy Costs Survey findings.
3. Discussion of ongoing policy and advocacy activity to address rising business energy costs.

1. SQE Energy Market Update

Justin Stokes from SQE Energy provided an overview of current developments in the UK energy market and the implications for retail businesses:

SQE highlighted that the UK energy system is undergoing significant structural change as renewable generation continues to increase. Key impacts include:

• Greater volatility in wholesale electricity prices due to the intermittent nature of wind and solar generation.
• Continued reliance on gas-fired generation during periods of low renewable output.
• Ongoing exposure to geopolitical events and gas market volatility.
• Increasing pressure on network infrastructure and associated costs.

SQE noted that non-commodity costs (NCCs), including network and policy charges, are becoming a growing proportion of business electricity bills. Particular concerns were raised around:

• Transmission Network Use of System (TNUoS) charges.
• Capacity Market costs.
• Contracts for Difference (CfD) costs.
• Future network investment costs associated with grid expansion and decarbonisation.

SQE's view is that these costs are likely to remain a major challenge for industrial and commercial energy users over the coming years.

SQE encouraged businesses to:

• Review energy procurement and hedging strategies.
• Reassess risk management policies in light of increasing market volatility.
• Improve visibility of energy data and non-commodity cost exposure.
• Explore flexibility opportunities including batteries, solar generation, refrigeration optimisation and EV charging management where operationally feasible.

The presentation also highlighted increasing value in understanding half-hourly consumption patterns and identifying opportunities to avoid peak charging periods.

SQE reported that many large energy users continue to experience challenges with:

• Billing accuracy.
• Reconciliation processes.
• Visibility of consumption and settlement data.
• Unexpected adjustment invoices.

The company outlined tools it has developed to improve invoice validation, cost forecasting and scenario modelling.

SQE noted that current government subsidy mechanisms have reduced the attractiveness of some new-build Corporate PPA opportunities. Instead, they are seeing growing interest in:

• Procurement from operational renewable assets.
• Longer-term hedging arrangements.
• More direct contractual relationships with renewable generation.

The discussion also covered energy broker regulation, with SQE supporting greater transparency and clearer disclosure of commissions and fees within the energy procurement process.

2. BRC Energy Costs Survey Update

An update on the Energy Costs Survey undertaken with members was provided. The survey demonstrates that energy cost inflation is being driven primarily by network and policy costs rather than increased energy consumption. We will soon publish a survey report on our website setting out the findings', and the action that the government must take to  tackle these. 

The survey found that energy consumption is expected to remain largely flat between 2025 and 2026, with electricity usage increasing by just 0.1% and gas consumption by 1.4%. Despite this, electricity expenditure is forecast to rise by 16% (from approximately £2.7bn to £3.16bn), while gas expenditure is expected to increase by 12%, highlighting that rising costs are being driven by charges rather than increased demand.

The main drivers of these increases are non-commodity costs, with significant rises forecast in Transmission Network Use of System (TNUoS) charges (+70%), Balancing Services Use of System (BSUoS) charges (+16%), Capacity Market costs (+10%) and Contracts for Difference (CfD) charges (+22%).

3. BRC Policy and Advocacy Priorities

The survey findings will form the evidence base for ongoing engagement with government on our policy priorities to reduce costs:

Short-to-Medium Term Priorities

1. Expand the British Industry Competitiveness Scheme (BICS)

The BRC continues to call for retailers to be included within the scheme.

Retail businesses are currently excluded despite significant energy usage associated with:

• Heating and cooling requirements.
• Refrigeration.
• Distribution operations.

It is estimated that inclusion could reduce retailer energy bills by approximately 25%.

2. Remove Legacy Renewable Policy Costs

Historic renewable support costs (including RO and FIT-related costs) to be removed from electricity bills where appropriate and funded through alternative mechanisms.

3. Introduce Targeted Energy Bill Relief

A temporary and targeted business support mechanism to help businesses manage immediate cost pressures until longer-term reforms are implemented.

Government already has delivery mechanisms from previous energy support schemes that could potentially be adapted.

Longer-Term Reform Priorities

The BRC continues to advocate for:

• Reform of renewable and system cost funding mechanisms.
• Greater predictability and stability of network charges.
• Support for investment in on-site renewable generation and electrification.
• Alternative approaches to funding major grid investment.

5. Advocacy Update

The BRC provided an update on recent engagement activity, including:

• Submissions to HM Treasury.
• Engagement with DESNZ and DEFRA.
• Participation in parliamentary and select committee discussions.
• Responses to consultations relating to BICS and business energy costs.

The BRC is also continuing to work with other trade associations to build a broader coalition supporting reform.

Potential joint activity includes:

• Coordinated advocacy campaigns.
• Shared evidence gathering.
• Ministerial engagement.
• Communications and media activity.

Members expressed support for continued coalition-building across sectors.

Invites for the next quarterly meeting will be sent tout indue course. If you are not part of the energy group but would like to attend future meetings or receive updates on our energy cost work please do email me. 

 

 

Please contact Harry Judd at SQE if you wish to learn more about them.