UK Business Electricity Bill Breakdown

Over the last decade, business electricity bills have risen by 43%. The price of wholesale electricity has been blamed on energy companies for these price hikes, but are wholesale prices driving these increases, or are non-commodity costs also climbing?

Government policy cost components

33% of your commercial electricity bill breakdown goes directly towards the government, allowing them to cover the costs for environmental initiatives. Here are the five key elements that you may receive a charge for within this:

Renewables Obligation Certificate (ROC)

This is an initiative for the development of generating large scale renewable electricity. In March 2017, the Renewal Obligation was closed for generating new renewables. However, subsidy payments will continue for the next 20 years.

Climate Change Levy (CCL)

The Climate Change Levy is a charge only payable by commercial customers. The purpose of its implementation is to improve energy efficiency and cut carbon emissions. It was first introduced in 2001. This is just one of the ways the UK will hope to reach its target of net zero by 2050 for greenhouse gas emissions.

Feed in Tariffs (FiTs)

Feed in Tariffs were introduced to market the installation of small-scale renewable and low carbon electricity generation. This energy generation is capped with 5MW installations. Feed in Tariff payments last for approximately 20 years.

Contracts for Difference (CfD)

Contracts for Difference are the existing mechanism for low carbon generation. For each MWh generated, these CfDs guarantee a fixed price, referred to as the ‘strike price’. The duration of a CfD is 15 years and are auctioned and budgeted for by government.

Capacity Market (CM)

The Capacity Market allows for the facilitation of annual auctions for capacity. This is provided for demand side response, energy storage and power stations, and is required to maintain the security of the supply. Procurement occurs four years in advance, along with a year ahead auction. Auction volumes are set by the government.

Learn more about energy procurement for large businesses in our friendly guide.

Government policy costs and charges

Here are the current charges paid by business energy users per kWh.

Charge name2014201520162017201820192020
Feed-in Tariff0.243p0.339p0.445p0.494p0.547p0.567p0.587p
Climate Change Levy0.524p0.541p0.554p0.559p0.568p0.583p0.847p
Renewal Obligation0.866p1.057p1.286p1.558p1.882p2.210p2.310p
CfD Operation Levy0.000p0.000p0.000p0.001p0.385p0.536p0.582p
CfD Levy0.000p0.000p0.000p0.001p0.385p0.536p0.582p

Wholesale costs

Over the past decade, the price of electricity on the wholesale market has remained relatively stable. Nonetheless, prices do tend to fluctuate throughout the seasons of the year.

The commonly referred to ‘day-ahead’ price per MWh is £51, or 5.1p per kWh. This is the same as the average prices from 2010 and 2011.

No matter what fluctuations take place in the wholesale electricity market and across the energy industry in general, it is highly recommended that you make sure your business is on the right tariff. This will help you save money over a longer period of time. Even more so if you are on a fixed rate contract.

Commodity and non-commodity costs