The energy sector is not known for its predictability. Change has become the most consistent feature. But while so much is hard to foresee, there are some new developments on the horizon that we can prepare for.
1. Changes to non-commodity charges
For starters, as a result of Ofgem’s wide-reaching Targeted Charging Review (TCR), we’ll soon start to see big changes to the way in which some of the largest non-commodity charges added to electricity invoices are calculated.
From April, the residual (lion’s share) portion of Distribution Use of System (DUoS) charges will flip from a predominately time-of-use plus smaller fixed-charge model to the opposite. The new larger fixed portion will also be based on one of four bands, set according to site voltage.
This will mostly impact consumers who currently shift consumption out of peak hours to reduce this charge. But whether you’ll pay more or less than you currently do will depend on your location too.
2. Last season for large-scale Triad avoidance
TCR-related changes to Transmission Network Use of System (TNUoS) charging methodology were also expected this year, but have been pushed back. This means consumers have another winter to reduce this charge via Triad management (shifting consumption away from the three peak half hours of demand between November and the end of February).
Then, from April 2023, we expect that the current 100% peak-consumption TNUoS model will switch to 10% peak-consumption and 90% fixed charges, again across four bands (although this date is still to be confirmed by Ofgem). So additional expense for any businesses who currently Triad manage.
We expect to see agreements on forthcoming changes to the forward-looking element of both transmission and distribution charges in 2022, but these are not expected to come into action until 2024/25.
3. Reforms for green tariffs
At some point this year, a review and consultation will start to look at the way green energy tariffs and related-products are sold.
We anticipate this will lead to some quick wins and long-term reforms around how businesses purchase renewable electricity, with a focus on increasing transparency. We will bring you news as soon as more information becomes available.
4. Climate Change Agreement scheme under review
The current Climate Change Agreement (CCA) scheme is due to end on 31 December 2022, although reduced Climate Change Levy (CCL) rates will continue until 31 March 2025 for eligible participants.
The Department for Business, Energy and Industrial Strategy (BEIS) is currently conducting a consultation on how to potentially structure a future CCA scheme, and this closes on 11 March 2022. This covers scheme length, eligibility, use of energy efficiency technologies, reporting, disclosing CCA benefit and the mechanism for claiming relief.
5. Levelling up gas and electricity levies
Consultations are expected this year on the fuel mix disparity in the levies and obligations added to energy invoices, with the aim of creating a better balance between electricity and gas.
The likely outcome will be that electricity becomes cheaper while gas becomes more expensive. Some of the current costs may also be shifted to general taxation. But any changes won’t be immediate – the government’s timespan is within the next decade. So we’ll bring you more information as announcements are made.
6. Supporting net zero
We anticipate the results of a consultation on how to strengthen the Energy Savings Opportunity Scheme (ESOS) in quarter one (Q1). This could incorporate recommendations for companies to set out their net zero commitments.
We are also waiting to hear if the UK Emissions Trading Scheme (ETS) will be extended, and potentially how carbon leakage could be addressed.
And BEIS is planning to consult on regulating non-domestic owner-occupied building stock, and whether it should align to the private-rented-sector standards (achieving Energy Performance Certificate (EPC) Band B by 2030.)
Again, we’ll bring you news on these proposals as soon as any announcements are made.
Finally, under the government’s Contracts for Difference (CfD) scheme, we’ll see a huge uplift in renewables capacity in the next auction to help the UK meet its net zero targets. The aim is to double the 6GW procured in 2019 to 12GW in 2022, with £200 million of the CfD’s £265 million budget earmarked for offshore wind.
Help when you need it
To understand how these changes may impact your business, please consult with your Client Lead or Account Manager (existing customers). Or drop us an email to info@npowerbusinesssolutions.com.
Our experts can help you to work out the financial implications and how best to plan your energy strategy effectively.
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