UK businesses are under particular pressure from rising non-commodity costs – the elements of energy spend that can be hard to control. In this blog, we breakdown some of the increasing charges and the reasons why. We point to where companies can reduce some costs – energy management strategies to help futureproof operations when high non-commodity costs will be a fact of business life for the foreseeable future.
Why are non-commodity costs rising?
Grid constraints can severely hamper business growth and innovation, as we’ve looked at in a recent blog. And the National Grid needs significant investment to support electrification and decarbonisation. This is critical if the UK is to meet the challenge of modernising the Grid for a changing energy infrastructure.
As we move away from dependence on fossil fuels to a low-carbon energy mix and more distributed model, the integration of sustainable energy sources and the finance necessary to support nuclear infrastructure require major investment to achieve energy security and net zero. Non-commodity charges, including levies to support these ambitions, severely impact energy-intensive industries but while there is some government support for eligible companies in these priority sectors, other businesses are meeting the costs of subsidy.
Non-commodity costs can broadly be broken down into network charges, environmental initiatives, and policy support fees. Some may be dependent on aspects such as your company’s consumption profile, geographical area, and business operations but, overall, these costs are now estimated as accounting for 64% of commercial energy bills[1].
Where wholesale energy prices were estimated at approximately 8-9p per kWh across last winter, when non-commodity costs are factored in the delivered costs rise sharply to approximately 24-26p per kWh[2].
Non-commodity costs: some headline increases
TNUoS (Transmission Network Use of System): TNUoS charges cover the high-voltage transmission network, sometimes described as the ‘motorway’ element of the Grid: building, maintaining, and operating the infrastructure that moves electricity from the point of generation to distribution points, including offshore-generated energy. To meet the costs of necessary upgrades over the next five years, NESO forecast necessary revenue growth from £5.1 billion last year to £8.9 billion in 2026 / 27, with anticipated increases to £13.6 billion for 2030 / 31[3].
NESO has forecast an average £/MWh for non-domestic consumers at £30.68 for 2027/28 – a further increase of £5/MWh from 2026/27[4]. Currently, some industry experts equate this to an increase of up to 102% through to April 2027 when compared to rates for April 2025[5].
DUoS (Distribution Use of System): This covers the local distribution costs, set by your Distribution Network Operator (DNO), and connecting Grid power to your site. Since these are set at DNO level rather than nationally, there are variables that impact exact increases: which DNO your site falls under, site voltage, tariff and meter type.
While the last year has seen these non-commodity charges remaining stable because DNOs had previously over-recovered on revenue, it’s anticipated that DUoS charges will also rise to allow for investment in regional infrastructure – with standing charges increasing between 65 – 77%[6].
Climate Change Levy (CCL): Unless your business is entered into a Climate Change Agreement (CCA) – more on this, below – or is exempt (e.g. a small energy user or charity), you will be paying CCL at main rates on electricity, gas, and solid fuels. Intended to encourage businesses to become more energy-efficient and to support decarbonisation, the rate for CCL has increased and is set to rise further. Where the rate for electricity from April 2023 was set at 0.00775 (£ per kWh), from April 2026 this has increased to 0.00801, rising to 0.00827 from April 2027[7].
Energy Intensive Industries (EII) Support Levy: Qualifying businesses in energy-intensive sectors can apply for exemption from certain network costs but most UK businesses don’t qualify. This means that, since April 2024, non-eligible businesses have been paying a fixed rate of 15p per kWh on energy consumed and, as support for qualifying businesses rises from 60% to 90% relief, it seems likely that the EII Support Levy will rise for all non-eligible, non-domestic energy users next April[8].
Regulated Assets Base (RAB) Nuclear Levy: This is a new levy, only appearing on electricity bills from December last year. It is designed to support the UK’s energy transition with a low-carbon energy source – where nuclear has a critical role in the country’s energy security. The RAB model enables investors to share some of the risks with consumers, reducing the costs of capital, with the first new plant under this model starting with the construction of Sizewell C[9].
Unless a business is exempt (under certain terms of EII exemption), all UK companies are now subject to the RAB levy, though how it appears on your bill may vary. For example, if you are on a pass-through contract, Nuclear RAB will be a separate invoice line, while for those on fixed-price contracts the levy is generally incorporated into your unit rate.
There are three parts to the RAB levy. The Operational Costs Levy (OCL) is only a small charge, and the Total Reserve Amount (TRA) is a quarterly buffer in case suppliers fail to meet payment obligations. The Interim Levy Rate (ILR) changes quarterly and reflects the anticipated project costs for that quarter. The levy is managed by Low Carbon Contracts Company (LCCC), which sets quarterly rates. For most businesses, the critical point is the ILR, where the actual levy included in your energy bill is determined by your energy consumption.
From 1st November 2025 to 31st December 2025, ILR was set at £3.455 / MWh. In April, for Q3 – 1st July 2026 – 30th September 2026, ILR is now set at £4.488 / MWh.
Where businesses can save on non-commodity costs: limited government support
The rationale behind government support for energy-intensive industries (EIIs) is clear, and logical: UK-based, energy-intensive businesses are competing in an international economy where we have significantly higher industrial electricity costs than our global competitors – four times higher than the US and 46% above the global average[10]. And the overarching ambition for net zero, to address climate change globally, is not helped by carbon leakage – when companies relocate production from countries with strict emission regulations to those less stringent in their approach.
The Modern Industrial Strategy, through the British Industry Supercharger (BIS) and the British Industrial Competitiveness Scheme (BICS), helps EIIs with some non-commodity elements of energy spend. Where BIS – as at June 2026 – enables eligible businesses to claim 100% exemption from renewable energy levies and up to 90% compensation against network charging costs, the scope of support is limited. Similarly with BICS: despite the extension – increasing in scope from 7,000 companies to 10,000 – the vast majority of UK companies are excluded from support, including energy-intensive sectors such as food and drink manufacturing, and hospitality and leisure.
Climate Change Agreements (CCAs) are a voluntary mechanism whereby companies entered into agreement with The Environment Agency can receive a discount on Climate Change Levy payments – up to 90% – by reducing energy use and / or CO2 emissions. First established in 2001, approximately 2,600 businesses across 53 sectors are projected to save an estimated £310 million per year from FY27 / 28 onwards, under the third phase of the scheme[11]. For companies who have not previously engaged with CCA, applications are open until August 2026.
In the context of CCAs, the latest Technical Annex from DESNZ highlights the value of self-generated renewables, where,
“units of metered electricity consumed from the grid and generated from the combustion of renewable fuel must be multiplied by a factor of 2.1”
whereas,
“Where a target facility uses electricity self-generated from an on-site renewable source the metered units consumed must be multiplied by a factor of 1.0…
… Generated in plant which is in, and is intended for supplying electricity for use by a facility, or supplied to a facility without passing through a distribution system operated by an electricity utility.”[12]
The value of on-site energy generation and battery energy storage systems (BESS)
While non-commodity costs are rising to address the immediate problem of our ageing energy infrastructure – particularly TNUoS charges – even with this investment, the issue of grid constraints will not be solved in the short-term. Yet businesses continue to negotiate volatile energy prices while balancing the need to electrify operations, decarbonise, and improve their own power resilience.
Investing in on-site storage can help reduce some non-commodity costs and mitigate the growing problem of grid constraints that hamper decarbonisation initiatives and electrification strategies.
TNUoS is, to a large extent, a fixed cost, with a pence-per-day charge depending on company size and connection voltage, and a small usage-based charge that varies by location. But usage still plays an important role: for half-hourly customers, the charge is based on usage over triad periods (the three half-hour intervals of highest total electricity demand on the Grid each winter), while non-half-hourly customers’ charge is based on forecast weekday usage from 4 – 7pm during winter.
Similarly, while DUoS charges are fixed in advance by your DNO each April, consumption and time of use can impact your band rating for future years. Unit charge is banded: red, amber or green, where red peak pricing is usage between 4 – 7pm. Reducing red bank consumption can positively impact your DUoS charges in the longer-term. And, for the other non-commodity charges we’ve mentioned – for CCL, and for RAB Nuclear Levy – both of these are based on your actual Grid energy usage.
In each of these instances, peak shaving, load-shifting, and reducing reliance on Grid energy can reduce your energy spend when BESS are combined with on-site renewable generation for flexibility and for incremental shifts from total dependence on Grid supply.
Overcoming grid constraints and mitigating energy market volatility
Continued reliance on your site’s Grid connection can hinder growth, impact efficiency and sustainability – which can also impact your non-commodity charges. A BESS can help by:
- Resolving issues around Grid limitations and DNO capacity
- Overcoming grid constraints, to drive business growth
- Storing surplus energy generated from on-site renewables, taking this energy outside of Grid usage which determines some non-commodity costs
- Increasing independence from the Grid, to reduce exposure to energy price volatility and improve your site’s energy resilience
- Enabling the installation of high-demand technologies, such as rapid EV charging, to facilitate electrification and support decarbonisation and ESG goals
BESS and on-site renewables in action
At Powerstar, we work with private and public sector organisations to help them achieve their energy management ambitions, and BESS working in tandem with renewables generates cost-savings, new income streams, energy efficiencies, and environmental benefits.
For South Staffordshire Council, we installed a BESS incorporating Uninterruptible Power Supply (UPS), to provide site-wide power resilience while offering the storage capacity to generate income from grid balancing services via their 100kW solar array. Here, the BESS stores excess power from the solar PV and manages its export to the Grid – without exceeding their agreed export capacity, avoiding any penalties from National Grid.
For Parkinson-Spencer, an energy-intensive manufacturer of refractories and glass industry solutions, we recommended BESS and Voltage Optimisation (VO), to address their primary concern: disruption to production due to increasingly frequent blackouts. As a manufacturer committed to sustainability, they needed assurance that our solution would contribute to their own investment in clean energy technologies, while also demonstrating a good ROI over the longer-term.
Our BESS with UPS protects the site from disruptions to Grid supply, and harnesses their on-site wind turbine generation, providing a new income stream, managed by GridBeyond, in addition to a 5% reduction in energy spend through implementation of VO.
How Powerstar can help your business manage non-commodity charges with advanced BESS technology
We can help you generate cost savings, improve efficiency, and lower Grid consumption when your BESS charges during off-peak, green or amber banded time slots, to take advantage of lower Grid energy prices and – potentially – improve your future DUoS band rating.
Working in tandem with on-site renewable assets, a BESS can help improve energy flexibility – storing renewable power as generated for use when most efficient. For those non-commodity costs based on Grid consumption, this can generate cost-savings in addition to boosting your company’s sustainability.
As the Grid becomes more constrained, as energy independence becomes more of a business imperative, our BESS technology provides greater energy flexibility: resolving issues related to Grid constraints; offering UPS resilience, and supporting ESG and sustainability strategies.
We undertake a thorough analysis to gain a full understanding of every customer’s energy infrastructure and all our products undergo rigorous testing in our state-of-the-art microgrid test bay, simulating real-world scenarios, while our AI software optimises energy flow and adapts to evolving site conditions. Our approach ensures that our BESS technology meet every client’s unique energy management priorities.
Negotiating grid constraints and reducing energy spend: taking control of the energy costs you can affect
We’re moving away from a single, centralised energy supply model. The Grid wasn’t built to handle distributed energy. Low-carbon energy demands a different approach. While non-commodity costs and levies drive and support a changing energy infrastructure, our customers are already taking greater control of their energy management.
Forward-thinking companies are no longer simply buyers of Grid energy – they are benefitting from grid balancing services, generating and storing their own energy behind the meter. And this is reaping benefits: for sustainability, for power resilience, and for cost-savings through improved efficiency.
We have installed more than 50 BESS units – from modular units < 1MW to containerised units up to 10 MW.
After an initial conversation, we can assess the potential for savings based on your site specifics and provide an indicative ROI.
Get in touch to find out more.
[1] https://www.moneysupermarket.com/gas-and-electricity/business-energy/a/non-commodity-costs-tnuos-duos-charges-explained/
