Third Party Costs are rising - what's next?
10th October 2019
The increasing price of wholesale energy is only partly responsible for the rising cost of business electricity. So, what other factors are inflating your power bills – and what direction might they be going next?
Read more below:
Rising electricity bills are largely due to increases in Third Party Costs (TPCs), which pay for keeping the UK electricity network running smoothly. The industry passes on these TPCs to customers in the following two categories:
1. Network costs – These are the costs associated with delivering power to businesses and maintaining the UK power grid. They include Distribution Use of System (DUoS), Transmission Network Use of System (TNUoS) and Balancing Services Use of System (BSUoS) costs.
2. Policy costs – These are the costs of Government policies designed to support the decarbonisation of the grid and the development of renewable energy. Examples include the Climate Change Levy (CCL) and subsidy schemes such as the Renewables Obligation (RO), Feed-in-tariffs (FiT) and Contracts for Difference (CfD).
Recently, policy costs have increased rapidly – largely to help accommodate for the vast number of new, distributed generators within the evolving grid structure. In 2011, only a few hundred registered generation sites existed across the UK; there are now more than 500,000 – mostly providing renewable generation capacity (e.g. via solar panels).
Connecting all these new generators to the grid has resulted in a substantial increase in costs – not least because of the RO, FiT or CfD subsidies that many receive. And, while the FiT scheme is no longer open to new applicants, its closure is unlikely to reduce TPCs significantly.
As the UK aims to decarbonise energy and meet commitments to fighting climate change, TPCs for businesses seem likely to increase further. As a result, many companies in the UK are working with their supplier to use renewable energy and become more energy efficient, and – in some cases – to investigate ways of generating (and storing) their own renewable power.
Find out how Haven Power can help your business reduce its electricity bill – simply get in touch via our contact form.Contact us
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