Luke Booth, Director, Key Accounts at Equity Energies
For years, the story of business energy costs has been dominated by wholesale markets. As geopolitical shocks rippled across Europe and prices surged, energy volatility was seemingly never out of the headlines.
But if you’re tasked with managing energy budgets you may have noticed the pressure on wholesale costs is lifting and stabilising. Instead, the biggest upward force on energy budgets no longer comes from the price of power itself, but from everything wrapped around it.
Non-wholesale costs are the network, policy, environmental, and balancing charges that sit behind every unit of energy consumed and now account for around half of the average business bill. In some sectors, that proportion is even higher. And unlike wholesale markets, which rise and fall with global conditions, non-wholesale costs trend in one direction: up.
This is where the next phase of energy management is heading. Not just negotiating better commodity prices, but understanding the structure of the bill itself, knowing where the hidden drivers sit, and taking proactive steps to reduce exposure wherever possible. Many organisations are already doing this well, while others still treat non-wholesale costs as unavoidable overheads. But there is real opportunity here, and energy managers are central to unlocking it.
Understanding the shifting cost landscape
Non-wholesale costs aren’t new. They fund the infrastructure, policies, and programmes that keep the UK’s energy system functioning and help drive the transition to Net Zero. But the scale, complexity, and impact of these charges have increased significantly over the past decade.
Network charges, which are the cost of maintaining and upgrading the transmission and distribution system, continue to rise as the grid adapts to decentralised, renewable-heavy generation. Policy costs, such as Contracts for Difference, the Capacity Market, and legacy renewables schemes, reflect the scale of investment required to deliver a modern, low-carbon energy system. And even metering and settlement reform, including Market-Wide Half-Hourly Settlement (MHHS), is beginning to appear on bills as the industry prepares for a more accurate, flexible market.
For energy managers, this shift matters because it changes where control sits. We cannot influence wholesale markets. But we can influence many of the conditions that determine how non-wholesale costs apply to your organisation, from the timing of consumption to the type of contract you choose, to how accurately you’ve sized your capacity agreements.
And importantly, these charges are more closely linked to behaviour and operations than most energy teams realise.
Why non-wholesale costs demand attention now
Three forces have brought non-wholesale costs to the forefront for energy managers.
First, they are predictable in a way wholesale markets are not. While wholesale prices spike and soften based on weather, global supply, and market sentiment, non-wholesale charges steadily increase as the UK advances towards Net Zero. For organisations planning budgets, this puts long-term upward pressure on costs.
Second, their scale means they can undermine even the strongest procurement strategy. It’s entirely possible to secure a competitive wholesale rate and still see costs climb because network charges or policy levies have moved in an upward direction.
Third, and most importantly, they are increasingly influenced by how organisations use energy. The shape of demand has a direct impact on costs such as Distribution Use of System (DUoS), balancing charges, and capacity costs. Understanding and modifying when energy is used, how much is consumed at peak times, even whether equipment operates unnecessarily, can all make a significant difference to the overall cost.
Non-wholesale costs are no longer the passive part of the bill. They are becoming a core part of energy strategy.
The role of data in managing non-wholesale exposure
Once you understand that non-wholesale costs are behaviour-driven, the case for better data becomes very clear. You cannot manage what you cannot see, and half-hourly billing data alone is not enough to uncover the patterns that really matter.
For example:
- You might be paying higher network charges simply because equipment starts before it needs to.
- A small number of avoidable demand spikes may be inflating capacity-related costs.
- Plant cycling overnight could be driving unnecessary exposure to balancing fees.
- Distribution red-band usage, often accidental rather than operationally required, can unknowingly add thousands each year.
Granular monitoring gives energy managers the ability to pinpoint these issues, quantify their financial impact, and build a targeted case for change. This is where some of the biggest savings lie: in incremental operational adjustments that collectively reduce non-wholesale cost exposure.
Contract structure matters as much as consumption
Behaviour and technology help control non-wholesale costs, but there’s also significant benefit in reviewing contract structures, so they match your organisation’s needs. Many organisations remain on inherited agreements, like capacity levels that no longer reflect the shape of their operation, or fixed/pass-through decisions that were set years ago and never revisited. Recognising and amending this can deliver immediate, tangible improvements.
Some organisations benefit from fixing specific non-wholesale elements because this provides budgeting certainty, while others achieve better value by passing charges through at cost. In both cases, the decision should be rooted in your organisation’s consumption profile and appetite for risk, instead of being left at whatever previous setting has been agreed.
Capacity agreements are a prime example. Many organisations are overpaying for capacity that far exceeds their real requirement, while others may have set their levels too low which will trigger expensive penalty charges during peak periods. Both problems disappear with accurate baselining and a well-evidenced request to the network operator.
For energy managers, this is an area where technical understanding meets commercial decision-making. And it’s an area where small adjustments can significantly reduce long-term costs.
The growing role of onsite generation and storage
Renewables and storage are often discussed through the lens of decarbonisation and energy resilience, but their role in mitigating non-wholesale costs is becoming increasingly relevant. Solar generation, for example, reduces exposure to DUoS red-band charges during high-usage periods. And in turn, battery storage can help flatten peaks, protect against balancing fees, and create a more predictable demand profile.
The economics are shifting quickly, and recent regulatory changes have strengthened the commercial case for battery storage, particularly for high-consumption sectors and multisite organisations that have predictable but intensive daytime loads. For many organisations, solar and batteries go beyond being a purely environmental choice. They are powerful economic tools that help bring rising non-wholesale costs under control.
A strategic opportunity for energy managers
Non-wholesale costs can be confusing and difficult to navigate, but they are an area where energy managers can make a measurable difference.
I would suggest that the task is not simply to react to charges as they appear on the bill, but to understand the mechanics behind them, use data to challenge assumptions, collaborate with operational teams, and build energy strategies that reduce both cost and carbon.
The reality is non-wholesale costs will dominate energy bills for the foreseeable future, and managing and mitigating them is possible, but complex. However, this approach can become a central part of a broader shift towards more informed, evidence-based energy management.
This article appeared in the Jan/Feb 2026 issue of Energy Manager magazine. Subscribe here.