Louise Ward, Head of Optimisation and Customer Costs, npower Business Solutions
Most energy professionals will be familiar with Labour’s Clean Power 2030 commitment. The pledge to generate 95% of the UK’s electricity from clean sources within this decade is bold, ambitious, and has been broadly welcomed as a progress towards a more sustainable energy system.
But what does it mean for large energy consumers, especially organisations with high demand, and what is the actual cost of clean energy?
Rapid change ahead
The scale of change is unprecedented. Currently the UK generates just over a third of its electricity from gas. By 2030, this must fall below 5%. Filling the gap will require a considerable expansion of renewable capacity, led by offshore wind.
Capacity must increase from 15GW today to 50GW by the end of the decade, while solar generation is set to triple. To achieve this, the UK will need to contract as much new offshore wind capacity in the next two years as has been delivered over the past six.
A £60 billion infrastructure bill
Delivering this scale of renewables also means building the infrastructure to connect and transport power. Around 5,500 km of new grid capacity is needed in the next five years, more than double what has been built in the past decade. Together with wider system upgrades, this could cost around £60 billion. Much of that will ultimately be recovered from customers over many years.
Rise in non-energy charges
The portion of bills that pays for networks and levies, known as non-commodity costs, will take the brunt of this shift. Three charges in particular are likely to be impacted.
- Contracts for Difference provide developers with a guaranteed price for power, ensuring new projects are financially viable. They are central to delivering Clean Power 2030, but they come at a cost. CfD charges could rise from around £10/MWh today to nearly £30/MWh by 2030.
- Transmission costs will also rise. With the network needing to grow four times faster than in the last decade, operators expect their investment to double. For businesses, that means annual charges could also double. A customer in the lowest high voltage band, for instance, could see costs increase from £8,000 in 2025/26 to £25,000 by 2030/31..
- Balancing costs are also likely to increase. These cover the cost of ensuring supply meets demand and are already heavily influenced by constraint costs, payments to generators who cannot sell their output because the grid cannot accommodate it. Unless the grid expands in step with renewables, balancing costs could rise from £12/MWh now to around £20/MWh by 2030.
The knock on to commodity costs
In the short-term, the greater reliance on homegrown renewables will not immediately translate into lower wholesale prices. Gas will continue to set the marginal price for some years, and with more renewable generation coming under CfD arrangements, forward market liquidity will shrink.
As a result, organisations may find it more complex and more costly to hedge far out on the curve. Liquidity is likely to concentrate in the day ahead market, leaving energy managers more exposed to short-term swings.
Liquidity down, volatility up
An increase in volatility means procurement strategies need to adapt. The traditional reliance on forward hedging will be harder to sustain, while volatility will become more of a year-round challenge. With more weather-dependent generation, price swings will not just appear in winter peaks but could arise from day to day, depending on wind speeds and solar output.
Public sector pressures
For the public sector, these issues present an even sharper test. Councils, NHS trusts, universities and schools are under pressure to cut emissions while managing constrained budgets. Rising non-commodity costs will make long-term financial planning more difficult, while varied estates often limit the scope for demand flexibility. Strict procurement frameworks can also make it harder for public bodies to respond quickly in volatile markets.
Looking ahead
Clean Power 2030 is a once-in-a-generation chance to cut carbon and improve energy security. While in the long-term, this could result in lower prices, for energy managers, the challenge is to prepare now for a system where non-commodity charges rise, forward markets thin out, and volatility increases.
Energy managers who act now by rethinking procurement, building flexibility, and strengthening resilience will be better equipped to control costs, manage risk, and capture the opportunities of a clean energy future.
www.npowerbusinesssolutions.com
This article appeared in the October 2025 issue of Energy Manager magazine. Subscribe here.