Non-Commodity Costs Webinar – Key headlines and updates

Following on from our popular Non-Commodity Costs webinar last month, Mark Cox, Strategic Account Manager and our webinar host, looks at the key headlines of the webinar and the predictions and impacts of any changes in the industry.

Renewable Obligation - projections are on the up!

The Renewables Obligation mandates that electricity suppliers in the UK source a specific amount of their supply from renewable generation.

The RO forecast is showing an upward trajectory. The RO forecast for 2024-25 was published at £27.67/MWh, has caught the attention of the industry due to the significant increase of over £3 per MWh predicted in the near future. This notable price surge is primarily attributed to two key factors: the buyout price and the obligation levels.

The buyout prices are index linked to Retail Price Index (RPI) calendar inflation and the RPI inflation for this year is forecast to land above 9%. This projected price jump underscores the importance of carefully monitoring and adapting to changes in the RO.

Contact for Difference - Budget now for higher scheme cost!

Wholesale prices in the energy market have seen a significant decline, which may come as good news for many consumers. However, this apparent relief in wholesale prices may not be as straightforward as it seems. While lower wholesale prices can offer short-term financial relief to consumers, the revival of CfD is a clear indicator that there are cost increases coming up.

CfD is designed to ensure the long-term stability of the energy market by guaranteeing revenue stabilisation for low-carbon energy generators. This scheme aims to increase investment in sustainable energy sources, which is undoubtedly a positive step toward a greener future. On August 3rd, the UK Government announced an additional £22 million in funding for the CfD scheme. This brings the overall budget for the CfD scheme in the Allocation Round 5 (AR5) auction, launched in March 2023, to a total of £227 million.

With the CfD going back up, consumers should prepare for higher energy bills. Smart budgeting today can help soften the impact of these anticipated cost increases, ensuring a more stable and affordable energy future for all.

Balancing Services Use of System Charge - How has the Grid over recovered so much?

Recently there have been shifts in the main system and network charges. From 1 April 2023, generators no longer pay BSUoS charges. The purpose of the BSUoS scheme is to keep the renewable energy market stable and balance the supply and demand of the network. Grid has published new seasonal tariffs for the next 9 months. The current rate for next summer April-September 2024 is at £7.63/MWh. While this helps the industry budget costs better in short term it also increases the risk of undermining recoveries.

Grid recently published the tariff for summer 2024 which stands at £7.63/MWh with the overall recovery reducing the tariff by £3.30/MWh. These charges cover the ESO's costs for balancing the network, which are increasing difficult to predict as renewables generation penetrates the grid, therefore to minimise the financial impact of BSUoS charges we should track and adapt to future developments. Therefore, to minimise the financial impact of the BSUoS charges we should track and adapt to future developments.

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