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Decoding Non-Commodity Costs: Preparing your business for what’s next
Discover how non-commodity costs are reshaping energy bills. Explore insights from SmartestEnergy’s webinar with Mark Cox and Alex Walmsley.
When businesses think about energy costs, wholesale prices usually take centre stage. But as SmartestEnergy’s latest webinar made clear, the real story is increasingly about non-commodity costs (NCCs) - the complex mix of charges for networks, balancing, subsidies, and levies that now make up a significant share of every bill.
Mark Cox, Strategic Account Manager and host of our popular Non-Commodity Costs webinar, shares his key takeaways.
On 23rd September 2025, I hosted the session alongside my colleague Alex Walmsley, Head of Pricing. Together, we explored how non-commodity costs are evolving and what businesses need to prepare for.
System and network charges
The UK’s system and network charges — Transmission (TNUoS), Distribution (DUoS), and Balancing Services (BSUoS) — are undergoing significant reform. While they can appear technical, these charges reflect the real cost of operating and balancing the electricity grid.
As Alex put it:
“The shift we’re seeing is increasingly about capacity and system costs. That means businesses can’t just focus on how much energy they use through their consumption charges — the shape of their demand, the flexibility of their operations, and even their location within the grid are all becoming significant cost drivers.”
With TNUoS charges being re-banded under the next five-year price control, DUoS continuing its move toward more fixed and capacity-based tariffs, and BSUoS costs forecast to remain elevated, businesses face a more complex charging environment — one that demands foresight and proactive management.
Low carbon subsidies
Subsidies such as the Renewables Obligation (RO), Feed-in Tariffs (FIT), and Contracts for Difference (CfDs) were originally introduced as temporary mechanisms to support the transition to clean energy; however, they are now used as the government’s primary policy tool for reaching Net zero. Today, these costs are firmly embedded in the structure of NCCs.
The RO remains the largest, adding around £33–£35/MWh to electricity prices. FIT charges are smaller, but still material, and CfD costs are growing in both scale and volatility as more projects come online.
As Alex explained:
“We shouldn’t think of subsidies as something that will simply disappear. They’re now a permanent feature of how we fund the energy system. The uncertainty is more around how government chooses to recover those costs in the future — whether through general taxation or via consumer bills. For now, the burden is squarely on consumers.”
For businesses, this means these subsidies are not marginal add-ons but a predictable, long-term part of their energy cost base.
Capacity market
The Capacity Market is fulfilling its purpose — keeping the lights on and avoiding blackouts — but the price of security is becoming increasingly eye-watering. Recent T-4 auctions cleared at around £65/kW/year, up from the mid-£40s only a few years ago.
As Alex noted:
“The Capacity Market is doing its job, but the costs are creeping up. Securing standby generation in a market that’s becoming tighter naturally means higher clearing prices. Businesses need to recognise that security of supply isn’t free — and that cost trend is upwards.”
For a large consumer without an energy-intensive industries exemption, that can translate into hundreds of thousands of pounds per year purely for capacity payments.
The key takeaways
The message from the webinar was clear: non-commodity costs are no longer secondary; they are in fact the majority of the retail electricity cost stack. They are central to how energy is priced, consumed, and managed.
For businesses, three priorities stand out:
1. Budget smarter: NCCs are dynamic and rising; they demand proactive forecasting.
2. Value flexibility: The ability to manage load, respond to price signals, and optimise capacity will increasingly define cost exposure.
3. Think strategically: Energy is not just a procurement issue — it’s tied to competitiveness, resilience, and the UK’s net zero pathway.