Beyond unit price volatility: The business cost of energy market transformation

Beyond the unit rate: Understanding, managing and mitigating the rise of non-wholesale energy costs

Part one: Beyond unit price volatility: The business cost of energy market transformation

For the past few years, energy conversations have been focussed on the volatility of unit costs. Between 2021 and 2023, organisations across the UK have endured record-high prices driven by global supply shocks, geopolitical tensions, and at times, market panic. Those months of crisis left a significant mark on budgets, operations, and decision-making confidence.

Thankfully today, wholesale markets do appear to be somewhat calmer; prices have fallen back from their peaks, and the sense of daily uncertainty has eased. Yet for many organisations, energy bills remain stubbornly high, and in some cases, are rising again. This apparent contradiction raises an important question: if wholesale energy prices are stable, why aren’t costs falling?

The short answer is that the energy landscape itself is changing. The long-term drivers of cost are not just the price of gas or electricity traded on the market. Instead, we’ve entered a new phase that is defined not by commodity volatility, but by the price of structural transformation.

An energy system under pressure

Behind every unit of energy we consume sits a vast and ageing infrastructure. Much of the UK’s transmission and distribution network was built for a different era; one of centralised generation, fossil fuel-based supply, and predictable demand. But that world is becoming increasingly irrelevant.

As we progress toward Net Zero, the energy system is having to be rewired from the ground up. The grid must not only carry more electricity; it also needs to carry it differently to accommodate decentralised generation from renewables, manage two-way power flows, and cope with surging demand from the electrification of heat, transport, and industry.

The problem is that this transition means changing physical infrastructure, which demands unprecedented levels of investment. The National Energy System Operator (NESO) estimates that more than £50 billion will be required over the next decade to reinforce and expand the network. Add to that the cost of connecting renewable assets, building new interconnectors, upgrading substations, and balancing increasingly complex supply and demand patterns, and you have a perfect economic, highly electrified storm.

The rise of non-wholesale costs

Historically, wholesale energy prices made up the largest share of an organisation’s bill, sometimes as much as 70%. But that balance is shifting as non-wholesale costs – those linked to the required contribution towards transmission, distribution, balancing, and policy – can represent more than half of the total.

The influence of non-wholesale costs is growing too. These are not temporary surcharges or hidden fees; they are the building blocks of a modern energy system. Every new cable, substation, storage site, and renewable contract is a vital contribution to the transformation of how energy is generated, transported, and consumed.

But for organisations, it means that energy costs are increasingly determined not by market fluctuations, but by long-term policy, infrastructure, and regulation.

In effect, we’re moving from the era of price volatility to the era of non-wholesale charges, where the biggest cost pressures will come from system upgrades and decarbonisation, not commodity swings. We’ve arguably never faced this type of market pressure before.

The new cost dynamic

This evolution reshapes the risk profile for every organisation. Remember, commodity price spikes will still happen, but they will no longer be the sole or even dominant driver of energy cost exposure. Instead, we’re entering a period of what is effectively structural inflation, where standing and regulated charges rise year-on-year to fund the energy transition.

For large users, this will demand a rethinking of energy strategy. Procurement tactics alone can’t mitigate regulated costs. For public sector bodies and SMEs, it introduces new complexity, in understanding what sits behind the bill, and how to plan budgets around costs that are both rising and largely uncontrollable.

In this context, energy management becomes less about beating the market and more about understanding it; knowing what’s driving change, and what levers remain within your control.

What this means for UK organisations

The implications extend far beyond energy teams. Finance directors, sustainability leads, and operations managers alike all need to understand that the cost of energy is becoming a direct product of system transformation. Policy-driven costs will rise as the UK decarbonises, and those unable to adapt will face growing financial pressure.

At the same time, this transformation creates new opportunities for those who take a proactive approach. Organisations that invest in energy efficiency, flexible consumption, and on-site generation can insulate themselves from the full force of non-wholesale inflation. This requires forward planning and informed decision-making based on accurate, real-time data.

Preparing for the future

Understanding what’s happening behind the bill is now critical. The changes shaping today’s energy system are complex, but they are also transparent for those who know where to look. That’s where the right partner matters; one that can interpret the shifting energy landscape and translate policy, market, and infrastructure trends into actionable insight.

At Equity Energies, part of the DCC Energy group, we help organisations navigate this new reality, not just responding to volatility, but preparing for transformation. Because while nobody can control the market, every organisation can design how it responds to change.

As the UK’s energy system evolves, so too must the way we think about cost. The story of volatility is ending. The story of transformation has just begun.

By Luke Booth, Director, Key Accounts at Equity Energies 

In part two of this series, we’ll go behind the bill to examine what’s driving this new era of non-wholesale costs, breaking down the charges behind your bill, what they fund, and why transparency will be key to managing the next wave of energy price change.