Powering the digital economy – The new energy equation: Why non-wholesale costs are reshaping data centre strategy

Behind the UK’s burgeoning digital economy lies a hidden infrastructure: the energy that keeps it running. Every innovation in AI, cloud computing, and data analytics depends on electricity that is reliable, affordable, and increasingly, renewable. But as the demand for data grows, so does the complexity of delivering that power.

This four-part series from Equity Energies explores how data centres sit at the front line of this transformation, facing the realities of grid capacity, rising non-wholesale costs, evolving regulation, and the race to decarbonise, and how the sector’s response could define the future relationship between business, technology, and the energy system itself.

For years, energy risk was measured in market movement around wholesale cost. This was felt most acutely over the last five years, when a combination of global factors caused sharp increases in energy prices, and a period of ongoing volatility that was keenly felt by businesses throughout the UK.

While the wholesale market has stabilised over the past 18 months, mostly sitting between 6.5p/kWh and 8.5p/kWh, there’s another cost layer to consider that is going to bring a newfound challenge. Today, the biggest threat to predictability isn’t the price of energy itself, but the regulated charges wrapped around it.

These non-wholesale costs are the fixed and regulated charges that fund the UK’s electricity system. They are now growing faster than any other part of the energy bill, largely because of the need to fund the infrastructure upgrades we’ve already discussed. For data centres, which rely on constant, high-volume consumption, this shift is transforming how energy must be managed.

A shift to structural costs

Non-wholesale costs have increased by around 57% in the last four years, with another 10% rise expected by April 2026. These charges include everything from network use and system balancing to capacity and policy levies; the mechanisms that keep the grid stable, maintain resilience, and enable decarbonisation. From April 2026, these charges are expected to contribute to around 65% of the costs on an electricity invoice.

Over the next 18 months, the biggest increases are expected across four key components:

• BSUoS (Balancing Services Use of System): rising 0.495p/kWh (46%) from October 2025, to fund the cost of balancing supply and demand in real time.
• TNUoS (Transmission Network Use of System): in many cases set to more than double from April 2026, reflecting the need for long-delayed grid investment and infrastructure upgrades.
• Capacity Market Levy: forecast to increase by up to 100% by winter 2026, providing payments to keep flexible generation on standby.
• Nuclear Regulated Asset Base (RAB) – a new charge being introduced from December 2025, designed to fund the construction of Sizewell C, adding 0.354p/kWh to bills initially, plus a smaller ongoing operational levy.

Each of these supports a legitimate policy goal to strengthen energy security, accelerate Net Zero, and modernise the grid. But together they represent a significant and largely unavoidable increase in cost, especially for energy-intensive industries that do not meet the criteria for government support, such as Data Centres.

The impact on data centres

For data centres, the challenge is amplified by load profile. Unlike most commercial users, they operate around the clock, with limited flexibility to reduce or shift consumption. Many of these costs are embedded into standing charges, which means they pay the full impact of rising non-wholesale charges and can’t simply use less or switch supplier to offset the increase.

The combined effect is a sharp rise in budget uncertainty. Even long-term fixed contracts can be re-opened to pass on new or significantly increased regulated charges, exposing operators to costs that can regularly fluctuate. In this environment, forecasting, budgeting, and risk management are fast becoming as critical as energy procurement.

That also means taking a closer look at contract terms before signature. Many of the cost surprises seen in recent years come from vague or open-ended clauses around “pass-through” charges. Reviewing and, where possible, negotiating these terms upfront ensures that fixed means fixed or, at the very least, that the conditions under which a contract can be re-opened are clear, limited, and fair. A strong procurement process isn’t just about securing the lowest price on the day but about securing long-term cost certainty.

It’s also important to consider volume tolerances as part of the contracting process. These define how much actual consumption can vary from forecast levels before penalties apply. Setting tolerances as wide as possible helps accommodate business growth and operational fluctuations, while ensuring any penalties for breaching them are proportionate and transparent.

Together, these steps turn procurement into an integral part of financial risk management, ensuring that data centres can plan with confidence, avoid unexpected exposure, and maintain control over their total cost of energy.

Understanding the TNUoS challenge

The TNUoS rise is particularly significant, because delays in grid investment during the past decade, combined with the growing need to adapt infrastructure for electrification and decarbonisation, have created a funding shortfall that now needs to be recovered through customer charges.

According to the latest NESO forecasts, the lowest increase will still be around 70% higher than current rates. Most of that cost will be recovered via standing charges, rather than being linked directly to consumption rates, which limits the ability to avoid increases through demand management.

For data centre operators, the only way to reduce exposure is to adjust agreed supply capacity (kVA) with the local Distribution Network Operator (DNO). Moving to a lower charging band can cut standing charge costs, but once released, capacity is extremely difficult to reclaim, making this a high-risk strategy for a sector where continued expansion is expected and required.

New tools for cost control

The better option could lie not in cutting capacity, but in changing how and when energy is used. By combining on-site technology with intelligent tariff design, operators can offset non-wholesale increases and regain some control over their cost base.

Battery storage, once seen purely as a backup technology, now plays a central role in cost mitigation. By charging batteries overnight, when grid prices and non-wholesale costs are lowest, and discharging during peak periods (typically between 4 pm and 7 pm), operators can reduce the volume of electricity drawn from the grid at the most expensive times.

When combined with an optimised supply tariff, this strategy can generate substantial savings. For example, these calculations are based on real-world billing figures from a live data centre site:

• A 3.5GWh data centre spending around £700,000 a year on electricity could save £50,000 annually through a combined battery and tariff optimisation strategy.
• Add rooftop solar PV, and those savings could rise to £95,000 per year, with an average payback period of 5.3 years, or even immediate return under zero-CAPEX funding options.

Stacking benefits and shifting focus

The same approach can also be applied to the wholesale market for customers on specialist contracts with exposure to intra-day pricing. By taking advantage of the difference between low overnight prices and high evening peaks, which has been on average 5.96p/kWh average overnight rate in the last 18 months, battery storage can deliver an additional £17,000 per year in wholesale price arbitrage.

When these non-wholesale and wholesale savings are combined the total annual benefit can exceed £112,000 (16% of the bill), again reducing payback time and improving ROI.

The potential also extends beyond savings. By partnering with a flexibility aggregator, which coordinates energy users and generators to sell back to the grid, operators can sell stored energy back to the market at times of high demand, turning on a new revenue stream.

Measures like these also underpin the broader shift that’s required in how data centres view energy. As already discussed, managing costs is no longer about simply buying better. How energy is used, in a way that supports both business performance and grid stability, matters too. By drawing less power from the grid at peak times and shifting to battery supply when the system is most constrained, operators not only reduce exposure to high-cost periods but also demonstrate strategic alignment with national energy objectives.

In effect, they become good grid citizens, helping to balance demand rather than add to it. This kind of behaviour strengthens the case for new developments under the Gate 2 connection criteria, showing that data centres can deliver system-wide value, not just digital capacity.

Turning risk into resilience

This level of optimisation demands visibility and insight. Platforms like MY ZEERO and DCC Energy’s broader digital toolkit give operators real-time data on consumption, pricing, and operational performance, which all constitute the foundation for better forecasting and informed investment decisions.

The rise in non-wholesale costs is unavoidable, but it can be manageable; by investing in flexibility, optimising tariffs, and leveraging real-time data, data centres can protect themselves from the next wave of cost escalation, and even turn volatility into opportunity. In doing so, they can also be at the cutting edge of a new energy model that is fit for the future we’re racing towards.

The next stage of evolution goes beyond resilience. In part four, we explore how technology is helping data centres generate, store, and manage energy more sustainably, and why the path to Net Zero begins with taking control of the power that drives the sector forward.

Leo Evers, Sustainability Consultant at Equity Energies