Thursday 26 October 2023

Third-party energy costs in 2024

Third-party energy costs in 2024

Energy costs for businesses will decrease in 2024, primarily due to reductions in wholesale energy prices.

That's according to Drax Energy Solutions' latest Third Party Costs (TPCs) Guide, which suggests the decline in wholesale prices is noticeable - wholesale energy prices in September this year are approximately 47% lower than they were in January.

Analysts say that this decline can be attributed to several factors, including robust storage reserves, improved supply accessibility and favourable weather patterns.

Looking ahead to 2024, pricing dynamics will continue to depend on supply and demand factors, with potential risks associated with post-winter wholesale energy contracts.

The TPCs portion of a typical energy bill has decreased from 60% to approximately 40% due to significant increases in wholesale prices.

However, TPCs charges remain high compared to historical data, making even small changes impactful.

Balancing Services Use of System (BSUoS) costs are projected to substantially decrease for the upcoming year, primarily due to falling wholesale electricity prices and over-recoveries in total costs during 2023.

Contracts for Difference (CfD) costs are expected to fall for 2024/25, though they are influenced by day-ahead wholesale prices and the generation source.

Feed-in Tariff (FiT) is forecasted to increase in 2024/25 by 8.7%.

Distribution Use of System (DUoS), Transmission Network Use of System (TNUoS), and Renewables Obligation (RO) costs are expected to remain unchanged.

Paul Miller, Business Energy expert at Drax Energy Solutions, said: "Since our last TPCs Guide in April, we've seen the emergence of the Energy Bills Discount Scheme, and now, we eagerly await Ofgem's forthcoming review of the non-domestic supply market this autumn.

"Notably, the industry is experiencing an accelerating pace of modifications and significant code reviews, all outlined in the new Autumn Third Party Costs Guide.

"Looking ahead to 2024/25, we forecast a range of third party costs will decrease, with fluctuations and new, potential changes, while other TPCs will increase.”

Written by

Sumit Bose

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