Executive Summary
The UK’s business electricity market is overly complex, expensive and inconsistent. Businesses often face opaque contracts, regional pricing differences, volatile wholesale costs and network charges that are difficult to understand or predict.
A modern economy requires cheap, reliable and transparent electricity. As transport, heating and industrial processes become increasingly electrified, electricity will become the foundation of economic growth and national competitiveness.
This policy establishes a regulated Business Electricity Tariff Framework that provides nationally consistent electricity pricing for most businesses while recognising that the energy requirements of a small office, a supermarket, a logistics depot and a steelworks are fundamentally different.
Most businesses will benefit from a simple national electricity price of 15p per kWh, supported by transparent and regulated network charges. Large energy-intensive industries will have access to regional industrial pricing where locating close to abundant generation reduces costs for both the business and the electricity system.
Rather than relying on complicated time-of-use tariffs, businesses will also be able to earn demand response credits by supporting the electricity grid through batteries, flexible processes and intelligent energy management.
The Problem
The UK’s commercial electricity market has evolved into a fragmented and unnecessarily complex system.
Businesses often struggle to compare tariffs because contracts contain a combination of wholesale prices, pass-through charges, network costs, balancing charges and supplier margins. Identical businesses operating in different parts of the country can face significantly different electricity costs.
At the same time, the UK is asking businesses to electrify transport, heating and industrial processes.
Logistics companies are investing in electric HGVs. Manufacturers are replacing fossil fuel processes with electric alternatives. Commercial kitchens are moving to induction cooking. Warehouses are installing automation, refrigeration and battery storage.
Higher electricity consumption should be viewed as evidence of economic growth and decarbonisation—not something to penalise through increasingly expensive tariffs.
The current system also provides limited incentives for businesses to invest in technologies that support the wider electricity system, such as rooftop solar, batteries and flexible electrical loads.
A modern business electricity market should encourage investment, improve competitiveness and support grid stability without introducing unnecessary complexity.
Objectives
The Business Electricity Tariff Framework will:
- Deliver internationally competitive electricity prices.
- Create a level playing field for businesses across the United Kingdom.
- Encourage the electrification of transport, heating and industrial processes.
- Support investment in renewable generation, battery storage and smart energy management.
- Maintain transparent and regulated network charging.
- Encourage industrial investment close to abundant renewable generation.
- Improve electricity system flexibility through demand response.
- Increase economic productivity and investment.
Policy Details
National Business Electricity Tariff
Most businesses will purchase electricity through a nationally regulated tariff of 15p per kWh.
Unlike domestic customers, businesses will not be subject to tiered pricing or universal peak and off-peak tariffs.
Businesses already have strong financial incentives to reduce unnecessary electricity consumption. Higher electricity use often reflects increased production, additional employment or the replacement of fossil fuels with cleaner electrical technologies.
The national tariff will therefore provide:
- A flat regulated electricity price.
- Transparent supplier margins.
- Simple contract comparisons.
- Nationally consistent pricing for ordinary businesses.
This tariff will apply to businesses such as:
- Offices
- Shops
- Restaurants
- Cafés
- Hotels
- Small manufacturers
- Warehouses
- Farms
- Schools
- Professional services
Supporting Business Electrification
Electricity should become the preferred energy source for commercial activity.
The tariff framework will support businesses transitioning from fossil fuels to electricity, including:
- Electric HGV fleets.
- Electric vans.
- Commercial heat pumps.
- Induction kitchens.
- Industrial electric heating.
- Electric manufacturing equipment.
- Refrigeration.
- Agricultural electrification.
Increasing electricity consumption as part of decarbonisation or business expansion will not result in punitive pricing.
Transparent Network and Capacity Charges
While electricity itself will be purchased at a national price, businesses will continue to pay regulated infrastructure charges based on the demands they place upon the electricity network.
These charges will be independently regulated and fully transparent.
They may reflect:
- Connection capacity.
- Maximum agreed demand.
- Voltage level.
- Network reinforcement requirements.
- Local infrastructure costs.
- Flexibility commitments.
Businesses requiring larger network connections should contribute fairly towards the infrastructure reserved for their use, but these charges must remain predictable, proportionate and subject to regulatory oversight.
Regional Industrial Electricity Pricing
Large industrial facilities have significantly different energy requirements from ordinary businesses.
Energy-intensive industries often have flexibility over where they locate, making regional pricing an effective tool for economic development.
Strategic industrial electricity agreements may therefore be offered to qualifying developments located close to:
- Offshore wind generation.
- Nuclear power stations.
- Hydroelectric generation.
- Major renewable energy hubs.
- Areas with spare transmission capacity.
Eligible industries could include:
- Steel production.
- Battery manufacturing.
- Hydrogen production.
- Chemical processing.
- Large-scale food production.
- Data centres.
- Industrial heat users.
- Advanced manufacturing.
Electricity prices for these industries may be set close to wholesale generation costs, with transparent network and system charges added separately.
This encourages investment where electricity can be supplied most efficiently while reducing transmission requirements across the national network.
Regional industrial pricing will not apply to ordinary businesses such as shops, offices or local manufacturers, ensuring a bakery in London competes on equal terms with a bakery in Glasgow.
Business Demand Response Market
Businesses have an important role to play in balancing a renewable electricity system.
Instead of relying on complex peak and off-peak tariffs, participating businesses will be rewarded directly for providing flexibility to the electricity system.
Businesses may participate using assets including:
- Battery storage.
- Rooftop solar.
- Commercial heat pumps.
- Refrigeration systems.
- Manufacturing equipment.
- Electric vehicle fleets.
- Electric HGV charging.
- Other controllable electrical loads.
The National Energy System Operator (NESO), alongside Distribution Network Operators where appropriate, will procure flexibility through a transparent demand response market.
Participating businesses will receive financial credits for:
- Increasing electricity demand during periods of excess renewable generation.
- Charging batteries when surplus electricity is available.
- Reducing demand during system constraints.
- Exporting stored electricity back to the grid where technically appropriate.
- Supporting local network stability.
During periods of routine balancing, flexibility payments may be modest.
During periods of exceptional oversupply or critical system constraints, participating businesses may receive rewards worth up to 90% of the electricity value, reflecting the significant benefit they provide to the wider energy system.
This approach encourages investment in battery storage, solar generation and intelligent energy management while maintaining a simple national electricity tariff.
Benefits
The Business Electricity Tariff Framework will:
- Reduce business electricity costs.
- Improve international competitiveness.
- Encourage investment in UK manufacturing.
- Support electrification across all sectors.
- Create a level playing field between regions.
- Increase investment certainty.
- Encourage commercial solar and battery deployment.
- Improve electricity system flexibility.
- Reduce pressure on local electricity networks.
- Support economic growth.
- Reduce carbon emissions through electrification.
- Strengthen national energy security.
Implementation
Implementation should occur over several stages.
Stage One
- Introduce the regulated national business electricity tariff.
- Standardise commercial tariff structures.
- Increase transparency of supplier pricing.
Stage Two
- Reform network and capacity charging.
- Publish regulated infrastructure charging methodologies.
- Simplify business energy contracts.
Stage Three
- Introduce regional industrial electricity agreements.
- Encourage strategic industrial investment close to generation.
- Coordinate planning with local and national energy infrastructure.
Stage Four
- Launch the national business demand response market.
- Enable businesses to earn flexibility credits.
- Integrate commercial batteries and smart energy systems into electricity balancing.
FAQs
Why is there no off-peak tariff for businesses?
Businesses operate very differently. Some operate only during the day while others run continuously. A universal off-peak tariff would unfairly favour certain business models over others.
Instead, all businesses receive the same electricity price and can earn additional revenue through demand response where they provide value to the electricity system.
Why isn’t electricity cheaper overnight?
The objective is simplicity and fairness. Businesses already have strong incentives to minimise costs.
Rather than changing the electricity price throughout the day, businesses are rewarded directly when they provide flexibility to the grid.
Why do businesses still pay network charges?
Electricity infrastructure must be built to meet maximum demand.
A business requiring a large network connection should contribute towards the infrastructure reserved for its use. These charges will be transparent, regulated and proportionate.
Why do large industries receive different pricing?
Heavy industry often has flexibility over where new facilities are built.
Locating energy-intensive industries close to abundant electricity generation reduces transmission costs, improves network efficiency and supports regional economic development.
Will this reduce investment in solar and batteries?
No.
Businesses will still reduce their electricity purchases through self-generation while also earning additional income from demand response markets.
Criticisms
“Businesses should simply use the wholesale market.”
Large businesses may continue to negotiate bespoke contracts, but most businesses benefit from predictable pricing rather than exposure to wholesale volatility.
“Regional industrial pricing is unfair.”
Regional pricing is intended only for strategically significant, energy-intensive industries where location decisions can reduce costs across the entire electricity system.
Ordinary businesses continue to benefit from nationally consistent pricing.
“A flat tariff removes incentives to reduce demand.”
Businesses already have strong commercial incentives to reduce waste.
Additional flexibility incentives are provided through demand response credits rather than punitive electricity prices.
Supporting Documents
References
- Ofgem – Business Energy Market
- National Energy System Operator (NESO)
- Department for Energy Security and Net Zero
- Climate Change Committee
- International Energy Agency
- National Grid Electricity Transmission