What does it take to lower business energy bills for good?
We share our recommendations with UK government
UK businesses are paying some of the highest electricity prices in Europe. That’s not a minor irritant to their bottom lines – it’s a structural cost that eats into margins, makes UK-made goods and services less competitive internationally, and discourages the very investment the government wants to attract, from manufacturing to data centres.
So why are business energy costs still so high when more than half of Britain’s electricity now comes from renewables? And what would it actually take to bring them down?
In this article, we look into the real reason behind high energy costs, and share our recommendations to government for bringing them down for good.
Why are UK energy bills so high?
Gas still sets the price of electricity
Despite generating more than 50% of our power from renewable energy, homes and businesses are not seeing the full benefit from lower-cost, homegrown energy. That’s because gas-fired generation usually sets the wholesale price of electricity – even when renewables are meeting most of the demand.
For energy-intensive sectors, like manufacturing, hospitality, retail, and data centres , that gap goes straight into the cost of doing business, and it’s impacting our competitivity in global markets.
Since late February 2026, the war in the Middle East has added a fresh and severe shock on top of these structural problems. The disruption of shipping through the Strait of Hormuz led to wholesale gas prices rising by around 75% in the four weeks after the conflict began – as well as pushing up the cost of diesel by 20%.
For businesses finding themselves out of contract, or those that rely on road transport in their supply chain, this is a direct cost shock. And while the acute pressure has now eased – analysts predict that energy prices may stay inflated until well into 2027.
This volatility makes the underlying case for reform incredibly strong. A conflict thousands of miles away should not be able to move UK energy costs so directly.
Policy costs are disproportionally sitting on electricity bills
Policy costs supporting renewables and vulnerable households are loaded disproportionately onto electricity bills rather than gas.
That pushes the price of electricity relative to gas to around 4:1 in the UK, compared with 2:1–3:1 in other European countries. This ratio makes electrifying industrial processes, fleets and heating systems a much harder investment case for British businesses than for their European competitors. This is directly slowing decarbonisation.
How could we bring down UK energy bills for good?
This week, we’ve published a report — Rewiring the Market: How to Tackle the Hidden Causes of High Energy Bills.
This report sets out our recommendations to government for tackling the underlying causes of high energy costs.
Here’s what our suggestions would mean for UK business energy bills:
Save £40 / MWh by moving the remaining major policy costs off energy bills
This would cut business electricity costs by around 17% almost immediately.This measure could be taken before the winter. We suggest these costs move into general taxation instead.
Save £24/MWh by breaking the link between gas and electricity prices
The government has announced measures aimed at reducing this exposure, but independent analysis suggests the impact on bills would be limited — and could even increase costs in some scenarios. Our proposal goes further: removing gas power stations from the wholesale market entirely and placing them in a regulated strategic reserve, so gas no longer sets the marginal price of power.
Our modelling suggests this could deliver a further £24/MWh reduction for non-domestic users.
Save £9/MWh by lowering the cost of financing clean power
Renewables are cheap to run but capital-intensive to build, so financing costs feed directly into long-term electricity prices. A targeted Bank of England scheme to reduce borrowing costs for clean energy infrastructure could add a further £9/MWh saving.
Taken together, this package would cut non-domestic electricity costs by 31% – equivalent to a £73/MWh reduction.
What does this mean in practice?
- A secondary school using 100MWh a year could see electricity costs fall from roughly £23,800 to £16,500, a saving of around £7,300 – funds that stay in the classroom rather than the energy bill.
- A typical village pub using 60MWh could save around £4,400 a year.
- A medium-sized data centre consuming 50GWh a year could save roughly £3.7m a year. Since electricity typically accounts for 35–60% of a data centre’s operating costs, a 31% price cut translates into an overall operating cost reduction of approximately 11–19%: a meaningful factor in where operators choose to locate AI infrastructure.
The benefits extend beyond individual energy bills. Lower and more stable energy costs reduce a major cost across the economy, which in turn eases inflation: the full package is estimated to reduce CPI by up to 0.65%. That matters for every business managing supplier costs and pricing strategy, and it eases pressure on interest rates, which affects the cost of business borrowing too.
A cleaner energy system should be a cheaper one
As the UK prepares for a new Prime Minister, there is a huge opportunity to lower business and home energy bills for good. The measures set out in our report show that meaningful progress is possible – and fast – but only if policymakers are willing to tackle the structural causes of high energy costs rather than just the symptoms.
Fixing that is a priority: for affordability and for competitivity.
Renewable energy is not the reason bills are high. In fact, it’s one of the best tools we have to bring them down. The challenge is making sure the energy system is designed so that households and businesses benefit from the cheaper, cleaner power we’re already producing.
That’s the central argument of our new report, Rewiring the Market: How to Tackle the Hidden Causes of High Energy Bills.
We’re working hard to get our report seen by decision makers. With over 200 pieces of news coverage so far – our efforts are working. If you want to help, please do read our report, and share it with other UK industry professionals.
