A quick note from me (Josh):
Welcome to The George Briefing. Each week, my co-founder Lu and I use our tech-focused lens to scan the UK energy market. Our goal is to cut through the noise and deliver the key developments that will impact your business's bottom line, all explained in simple, actionable terms.
This weeks developments are:
The AI Energy Shock: How Data Centre Growth Will Inflate Your Business Energy Bill for a Decade
CARBON TAX 101: The Hidden Charge on Your Bill You've Never Heard Of
From 'Nice-to-Have' to 'Must-Do': Government Signals Future Energy Audits for SMEs
This Week's B2B Market Pulse
Five More "Hidden Gem" Stories You Might Have Missed
LATEST DEVELOPMENTS
Department for Energy Security and Net Zero
Image source: Ideogram / Meet George
The Spark: The UK's soaring demand for data, driven by AI, is set to double the energy consumption of data centres within a decade, putting serious strain on the national grid and your future business energy costs.
The details:
A government report forecasts that UK data centre electricity consumption could more than double by 2033, rising from an estimated 12-24 TWh today to between 30 and 55 TWh.
This surge is primarily driven by the rapid adoption of artificial intelligence (AI) and cloud computing services across the economy.
This growth is creating major grid constraints, particularly in West London, where data centres are competing with other businesses for limited power capacity.
The government is now exploring policy interventions, including improving energy efficiency standards and encouraging data centres to locate in areas with more grid capacity.
Why it matters: This isn't just a tech sector problem; it's a future cost-of-power problem for every business. When huge, power-hungry data centres cluster in one area, they create localised grid bottlenecks. This means National Grid has to invest billions in reinforcing the network, and those costs are ultimately socialised across all business energy bills through network charges (like TNUoS and DUoS). The explosion in AI-driven energy demand is creating a new, structural pressure on wholesale prices and network costs that will be felt on your P&L for the next decade.
What you can do:
Review your non-commodity cost forecasts: Ask your energy consultant for their projections on network charges for the next 2-3 years, specifically mentioning the impact of data centre growth.
Factor grid capacity into expansion plans: If you're a high-energy user planning a relocation, make grid connection availability a key part of your due diligence, especially in high-demand areas like West London.
Audit your own IT energy use: Assess if migrating services to an energy-efficient cloud provider could be more cost-effective than running power-hungry on-premise servers.
Department for Energy Security and Net Zero
Image source: Ideogram / Meet George
The Spark: The UK's carbon market isn't just for heavy industry; it's a volatile, hidden tax that's already driving up your business's electricity bills.
The details:
The UK Emissions Trading Scheme (ETS) is a 'cap and trade' system, setting a cap on total emissions for certain sectors.
It directly applies to energy-intensive industries, power generation, and aviation, who must buy 'allowances' to cover every tonne of CO2 they emit.
The cost of these allowances is passed on, meaning the UK ETS is a key driver of wholesale electricity prices for all businesses.
The scheme is set to expand, with sectors like energy from waste and shipping likely to be included in the coming years, broadening its cost impact.
Why it matters: This isn't just abstract climate policy; the UK ETS is a direct and volatile cost component baked into your business's electricity bill. Every time a gas power station generates electricity, it has to buy these carbon allowances, and that cost is passed straight through to the wholesale market. So when you hear about 'carbon prices', don't tune out. Think of it as a fluctuating, market-driven tax on energy that directly impacts your P&L. Understanding this is critical for forecasting your long-term operational costs.
What you can do:
Ask your energy supplier or broker to quantify the impact of UK ETS costs within the non-commodity charges on your bill.
When budgeting for future energy spend, model scenarios with higher carbon prices (£70/tonne+) to stress-test your operational costs.
Accelerate energy efficiency and on-site generation projects; reducing your grid consumption is the most direct way to insulate your business from these policy-driven costs.
Department for Energy Security and Net Zero
Image source: Ideogram / Meet George
The Spark: The government is scrutinising how UK businesses audit and report their energy use, signalling that new energy efficiency rules could be on the horizon for firms of all sizes.
The details:
The government has published a series of research papers evaluating the effectiveness of the UK's main energy audit scheme for large businesses, the Energy Savings Opportunity Scheme (ESOS).
A key focus of the research is on the specific barriers SMEs face when trying to implement energy efficiency measures, citing lack of time, capital, and trusted advice.
The findings are part of a wider review of business energy reporting, suggesting a potential future shake-up of compliance and reporting frameworks.
Research showed that while audits successfully identify savings, a major challenge for businesses is converting those recommendations into tangible, implemented projects.
Why it matters: This isn't just bureaucratic navel-gazing; this research is the foundational work for future government policy. For years, mandatory energy reporting like ESOS has only applied to large businesses. This new, explicit focus on SME barriers is a strong signal that policymakers are looking for ways to bring smaller, but collectively significant, energy users into the fold. For a business owner, this means the groundwork for future operational costs and compliance requirements is being laid right now. It's a clear sign to start treating energy efficiency not just as a 'nice-to-have' cost-saving exercise, but as a future strategic and compliance priority.
What you can do:
Conduct a simple 'DIY' energy audit this month: Walk your premises and identify obvious energy waste to establish a baseline understanding of your consumption patterns.
Ask your current energy supplier or broker if they offer any free or subsidised energy audit services or smart meter data analysis for SME customers.
Start tracking your monthly energy data more granularly in a spreadsheet to prepare for a future where more detailed reporting might be required.
LATEST MARKET NUMBERS
📊 B2B Market Pulse
Wholesale Electricity Price (weekly avg.):
8.30 p/kWh(Up 8.1%) - A sharp increase in the weekly power price ends the recent downward trend, creating a more challenging environment for businesses looking to secure new contracts.Wholesale Gas Price:
2.60 p/kWh(Down -8.8%) - Gas prices fell significantly, but this was not enough to offset other factors, highlighting that gas is not the only driver of electricity costs.UK Carbon Price (UKA):
£50.81 per tonne(Marginally Up 1.4%) - The cost of carbon saw a slight increase, adding minor upward pressure to the non-commodity portion of business energy bills.Wind + Solar Generation (Share of UK Mix):
27.7%(Down -49.7%) - Renewable generation fell from last week's high, forcing the grid to rely on more expensive power sources to meet demand.
The George Take: This week's data shows the flip side of the renewable-driven market. While the wholesale gas price saw a significant drop, electricity prices still shot up. The culprit? A lower contribution from wind and solar compared to the previous week. This forced the UK to fire up more expensive power plants to fill the gap, and the cost of that generation had a much bigger impact than the falling gas price. For businesses, this is a clear demonstration of weather-driven volatility; a less windy week now has a direct and immediate impact on the cost of power, creating a much less predictable pricing landscape.
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A PLUG FOR GEORGE 🔌
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