Ofgem has confirmed its decision regarding the way in which Balancing Services Use of System (BSUoS) charges are collected from electricity network users. BSUoS charges, which recover costs associated with balancing the electricity transmission system, are currently paid by ‘Generation’ – those generating electricity, and ‘Demand’ – the end user.
From 1 April 2023, BSUoS will only be charged to Final Demand. As a result, BSUoS charges which previously represented approximately 4% of a typical business customers’ electricity bill, will increase.
The change is intended to create greater alignment between GB market arrangements and EU member states, reduce the volatility of BSUoS and remove market distortion, ultimately enabling the transition to net zero to be achieved at least cost.
At the same time, other non-commodity costs which include transportation and distribution charges as well as government levies and taxes are predicted to increase by another 15% in the next few years. By 2031, non-commodity costs are set to make up 80% of the bill, adding to the pressure businesses face from rising wholesale energy costs.
However, onsite energy generation solutions including hydrogen-ready gas generation as well as Solar PV are already delivering guaranteed savings for many businesses by reducing reliance on power from the grid and removing the impact of rising non-commodity costs including BSUoS charges.
Ofgem’s confirmation that BSUoS charges will move solely to demand in less than 12 months, strengthens the business case for large energy users considering onsite solar and gas generation solutions to reduce costs, improve resilience and support the transition to net zero.
In less than 10 years, a 1MW onsite generation solution, providing 75% of a business’ 10,500,000 kWh demand, currently taken from the grid, will have created savings of more than £3m.