What affects business energy prices in 2026?

You didn't go into business to become an expert in business energy. In 2026, it feels like you need to be one.

Conflicts taking place thousands of miles from your shop window, office or warehouse are having a direct impact on the big - and rising - number on the bottom line of your energy bill.

We know what it's like to watch the news and feel helpless, not knowing how the latest crisis will hit your business. And we're here to help.

You can start with our simple guide to business energy for basic principles. Then understanding what affects business energy prices is another step towards protecting your business from whatever happens next.

In this article:

• Learn about key factors driving business energy price rises - and falls.
• Understand what has the biggest impact on your bills.
• Assess how your business can adapt to changing costs.

What affects business energy prices?

Of course, the key factor that determines your monthly energy bill is usage - use more, pay more - but this doesn't reduce the fundamental price of your energy.

And many businesses rely on a steady supply of power for critical appliances, from refrigerators to manufacturing equipment. There are some things you simply can't cut out.

Your energy bill is largely dictated by three major factors:

1. Wholesale costs

Approximately 40% of your business electricity bill - and 60% of your gas bill - pays for the energy flowing through your site, according to Ofgem. Supply and demand plays an enormous role in setting the price of wholesale energy.

If supply is higher than demand, there is plenty to go around and prices should fall. If demand outpaces supply, energy becomes scarce and the price is likely to rise.

Supply shocks

Geopolitical tensions and conflict around the world can lead to weak supply.

During the US-Iran conflict in 2026, the Strait of Hormuz, a critical shipping passage from the Persian Gulf, was effectively closed by Iran in response to US airstrikes on the country.

Prior to February 2026, around 27% of the world's maritime crude oil and petroleum trade and 20% of the world's liquefied natural gas (LNG) passed through the strait, according to the US Congress.

The reliable supply of oil and gas leaving the region was greatly reduced as a result of the closure, while global demand remained consistent. Brent crude oil prices rose 80% from the start of February to peak around $126, adding huge pressure to energy industry supply chains.

Other recent supply shocks include the Russia-Ukraine war, which led to many European nations vastly reducing - or completely cutting off - their supply of gas from Russia.

Demand spikes

The Great British weather is one of many demand factors that directly impacts energy prices.

Extreme temperatures lead to spikes in usage. Cold weather increases demand for heating appliances, while hot weather increases demand for cooling systems.

The productivity of renewable technology also relies on the weather. Not enough wind or sun may diminish the effectiveness of turbine and solar generation, requiring fossil fuels to step in to meet demand.

On the flip side, prolonged spells of wind and sun can lead to bumper generation. Businesses with their own on-site turbines or solar panels could stand to benefit from a strong supply of 'homegrown' power regardless of what is happening around the world.

Businesses can also agree to sell excess electricity back to the National Grid through a process knowing as exporting.

2. Network costs

It's relatively easy to track the latest news headlines, but it can be much trickier - and if we're honest, less interesting - to follow the movement of underlying charges.

Non-commodity costs can make up almost two thirds of a business energy bill. A large portion of non-commodities revolve around maintaining transmission and distribution infrastructure.

Understanding that energy price rises stem from a range of sources beyond global instability can help you make smart decisions to protect your business.

There are two major non-commodity charges included in every unit of energy:

• TNUoS (Transmission Network Use of System): the cost of building, running and upgrading the high-voltage grid that moves power across the UK. These charges are expected to rise in the coming years.
• DUoS (Distribution Use of System): pays for local networks—the cables, substations and repairs in your region. Costs differ depending on location.

These costs are mandatory. You cannot reduce them. Knowing what they are, and looking ahead to see where they are going can help you make budget forecasts with greater precision.

3. Government policy

Following on seamlessly from network costs, non-commodity charges also include various taxes and levies applied to energy bills by the Government.

• VAT: this tax is applied to most goods and services across the economy and energy is no exception. There is a 20% tax applied to energy as standard, though low-usage business and not-for-profit organisations can benefit from a reduction to 5%.

• Climate Change Levy (CCL): this tax is designed to incentivise a transition from fossil fuels to renewable energy sources. Businesses who qualify for lower VAT are usually exempt from CCL but many receive the charge. Businesses have the option to agree a Climate Change Agreement (CCA) with the Environment Agency, which set targets for lowering carbon emissions, meaning they could enjoy up to 90% discount on the levy.

• RO (Renewables Obligation): an older scheme for large renewable projects. It closed to new entrants in 2017, but existing contracts run into the 2030s, so it still appears on bills.
• CfD (Contracts for Difference): long-term price support for low-carbon generators, giving them stability and encouraging investment.
• FiT (Feed-in Tariff): recovers the cost of small-scale renewables supported under the scheme, such as rooftop solar.

• Nuclear RAB (Regulated Asset Base): this levy was introduced in 2022 to support the construction of nuclear power stations given their high upfront costs.

VAT and CCL are two key charges on your bill, but each of them can be heavily reduced if your business meets certain conditions, as we'll explain below.

How to protect your business from rising energy costs

1. Make sure you're paying the right VAT and CCL: Staying on the theme of non-commodities, the VAT and CCL discounts are not applied automatically. Charities and non-profit organisations, village halls, care homes and low business energy users are among those who can benefit from a reduced VAT rate and likely CCL reduction. More than a third (37%) of charities did not know they could claim for a reduction, according to the Energy Action Group.
   

    

2. Fix your energy deal: There are benefits to both fixed-rate and flexible business energy contracts, but if protection against rising costs is a priority, fixing your deal may be the right course of action.  A fixed rate contract locks in the kWh unit rate and other charges for the duration of your contract, offering peace of mind. If prices skyrocket while you’re under a fixed-rate deal, you are protected. Bear in mind, if prices fall, you won’t benefit from drops during the term.
   
3. Consider renewable energy: Many businesses are turning to renewable sources for on-site electricity generation. There are various grants and schemes available for businesses to help with start-up costs. Once up and running, micro wind turbines or solar panels could help you ride out price shocks in a volatile world. Rely on your own supply.
   

How we can help

Business energy price rises can be scary. Geopolitics, the weather, non-commodities... numerous factors outside of your control will continue to have a direct impact on your bill.

We get it. We can support you.

Troo exists to help businesses like yours make sense of their energy needs, simplify complex information and make smart decisions that lead to real change and reduced costs.

We are not here to sell you a quick fix. We're here to understand what matters to you, offer clear advice, and take ownership of the hard parts, so energy becomes one less thing to worry about.

Book a free energy health check today for practical guidance on your business electricity, gas or water bills.