Drax Energy Solutions’ Post

With recent changes introduced by Ofgem, additional costs are being added to non-commodities, leading to an increase in overall bills going forward. The TCR framework has presented challenges, particularly for businesses struggling to grasp the implications. At Direct Business Group, we offer support with the TCR framework transition and help navigate through the upcoming additional charges. Furthermore, our services include providing analytical data to optimize consumption, aiding in achieving long-term energy objectives for businesses. Feel free to get in-touch martin.pattinson@dbsne.com 07359601890 #EnergyManagement #TCRFramework #BusinessSolutions #AnalyticalData #CostReduction

Transmission Network Use of System (#TNUoS) charges are forecast to rise over 30% from April 2025. This graph summarises the total TNUoS costs and year-on-year movements in TNUoS tariff for a typical Low-Voltage Site Specific Residual Band 2 customer (LVHH RB2). In the recent Five Year View of TNUoS charges, National Grid ESO predicted the tariffs would increase as follows... 👆 32% (£29.76/site/annum) for the average non-locational banded tariffs - this is skewed by the number of domestic customers on the system – the average rise for all business consumers is 33% and the £/site/annum figure varies 👆 19% (£1.26/kW) for the average locational half-hourly (HH) tariff 👆 21% (£0.06p/kWh) for the average non half-hourly (NHH) locational tariff The increase to the non-locational banded tariffs is due to a forecasted £1bn rise to the transmission demand residual revenues. This in turn is driven by greater TNUoS revenues to be recovered in the year. An increase in forecast zonal locational revenues is driving HH and NHH charges higher on average. Customers in the West Midlands and South Wales will see slightly lower locational HH charges based on the forecasts but still face greater TNUoS charges overall. Currently, the ESO forecasts TNUoS tariffs will increase much more slowly between 2025/26 and 2029/30, but several uncertainties exist around the longer-term forecasts.

As the round of tariffs continues in a tit for tat manner, the question is: Do tariffs really work?! I found the answer in a well written paper under the name: Are tariffs bad for growth? Yes, say five decades of data from 150 countries In fact, the paper suggests that for every 3.6% increase in tariff, the economy shrinks by the fifth year by 0.4%. The paper continues to try to rationalize why it doesn’t work: “The estimated decline in output seems related to reduced efficiency in the use of labor across sectors, an appreciation of the real exchange rate which hampers competitiveness (and undercuts possible improvements in the trade balance), higher imported input costs which raise production costs, and intertemporal effects as anticipated tariffs bring forward consumption and output, only to see these macro variables collapse once the tariff is actually imposed.” The question in my mind remains: if there is no scientific data to support the benefit of tariffs, why apply it? The only other reason I can think of is political gain! Those policies usually try to protect industries with big labor force. Coincidentally, we see more tariffs this year as many countries have election year. Or what do you think?

The NEURC approved tariffs for NPC Ukrenergo for 2025. The tariff for electricity transmission services was approved at UAH 686.23/MWh (+0.16 UAH/kWh compared to the current year's tariff), and for dispatch control services - at UAH 98.97/MWh (-0.005 UAH/kWh compared to the current year's tariff).  The largest share of NPC Ukrenergo's expenses included in the tariffs is the cost of PSO, purchase of reserves (ancillary services), servicing and repayment of IFO loans, settlements in the electricity market (costs related to the purchase of electricity to compensate for technological costs, costs of system constraints, etc.), which the power system operator must pay by law. Expenses related to the operating activities of NPC Ukrenergo account for up to 11% of both tariffs. This means that ensuring the company's vital activity, carrying out repairs and restoration works, construction and modernisation of our facilities make up the smallest share in the tariff structure. ❗ The change in tariffs of NPC Ukrenergo does not affect the cost of electricity for households, so the tariffs for household consumers will not change. Read more about the new tariffs of NPC Ukrenergo by following the link in the first comment.

Did you see National Grid ESO's summer update of forecast Transmission Network Use of System (#TNUoS) tariffs to apply for 2025/26 last month? Both the forecast half-hourly (HH) and non half-hourly (NHH) average tariffs have fallen. The ESO reports that the average HH gross tariff forecast has reduced £1.13/kW to £6.64/kW and the average NHH tariff is forecast to dip 0.07p/kWh to 0.30p/kWh. 📉 While the forecast tariffs have decreased slightly, they remain significantly higher than tariffs in 2024-25. 📈 👉 The average tariff is expected to increase by 30.4% based on the latest forecast. This is 2.2 percentage points lower than the average 32.6% expected in the April forecast. Explore our full analysis in our latest Intelligence article: https://lnkd.in/d4ketJgP

You know, no matter what you call it, tariffs basically end up making everything more expensive. And let's be real, they hit the poor and middle class way harder than the upper class. So, in a way, tariffs are kinda like a consumption tax because they affect what we buy. I'm all about fair trade, and honestly, for the past 60 years, China and many other countries haven't been playing fair in the marketplace. So, a tariff might be warranted, but our government needs to be strategic with very targeted tariffs, not just blanket ones. Impact on Consumption Higher Prices: Tariffs jack up the cost of imported goods, which means we end up paying more. Reduced Consumption: With higher prices, people might buy less or look for cheaper alternatives. Domestic Alternatives: Some might switch to locally-made products, but these aren't always a perfect fit. Impact on Different Economic Classes Poor and Middle Class: These folks spend more of their income on goods, so higher prices can really mess up their budgets. They also have less flexibility to find cheaper options or handle the cost hike. Rich: Wealthier people don't feel the pinch as much because they have more disposable income and can handle the price increases better. Top 1%: The ultra-rich are the least affected. Their spending habits aren’t really sensitive to price changes, and they have plenty of resources to cover any extra costs. So, in short, while tariffs aren't exactly the same as a consumption tax, they do the same kind of damage by making stuff more expensive. And this hits the lower and middle-income folks much harder than the wealthy.

TARIFFS! I am a fan of tariffs when used properly. Trump did a great job with tariffs the first time around, however they can be anti-productive if used in the wrong way on the wrong products. My sense is that Trump uses tariffs as a big bargaining tool in many cases which has proven very effective. There are potential unintended consequences that must be considered however. Came across this note by Mark Skousen, one of the greatest and accurate economists on the planet today, in his newsletter, he memtioned, "One core finding is that industries with higher tariffs did not have higher productivity -- in fact, they had lower productivity. Tariffs did raise the number of U.S. firms in a given sector, but they did so in part by protecting smaller, less productive firms… Not only does it slow economic growth, it also keeps workers in jobs without much of a future.” Of course the productivity can vary based on the industry, regulations, economic conditions, and so forth. But the message is, tariffs can be great, we used them effectively to build our country and build the foundation of a great economy. That said, they must be implemented strategically and targeted at products where it makes sense and the economy can benefit. I don't doubt Trumps ability to use tariffs effectively, but be watchful of the potential pitfalls.

How tariffs are felt through personal inflation This chart illustrates how tariffs – which are essentially taxes on imported goods – significantly increased prices for consumers during the last US-China trade war. Here’s what you need to know: 1)  What happened: a. When tariffs were last introduced in 2018-2019 on goods like auto-parts, furniture and electronics, prices for these items rose noticeably. The chart shows that ‘tariff-impacted goods’ became more expensive, while other goods remained relatively stable. 2) Why it matters: a.  70% of the tariff costs had a direct impact on consumers – essentially meaning you paid more at the store. b.  If similar tariffs are introduced this could increase inflation, or stall/reduce the speed of disinflation. 3) Looking ahead: a. Analysts estimate that a 1% increase in the effective tariff rate can raise prices by around 0.1%. Tariffs affect consumers’ wallets directly and also mean businesses could face higher costs. They key takeaway is that although overall tariff impacts on inflation can be more limited, sector or goods specific tariffs can still have a meaningful impact on household budgets and ‘personal’ or felt inflation.