Energy Costs in 2026: What Manufacturers Need to Know (and What to Ignore)
Energy has firmly moved back up the agenda for manufacturers.
Prices are changing and there’s no shortage of opinion or commentary. But for most businesses, the challenge isn’t access to information, it’s working out what actually matters, what can be ignored, and where the real commercial risks sit over the next 12 to 24 months.
Recently, we ran two webinars with manufacturing businesses from across the UK. We covered commodity markets, non-commodity costs, 2026 TNUoS, and the British Industrial Competitiveness Scheme. The sessions were practical and open, with businesses sharing real concerns, asking direct questions, and comparing experiences.
What became clear was that many manufacturers are facing the same issues. There are consistent patterns in where costs and risks are emerging and just as importantly, where uncertainty and misunderstanding are creating unnecessary exposure.
Here’s what manufacturing businesses really need to know about energy costs in 2026, and what they can safely ignore.
1. Short-term price spikes don’t tell the full story
There’s no denying that short-term wholesale prices can spike. Day-ahead and month-ahead markets are volatile by nature. What matters is perspective.
When you step back and look forward 12-24-months, the picture is far calmer. Compared to the energy crisis peaks, wholesale markets remain relatively stable, particularly further out on the curve.
A helpful way to think about this is the “ripple effect”: the closer you are to an event, the bigger the movement; the further out you look, the calmer the water tends to be.
What to ignore: decisions driven purely by near-term headlines.
What to focus on: the timeframe that actually aligns with your contract and budget cycle.
2. Fear-based sales tactics are still driving poor decisions
A recurring theme in our webinars was the volume of misinformation circulating in the market.
Manufacturers are still being told:
“You must sign before April or you’ll lose out”
“Transmission charges mean prices will explode if you don’t act now”
“This deal is only available today”
In reality, future network and non-commodity costs are already factored into supplier pricing. Signing early does not make those costs disappear.
If urgency is being used instead of explanation, that’s a red flag.
What to ignore: pressure tactics and selective storytelling.
What to focus on: clarity on structure, assumptions, and exposure.
3. Non-commodity costs are the real issue to watch
Wholesale prices get the attention, but non-commodity charges now make up a significant proportion of electricity bills, and they’re where the biggest surprises are landing.
Many businesses are still budgeting based on today’s assumptions, unaware that major elements of the cost stack are changing.
This is particularly risky for:
Electricity-heavy sites
Multi-meter operations
Businesses with high agreed capacity
What to ignore: the idea that falling wholesale prices automatically mean lower bills.
What to focus on: how non-commodity costs apply to your specific setup.
4. RIIO-ET3 will materially change network costs from April 2026
One of the biggest drivers behind rising non-commodity costs is the next electricity network price control period (RIIO-ET3), running from April 2026 to March 2031.
The intention, increased grid investment and resilience, is well understood. What hasn’t landed widely enough is the scale of the impact and how unevenly it can hit different manufacturers.
We continue to see large, sophisticated businesses that haven’t yet modelled what this means for them.
What to ignore: vague reassurance that “it’ll average out”.
What to focus on: understanding your likely exposure before it hits your bill.
5. “Fixed” contracts may not be as fixed as you think
Many manufacturers take comfort in the idea of a fixed contract. In practice, it depends entirely on structure.
Key to note:
Pass-through contracts will reflect increases directly.
Fully fixed contracts may still contain provisions that allow suppliers to recover unforeseen network costs.
Assumptions made a few years ago don’t always hold today.
What to ignore: blanket assumptions about protection.
What to focus on: what is genuinely fixed, what can move, and when.
6. Risk should be assessed against your business, not the market
Energy risk isn’t theoretical. It’s commercial.
The smartest conversations we have with manufacturers don’t start with “Where will the market go?” They start with:
“What cost works for our business and what would genuinely hurt?”
Once that’s clear, procurement strategy becomes far more grounded. Chasing marginal savings while exposing the business to material downside rarely makes sense for manufacturers with tight margins and operational complexity.
What to ignore: one-size-fits-all procurement strategies.
What to focus on: budget certainty, operational resilience, and risk tolerance.
7. Capacity and banding are becoming critical and often overlooked
One theme that came through strongly in our webinars was capacity.
Agreed supply capacity directly influences charging bandings, and in many cases, it no longer reflects how sites actually operate. Where capacity is materially higher than peak demand, businesses may be paying more than they need to and increasing their exposure to rising network costs.
This is one of the few areas where proactive review can make a meaningful difference.
What to ignore: historic settings that “have always been fine”.
What to focus on: whether capacity still matches reality.
8. CHP and on-site generation are back in the conversation, but selectively
Several manufacturers shared real-world experiences of CHP installations and on-site generation projects.
This isn’t a silver bullet, and it’s not right for every site. But where heat demand is consistent and reliability matters, CHP is re-entering serious discussions – often as part of a wider risk and resilience strategy rather than a purely cost-driven one.
What to ignore: blanket claims that on-site generation is always the answer.
What to focus on: whether it genuinely fits your operational profile.
9. Support schemes can help, but they won’t solve everything
There’s growing interest in government support schemes aimed at improving industrial competitiveness.
Where manufacturers qualify, these schemes can provide meaningful relief on certain electricity costs. What they won’t do is offset the scale of transmission and network increases coming through from April 2026.
They should be treated as an upside, not a plan.
Key takeaway
Energy is no longer a transactional purchase for manufacturers. It’s a strategic cost with long-term implications for margin, planning, and resilience.
The businesses that stay in control will be the ones that:
Ignore noise
Understand structure
Model risk early
And make decisions based on their business reality, not headlines
If you don’t yet know how upcoming changes affect your sites, the answer isn’t to rush, it’s to get clarity and we can help with that.