Business Energy Market Update: February 2026

January experienced heightened volatility in the wholesale market following a comparatively stable 2025.

Mid-month, power prices moved sharply higher with notably bullish momentum; however, by month-end the day-ahead contracts had reversed course, trading unexpectedly around £15/MWh lower at approximately £100/MWh, compared with the start of the month. Power prices didn’t emerge completely unscathed however, with February electricity priced at a £20MWh premium compared with December’s close. Further out, prices were stable with only Winter '26 attracting a slight premium.

Gas spot prices and February deliveries both saw an increase of 25% on the previous month. Uncertainty around gas storage levels and LNG shipments kept the gas market bullish out to the end of the year with average increases of 15% across contracts up to Summer 27 where the market remained more stable.

Prices were mostly influenced by cold weather in the US, which saw natural gas that would have otherwise been exported diverted into the domestic market. In the EU, gas storage levels have fallen due to increased gas-for-power demand and this also added upward pressure.

In energy news, it is now looking increasingly unlikely there will be any help for the agricultural sector through the BICS scheme announced last year. The Department for Business and Trade’s British Industrial Competitiveness Scheme (BICS) is intended to reduce electricity costs for energy-intensive manufacturing businesses by removing certain cost elements from the wholesale part of energy bills, such as the Renewables Obligation, Feed-in Tariffs and Capacity Market charges. Aimed at making British manufacturing more competitive globally, the scheme primarily benefits factories and heavy industry, but it was hoped some parts of the agricultural sector would fall within its remit. As currently designed, primary agriculture sits outside the eligibility criteria, so most farm businesses will not receive direct relief on their electricity bills. Even relatively energy-intensive farm activities, including grain drying, dairy processing and glasshouse heating are unlikely to qualify unless they form part of a recognised food manufacturing operation.

Last month the government also announced changes to the way buy-out prices are calculated for renewable generation assets under the Renewals Obligation Certification (ROC) scheme. Currently, the buy-out price is calculated using the retail prices index and is around £60-70MWh, but from April this year the CPI will be used instead. Using the lower metric is expected to save £270m-per-year by the end of the decade, due to the way the scheme is subsidised. The scheme closed to new entrants in 2017, and set against the broader cost challenges faced by both the government and energy consumers, this saving seems inconsequential. However, changing the rules mid-contract and reducing revenues may affect investors' decisions to back future UK energy projects or worse, increase the cost of financing such endeavours.

This decision may well have been driven in part by the government’s decision to fund the domestic share of the ROC scheme through general taxation rather than energy bill contributions to maintain their election promise to cut energy bills.

It seems almost hypocritical that so soon after introducing the RAB charge to reduce finance costs for large energy projects, the government is now introducing a policy that may drive them back up. However a DESNZ spokesperson said: “By introducing common sense reforms to legacy schemes, we’re delivering better value for money for bill payers.”

As ever, if you have any energy or utility related queries, the team at Clear Utility Solutions is on hand to help.