Business Energy Market Update: September 2025

As August got underway things were looking good, wind generation increased and at the same time temperatures began to ease and the market responded accordingly. By mid-month, optimism that peace might be achieved in Ukraine saw wholesale prices continue their slight downward trend. However, as it became clear a ceasefire was still some way off, the market became bullish and wholesale prices rose towards the end of the month, albeit by only a small margin.

As of month’s end, day ahead power had seen gains of 7%, in contrast to contracts for September and onwards which saw losses of 5%, along with the rest of the curve for 2025. Winter 26 saw power contracts also fall very slightly, whilst those further out remained stable. Gas was a similar story; all forward contracts followed the same downward trend as power, with the exception of day ahead which lost only 3% of its value through the month.

Overall, the outlook remains positive as we come into Autumn, however the amount of Norwegian capacity currently offline will nonetheless continue to serve as an underlying source of support over the next few weeks, potentially limiting the extent of any further declines.

Donald Trump renewed his sporadic attack on renewable energy this month with the US Government’s decision on Friday 22nd August to call a halt to Orsted’s ‘Revolution’ wind project off the coast of Rhode Island. Work has now stopped on the nearly completed project and the state owned Norwegian energy giant saw shares slide more than 15% on the news.

This wasn’t Mr Trumps only outburst against windmills this Summer, coming hot on the heels of his visit to Turnberry golf course in July, where a number of wind farms are visible from the greens. Trump was heard to repeat his oft-stated claims that wind farms are expensive, ugly and kill birds.

The beauty of a 100-metre tall turbine is perhaps in the eye of the beholder and in no small part a factor of its location, and of course birds and sometimes even bats have been known to fly into their blades, but is there any truth to the idea that wind is in fact an expensive form of energy?

In 2025 the cost for offshore wind is higher than onshore and varies between £73/MWh for bottom-fixed projects and £176/MWh for floating turbines. Onshore wind also varies but is around £50/MWh, although recent government figures put onshore wind at just £38/MWh this year. All this sounds very attractive when compared against the cost of electricity generated by our fleet of CCGT gas power stations, which the UK government forecasts will cost on average £114/MWh this year. This is made doubly so when considering those cost estimates for wind remain relatively stable. I need not remind anyone what the price of gas is capable of doing!

But this isn’t quite the whole story. There is another side to wind that proponents of renewable energy are less keen to talk about. Various sources put the cost of ‘Curtailing’ - a mechanism whereby wind farms are paid to ‘turn off’ when they generate more energy than the grid can cope with - at over half a billion pounds so far this year. The practice of paying green energy producers to turn off, while at the same time asking gas power stations to fire up seems absurd, but the reality of our energy infrastructure is such that it was designed to carry energy only short distances - from power stations positioned close to centres of population. Our 21st green energy revolution means the grid simply doesn’t have the capacity to move vast amounts of power from one end of the country to the other.

This situation is changing though, and new projects are in development and under construction right now to redress this imbalance. Some argue the costs of such projects, which often manifest themselves in rising standing charges, are another reason wind and other green energy technologies are expensive. I say the more connected our grid is, the more resilient we are. The ability to send and receive energy far afield, and even to other countries, will inevitably mean cheaper green energy can be built in the most cost effective and productive locations to the benefit of us all. Offering the whole continent access to cheaper greener and more affordable energy in the future.

Staying with renewable energy, DRAX came under renewed scrutiny this month as the FCA announced it will look at allegations the biomass power station misled investors, and Whitehall, about its wood sourcing. It has long been suggested that cutting down forests and turning waste wood into pellets before shipping them across the Atlantic, loading them on a train and then finally burning them in a converted coal fired power station, is not environmentally friendly.

The focus of the latest investigation however is on the sustainability credentials of where this wood is sourced. DRAX was the subject of a 2022 BBC documentary and another similar investigation by Channel 4's Despatches in 2018, where if faced similar accusations.

Further to this, DRAXs former head of public affairs and policy Rowaa Ahmar also accused the company of misleading key stakeholders over the source of much of its wood for biomass pellets. Her recent claim for unfair dismissal was settled by DRAX before it could be heard at an employment tribunal - a key part of her claim being the above accusations. It seems there’s no smoke without a ‘forest’ fire after all!

Since the conversion of the first unit at DRAX’s Selby power plant in 2012, the company has received £6.5 billion in subsidies paid for by British businesses though higher energy bills. And yet, despite the enormous investment in their technology, DRAX is still amongst the most expensive sources of energy on the grid, outpacing even gas in its cost. It may well be time to call it a day on the biomass experiment taking place at Selby and the government may be in agreement, having decided to halve subsidies from 2027.

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