Power and how to get it

ECONOMISTS HAVE identified the single biggest issue affecting the economic outlook in the UK – inflation but they are not blaming the Bank of England, they are pointing the finger at decisions taken by MPs in Westminster and in particular policies around energy production.

According to an article in The Times written by investment bank Panmure Liberum managing director, chief economist and head of research Simon French in the mid 2000s the UK had the same industrial electricity costs as the United States at 3.8p/kWh which was broadly in line with the average for all the countries that are members of he International Energy Agency – now that figure has risen six fold with the UK somewhat ingloriously boasting electricity prices that are the highest in the IEA and two and a half times that of the US.

Because electricity prices affect every business throughout the economy and because MPs have chosen to embed energy-driven price increases in regulated prices for labour, pensions and tariffs of key good and services, the price of energy is a driver of inflation. The higher it gets the more it pushes inflation – reduce those costs and inflation reduces.

The country is a formidable global player in renewable energy technologies and production which lead it to be the first major economy to halve its greenhouse gas emissions compared to 1990 levels.

In 2025 renewables made up nearly 47-50% of the total electricity supply. It is an extraordinary achievement. Electricity prices as a result should be among the lowest and inflation thus lower.

So, what is the problem and why are costs continuing to increase? There are a number of reasons but mostly a lack of national grid infrastructure and the high bar set by successive Governments to get the UK to net zero.

Putting it bluntly MPs are trying to get the UK power supply chain to run before it can walk. There is not enough cabling infrastructure immediately available to meet political ambitions that would see the shift from gas power to large-scale wind, solar, and nuclear to provide clean, dispatchable power, aiming for a zero-carbon grid by 2035.

A classic example of a cabling bottleneck is at the B6 Boundary, where electricity produced by Scotland’s wind farms passes through to consumer in England. When there is too much wind power production the amount of electricity overwhelms the system so the National Energy System Operator, pays the wind farms to shut down. Then it buys replacement electricity on the other side of the cabling bottleneck which according to Octopus Energy’ Wasted Wind tracker, cost nearly £1.5 billion in 2025 alone.

Much of the replacement electricity is generated from gas but because there is a political ambition to shift from gas to large scale renewables the UK’s gas production and storage capabilities have been reduced. Production down from 36% ten years ago to 3% meaning the shortfall is being supplied by Norway or else from more polluting and less secure imported liquified natural gas from the US or Qatar.

Octopus Energy warned that without a rapid infrastructure development the bills for turning off wind farms (because there are more due to come on line) could hit £8 billion by 2030.

Another reason for the high costs of UK electricity bills according to small business comparison site Bionic head of commercial operations Alex Staker: “is the fact that Energy prices are set using a system called ‘marginal cost pricing’. In short, this means that the most expensive type of energy is used to set the price for all types of energy, including renewables.”

As the UK only provides 3% of its own gas and in addition has the some of the lowest gas reserves and storage capacity in Europe, roughly 2% of the UK’s annual demand, compared with AN AVERGAE OF 25% for other European countries the UK is more vulnerable to gas price fluctuations.

The cost of upgrading grid infrastructure will ensure that electricity bills remain elevated at least in the short to medium term – recently approved plans will see £70 billion invested adding £60 to annual bills by 2030.

The good news is that with these issues in mind there is actually quite a lot that occupiers can do to reduce electricity/power costs.

At Tomorrow’s Warehouse event in Manchester [organised by Logistics Matters] Sol PV Group CEO and co-founder Tony Waite pointed to the installation of roof top solar photovoltaic systems as a way for occupiers to slash their costs going from prices of 58p per kWh to pennies per kWh.

Indeed, research by the UK Warehousing Association noted: “Solar PV can reduce annual electricity costs by 40-80%.”

Waite said : “Energy is one of the top three costs a business faces and that goes across every business in the UK not just warehousing or manufacturing – every single business.

“That being said warehouses with their underutilised roof spaces are perfect for significant roof top solar systems.”

However, for many occupiers, the installation of such systems can be expensive – Waite said: “A half a million pounds is a huge decision for a financial director to make for what is viewed as an emerging technology especially when finances are tight. We know it works but for many this is all new.”

Fellow Tomorrow’s Warehouse panellist, architect Corstorphine & Wright’s head of industrial & logistics, Mike Teague added: “[Unless there is a corporate imperative i.e. to increase ESG credentials] What we are talking about here is that it would be nice to have for a business but not essential – that is the way it is perceived.

“[Most] get their electricity from the grid [which is understandable and guaranteed] but they fear what would happen if they solely relied on PVs – what would happen if a production line breaks down and they haven’t got backup so they are nervous around investing in things like renewable energy and energy efficiency, but this is not the case where the systems are designed and presented properly.”

Teague said he thought many businesses did not appreciate how cheap generating electricity is. “Businesses continue to pay 20, 30, 50 pence per kWh when they could put an asset on their roof and be generating electricity for pennies per kWh.

“It seems mad that business does not pick up on this especially when you look at the fact that it is one off cost for the system which will continue to work for years. In 20 years, time when other businesses are paying over £1 per kWh you are still paying 3p per kWh – I think that is what goes unnoticed and is not really explained in the industry.”

Returns on investment are impressive. Waite said he had seen paybacks in as little as under three years. “That comes down to costs, cost of the system, the products used and what the current energy costs are – the higher the [electricity] price the quicker the ROI.”

If savings and ROI are so rewarding, why is roof top solar PV adoption not more prevalent? UKWA chief executive Clare Bottle explained: “There are still too many practical barriers and misaligned incentives. The most common complaint is long delays for grid connections: in some cases, projects have been waiting for years.”

Tritax head of Manchester office David Travis, who was also a panellist at the Tomorrow’s Warehouse event, agreed: “The biggest drag on solar PV uptake is grid connection, our buildings are all built 100% PV ready and we just don’t get the uptake.”

Savills data analyst, energy, renewables and infrastructure Kyle Rarick noted: “While progress is being made through reform and reinforcement, data shows that headroom capacity shortage persists. This shortage is increasingly shaping the pace and location of new housing, commercial, and industrial development, as grid capacity remains a key constraint on planning and delivery.”

The wait for a connection, especially for larger development projects can be anything from five to ten years, which is why some developers are investigating and in some cases implementing alternative energy provision at the outset of their development via micro grids, energy centres and even private wire networks essentially behind the meter to mitigate and in some case bypass the need for grid connection altogether.

Most of the time these alternative energy systems act to complement an already established grid connection.

Tritax Big Box development’s energy centres typically combine several power sources for reliability and flexibility such as roof top solar, combined heat and power and standby generators as well as battery storage within a localised private wire network, managed by a third-party specialist like BasePower. The system operates as a private microgrid that can run in parallel with the national grid or “island mode” ensuring no interruption to the occupiers. The entire setup is managed to optimise the use of onsite generation, balance power demand, and provide backup in the event of grid failure.

Travis said that for many of Tritax’s clients it’s not only energy provision that is important, sustainability is another factor – the energy centres help the developer to deliver net zero carbon facilities both in operation and construction.

Newmark energy team associate James Keir said: “Energy hub style smart grids where a number of occupiers are sharing the use and generation of renewable energy are gaining popularity and can provide a bit of stop gap for providing energy the grid cannot.”

He added that ground mounted solar PV, which is more straight forward contractually usually involving only two parties and simpler to set up structurally, are being used more and more as part of larger developments for behind the meter systems, for example, with data centre developments which require a large amount of energy. These field mounted arrays provide energy directly to the occupier rather than connecting to the grid hence being ‘behind-the-meter’.

However, to ensure deliverability of a site, especially if the scheme is larger, typically over 1 million ft2, field mounted solar is being integrated into planning applications. A field mounted solar park is integral to the proposals for the 3 million ft2 has happened at Popham Logistics Park on land north of the M3, near Basingstoke in Hampshire, which will provide renewable clean power to the development alongside roof top solar on all the buildings.

Columbia Threadneedle Investments, 2.1 million ft2 logistics park known as BOX:STN near Stansted Airport is another scheme where field mounted solar will play a part in the provision of electrical power behind the metre.

Prologis UK regional head Paul Weston noted: “Power will be a decisive factor for new developments in 2026. As automation, data-intensive operations and electrified transport expand, facilities with reliable power and grid connectivity are increasingly scarce. Developers will respond with on-site generation, micro-grid solutions and higher-capacity infrastructure to future-proof assets.”

While it has yet to announce an onsite energy generation centre in the UK, Prologis did announce the development of one in the Netherlands last year.

Because the developer was having difficulty connecting to the grid for a development in Almere, it decided to build a micro grid to generate, store and manage energy for the building it constructed. Originally the scheme had been given just 55KVa – far below what’s needed for a modern logistics facility.

Prologis developed a microgrid system using the company’s OnDemand Power platform to provide a solution when grid connections are constrained. The setup combines rooftop solar, battery storage and backup generation, managed by software.

For occupiers going it alone or looking at retrofitting rooftop solar PV array, there are other issues that raise their heads. UKWA’s Bottle said: “Even when the roof is structurally sound and the funding is there, the approval process can be confusing and inconsistent. And in leased buildings, old-fashioned lease terms or a lack of alignment between landlords and tenants can stop projects in their tracks, even when they make perfect sense on paper.”

That is why the UKWA produced its Solar Toolkit which provides advice and support to the rising number of organisations in the sector wishing to embrace rooftop solar power. It includes a step-by-step guide to planning, installing, insuring, and financing among other issues.

While it may not be as straightforward as one would like roof top solar could be a game changer. It has massive public support, a recent YouGov poll commissioned by the UKWA found that solar panels on industrial rooftops are the single most popular form of renewable energy backed by 9 out of 10 people.

“It is also the least controversial in terms of planning and in addition it is getting easier to manage and marry up power generation with power usage,” says Newmark’s energy & infrastructure team partner Sarah Stewart: “AI is the perfect tool.”

“The potential for roof top solar on warehouses is enormous,” said Newmark’s Industrial & Logistics Analytics partner Will Laing. He and his colleagues calculated that there is 2.24 billion ft2 of warehouses space in units over 50,000 ft2 in the UK and fitted with standard 300-watt solar panels (45 per 1,000 ft2 after allowances for spacing and usable roof space) harvesting three hours of peak sun hours a day could provide 68.3 million kilowatt hours of clean energy.

“This kind of solar deployment carries wide-reaching benefits. From a financial perspective, significantly reducing operational costs or generating additional income through feed-in tariffs or power purchase agreements.

“Environmentally, it drastically cuts carbon emissions, helping landlords and tenants meet their net-zero and ESG commitments. And strategically, it enhances energy resilience.”

No wonder the Government’s Minister for Energy Michael Shanks MP noted that putting solar on warehouses is a ‘no-brainer’ when the UKWA’s Solar Toolkit was launched at IMHX last year.