The 2025 UK Autumn Budget: What It Really Means for Energy Costs

The 2025 UK Autumn Budget has now landed — and it’s left households, businesses, and the entire energy industry wondering whether the government fully understands the pressures people are facing.

On the surface, the Chancellor positioned this Budget as a reset. But when you look closely at the details, especially around energy, it becomes clear that the changes are a mixed bag. Some cuts here, new charges there, and long timelines for anything genuinely impactful.

Here’s a clear, grounded breakdown of what the Budget means for households, businesses and the journey toward Net Zero from 2026 onwards.

The biggest headline for domestic consumers is the removal of legacy policy costs — the Energy Company Obligation (ECO) and the Renewables Obligation (RO) — from household energy bills.

This is expected to save the average household around £150 per year from 2026.

Why this matters

These costs were built into unit rates for years, meaning consumers paid them without necessarily understanding what they were for. Moving them into general taxation means:

• Lower unit rates for electricity and gas

• Slightly cheaper running costs for electric vehicles

• Cleaner, simpler domestic bills

However…

EV owners face a new 1.5–3p per mile “road tax”

A new electricity-based road pricing model essentially taxes every mile driven in an EV.

So while households see bill reductions, EV owners will see some of those savings diluted by new transport charges.

Energy efficiency incentives are weakened

This is the part the headlines gloss over.

Removing ECO and RO from bills also removes the “price signal” that encouraged households to invest in:

• Solar PV

• Heat pumps

• Home insulation

• Energy efficiency upgrades

• Smart energy systems

Heat pumps become cheaper to run, but upfront costs remain high. Solar payback periods may actually increase slightly.

In short: bills fall, but the motivation for low-carbon home investment is weakened.

The outlook for businesses is less positive — especially for energy-intensive users.

No relief from ECO/RO removal

Those legacy costs only applied to domestic consumers. Businesses see zero benefit.

Instead, businesses face new and rising non-commodity charges

From 2026 onwards, businesses will face:

• A new Nuclear RAB levy of 0.345p/kWh

• Higher TNUoS charges starting April

• Increases already locked into other non-commodity cost components

These changes push delivered energy costs up even in a market where wholesale prices have softened.

BICS: 25% bill reduction — but not until April 2027

The new Business Investment and Climate Scheme (BICS) promises support for around 7,000 UK manufacturers, offering up to 25% reduction in energy bills.

But:

• It doesn’t begin until April 2027

• It remains under consultation until January 2026

• Many of the benefits may be cancelled out by rising non-commodity costs

For most businesses, the reality is:

There is no meaningful energy cost reduction coming in 2026.

And if anything, costs will continue trending upward.

Domestic incentives weakened

Lower bills reduce the cost-saving case for solar, insulation, and efficiency upgrades — the opposite of what the UK needs to accelerate Net Zero.

Heat pumps benefit from lower running costs, but adoption still faces structural barriers (upfront cost, property type, installer availability).

Businesses will invest out of necessity

Rising non-commodity costs means businesses will increasingly turn to:

• Solar PV

• Battery storage

• Energy optimisation

• Demand-side response

• Flexible procurement

• Long-term power strategies

Not because the government is supporting them — but because doing nothing will cost more.

For households (from 2026):

✔ Lower bills
✔ Cheaper EV running (before road pricing kicks in)
✘ Weaker incentive for solar and efficiency
✘ Long-term uncertainty for low-carbon tech

For businesses (2026–2027):

✘ No benefit from ECO/RO removal
✘ Higher non-commodity charges
✘ Delayed relief from BICS until 2027
✘ Rising grid costs despite falling wholesale prices

For the UK’s Net Zero pathway:

✘ A risk of slowdown
✘ Reduced domestic incentives
✘ Delayed industrial support
✔ But increased commercial investment driven by necessity, not policy

The Autumn Budget 2025 wasn’t the game-changer the industry hoped for. While households will see a short-term cost reduction, businesses are left navigating rising charges with little meaningful support until at least 2027.

Ironically, the pressure created by this Budget may push more businesses toward clean energy technologies — not because the policy is supportive, but because the economics of inaction have become too costly.

If you’d like help understanding how these changes affect your organisation or want to build a strategy to get ahead of rising non-commodity costs, we’re here to support.