The UK’s energy landscape is shifting under the feet of the logistics sector and a relatively unknown change which commenced on 1st April.
For decades, the industry has benefited from a period of de-industrialisation where energy was relatively abundant and grid capacity was rarely a constraint. Today, however, we have entered a new normal: operators must now manage a surge in electricity demand (driven by warehouse automation and fleet electrification) while the grid struggles to accommodate intermittent renewable generation.
What’s changing?
To fund an estimated £70 billion in grid upgrades over the next five years, the mechanism for charging businesses for transmission services has fundamentally changed. In the past, finance and operational teams could mitigate costs through simple energy efficiency or by reducing consumption during peak periods. That flexibility has essentially gone.
Following Ofgem’s Targeted Charging Review, the majority of Transmission Network Use of System (TNUoS) charges have been decoupled from actual consumption. They have been replaced, since 2022, by a fixed daily charge known as the Transmission Demand Residual (TDR). This structural change significantly altered how costs are incurred across the logistics sector.
Confirmed TDR charges have increased by an average of 65% for many commercial users. Crucially, for 24/7 fulfilment centres, this is a fixed fee charged 365 days a year, regardless of whether operations are running at full capacity or at reduced throughput.
How peak power spikes lock in higher costs
For commercial and industrial organisations operating large-scale distribution centres, the real challenge lies in the ‘banding’ system used to calculate these fixed charges. Whether a site is classified as Low Voltage (LV) or High Voltage (HV), it is assigned to a charging band based on its contracted Import Capacity: the maximum amount of power it is permitted to draw from the grid.
With automated logistics in particular, power demand is rarely consistent. Instead, it is characterised by sharp, intense peaks: the morning rush as a fleet of electric delivery vans begins charging, or the moment a high-speed conveyor and sorting system comes online.
Under the new TNUoS cost recovery regime, these brief spikes can have lasting financial consequences.
If a site requires its maximum import capacity for occasional peaks, it becomes locked into its allocated TDR band. This means paying a large standing charge every single day of the year, even during holiday periods or maintenance windows when the warehouse is quiet.
What is far less widely understood is that reducing this agreed capacity is not straightforward. The current TDR pricing regime is now set for the next 5 years. If operators reduce their contracted grid capacity to reduce their fixed charges, their TDR charge rate will not change – unless operators reduce their capacity by more than 50%. For a large distribution centre, this makes incremental optimisation, such as trimming a few hundred kVA to drop into a lower band, effectively impossible. The result is a ‘capacity lock-in’ effect: logistics sites are charged for their peak capacity they may only use for short periods, yet are prevented from right-sizing it in a flexible or timely way.
The solution: energy storage and smart “peak shaving”
The key to protecting margins is a process known as peak shaving. Rather than relying on the grid to handle short-lived bursts of high demand, operators are increasingly turning to on-site battery storage to act as a buffer. The battery storage system monitors a site’s demand in real-time. The moment it detects a spike, the battery instantly discharges its own power. This effectively ‘shaves’ the top off a site’s grid demand, ensuring a business doesn’t stray into requiring a higher grid supply capacity, where the knock effect – at the next TDR Charge review – could mean the business crossing into a higher, more expensive TNUoS band.
In principle, this kind of real-time demand management should enable operators to safely reduce their Import Capacity and move into a lower charging band without affecting operations. However, even when technologies like battery storage demonstrably reduce the need for businesses to hold onto scarce grid supply capacity, this is not refl ected in how much the business pays for use of the transmission network.
This creates a clear mismatch: the logistics sector is being encouraged to electrify fleets and automate warehouses, while the regulatory framework makes it harder to deploy the very technologies that would ease pressure on the grid. In practice, unlocking these benefits at scale will require regulatory reform to recognise flexible, technology-driven reductions in demand. In doing so, energy costs become more predictable and easier to manage.
De-risking the transition with a fully funded solution
Now is the time to act. The next TDR charging regime begins in April 2031. The assessment of the banded charges for the 5 years following will be based on a businesses Import Capacity as of January 2029. Operators therefore have less than 2 years to evolve their energy strategy so that they are not over-contracted for grid capacity as of the end of 2028. While the operational case for battery storage is clear, the capital expenditure required to install industrial-scale storage and solar can be a barrier for many logistics businesses. High interest rates and competing investment priorities often push energy infrastructure down the list.
Rather than requiring upfront investment, Wattstor fully funds, builds, and operates onsite battery and solar assets. This means zero upfront capital investment required from the operator. In effect, Wattstor acts as a technology-driven energy partner, managing the site’s energy supply and combining grid power with onsite generation to create a single, dynamic tariff. This tariff follows the UK hourly wholesale price while offering a guaranteed discount and a fi xed price cap for up to 25 years.
The result: lower costs and guaranteed uptime
This approach delivers immediate benefits. Peak shaving reduces exposure to higher TNUoS bands, while long-term pricing provides protection against market volatility. Crucially, because Wattstor assumes both the technical and fi nancial risk of the assets, operations teams can remain focused on their core business — moving goods efficiently and maintaining throughput — while ensuring reliable power supply.
The grid is changing, and the cost of doing nothing is about to rise sharply. But without changes to current network rules, many logistics operators will remain locked into paying for unused capacity while being unable to fully deploy flexibility solutions.
At a time when grid connections are constrained and electricity demand is rising rapidly, enabling businesses to right-size their capacity would not only reduce costs, but also release capacity back to the network and support wider electrification across the sector. Logistics businesses that thrive in this next era will be the ones that stop viewing energy as an unavoidable tax and start treating it as a tool for competitive advantage.
