The UK's controlled environment agriculture sector is sounding the alarm over a devastating 94% increase in electricity network standing charges scheduled for April 2026. Without urgent government cooperation, the financial impact could trigger widespread business failures, reduce domestic production, and drive up food prices for millions of consumers.
A growing crisis for both glasshouses and vertical farms
Although current data focuses on protected horticulture, Vertical Farms (VFs) face an equally severe threat. The planned charges are based on grid pull capacity rather than actual energy usage, meaning larger, energy-intensive VFs, including major operators, could shoulder enormous additional costs. Even smaller vertical farms, which already operate on razor-thin margins, face existential challenges. These higher charges will also deter investment in new VFs, as reduced margins increase risk and weaken the business case for growth.
Sector excluded From Energy Intensive Industries (EII) relief
Part of the problem is the sector's exclusion from the Energy Intensive Industries (EII) exemption scheme, a policy oversight rooted in outdated Standard Industrial Classification (SIC) codes. Despite operating with energy demands comparable to many manufacturing sectors that already receive a 90% discount, vertical farming remains ineligible for this critical relief. Updating eligibility would provide essential support, although continued cost increases mean many businesses would still struggle even if relief were granted.
UK growers at a competitive disadvantage
UK energy prices remain the highest in Europe, leaving domestic growers, both horizontal and vertical, at a clear disadvantage compared with peers in countries such as the Netherlands and Belgium. Industrial electricity prices currently stand at £56/MWh in the UK, compared with £34–£38/MWh in major EU horticultural nations.
Expected financial shock
For some large glasshouse businesses, the planned 94% increase in standing charges could add almost £1 million to annual operating costs. Vertical farms, which often require high-capacity grid connection infrastructure for lighting and HVAC systems, face similarly unsustainable increases. Growers across the sector supply essential year-round crops, including tomatoes, cucumbers, peppers, and vertically farmed leafy greens, herbs, and soft fruits. With margins already squeezed, very few businesses can absorb a hit of this scale.
"For the Controlled Environment Agriculture sector including businesses like ours, a near-doubling of standing charges is simply not absorbable. Without urgent inclusion of horticulture in the Energy Intensive Industries exemption scheme, we risk undermining domestic food production at the very moment it is most needed. Rising energy costs will push growers out of production and increase costs for consumers," commented Dr Paul Myers, Managing Director, Farm Urban, and Non-Exec Director, UKUAT.
Energy intensity overlooked
The exclusion from EII relief is not driven by actual energy usage, but by administrative technicalities. Outdated SIC codes prevent eligibility, even though the sector's energy use ranks mid-table among industries that already receive EII discounts. The Government has previously recognised the energy-intensive nature of the sector by including vertical farming and controlled environment agriculture in the Industrial Energy Transformation Fund in 2023.
A pillar of the UK economy and energy grid
The value of home-produced tomatoes, cucumbers, and peppers exceeds £250 million and supports more than 3,000 jobs. The sector also plays a vital role in national energy infrastructure. Many sites operate Combined Heat and Power (CHP) systems, acting as embedded generators that export electricity to the grid rather than functioning solely as net importers. This local generation strengthens grid resilience, reduces transmission losses, and supports the UK's Net Zero ambitions.
Consequences for consumers and the economy
Without swift action, the impact will extend far beyond growers. Higher production costs are likely to feed through to consumers, compounding existing pressures from the cost-of-living crisis. Unviable energy costs will reduce the competitiveness of UK growers, increasing the risk of business failures and discouraging future investment in production and innovation. Domestic food resilience would be weakened as growing capacity shrinks, increasing reliance on imports. At the same time, innovation could stall, slowing progress toward more sustainable, low-carbon food systems.
A lifeline for growers
Industry bodies across the sector are calling for a straightforward, common-sense solution: update the eligibility rules for the Energy Intensive Industries exemption scheme to include controlled environment agriculture, protected horticulture, and vertical farming. The energy intensity of the sector is clear, the precedent has already been set, and the consequences of inaction will be felt throughout the UK food system.
"Without urgent action, UK food production is at risk, and consumers will continue to feel the impact at the tills," said the British Tomato Growers Association & Cucumber and Pepper Growers Association.
For more information:
UK Urban AgriTech
Email: [email protected]
www.ukuat.org
