Soaring Energy Costs Threaten UK’s EV Progress, ChargeUK Warns

The UK’s electric vehicle transition is facing a critical challenge from “prohibitively high” energy costs, which have seen some bills for public charge point operators (CPOs) skyrocket by over 460% since 2021. That’s the stark warning from a new white paper released today by ChargeUK, the trade body representing the nation’s EV charging industry.

The report, titled ‘Delivering Affordable Charging for All’, reveals that a perfect storm of persistently high wholesale electricity prices, punitive network charging reforms, and a controversial ‘pavement tax’ on VAT has driven the average cost of public charging up by 38% in just four years.

Now, the industry is calling on the government to implement an urgent three-point plan to tackle these underlying costs, warning that without intervention, the affordability of charging could become a significant barrier to the UK meeting its 2030 phase-out target for new petrol and diesel cars.

The UK has made remarkable progress in its shift to electric mobility. One in four new cars sold in August was fully electric, and the public charging network has expanded to over 85,000 charge points, growing by around 30% a year. However, this success story is under threat.

Vicky Read, CEO of ChargeUK, warned of the consequences of inaction. “If the Government wishes to ensure that cost of charging does not become a barrier to millions more drivers switching to EVs, it needs to take action – to tackle sky-high energy costs, to address the VAT penalty and to introduce EV charging to its existing renewable fuel credit scheme,” she said.

“The EV transition is well underway… But the public charging sector has been hit by a series of policy and regulatory decisions that have caused our own costs to soar, with an unavoidable impact on some driver prices.”

The Anatomy of a Price Rise

Drawing on independent analysis by industry experts Cornwall Insight, the ChargeUK report dissects the mounting cost pressures faced by the companies investing £6 billion to build the UK’s charging backbone. While many drivers with home charging benefit from low off-peak electricity tariffs, those reliant on the public network have felt the pinch. The analysis identifies three core drivers behind the price increases.

First, wholesale electricity prices remain stubbornly high. Despite falling from the peaks seen during the energy crisis, they are still approximately 66% above pre-2021 levels, and are forecast to remain elevated for the rest of the decade.

Second, and more uniquely damaging for the charging sector, was Ofgem’s Targeted Charging Review (TCR) in 2023. This regulatory change altered how network charges – the cost of using the grid’s poles and wires – are calculated. It shifted the emphasis from how much electricity a site uses to the maximum capacity of its grid connection.

This has disproportionately penalised CPOs, who must ‘build ahead of demand’ by installing high-capacity connections to future-proof their sites, even if utilisation is low today. The result has been a staggering 462% increase in standing charges for rapid and ultra-rapid sites since 2021/22, and a 389% increase for slow and fast chargers. For some rapid CPOs, these fixed standing charges now make up an incredible 70% of their total energy bill, compared to just 15% for a comparable industrial business. At a typical rapid charging site, these charges alone can add 20-30p/kWh to the operator's costs before a single electron of wholesale electricity is purchased.

The third major factor is the burden of government policy levies, including the Climate Change Levy, which are applied to every unit of electricity. These currently add around 6p/kWh to CPOs' bills. The report highlights the irony that a sector central to decarbonising transport is paying a levy designed to discourage energy use, while other energy-intensive industries receive exemptions.

The Pavement Tax on Drivers

Compounding these business costs is the much-criticised disparity in VAT. While home charging is subject to a 5% VAT rate, using a public charger incurs the full 20% rate. This “pavement tax” unfairly penalises the one in three UK households without access to off-street parking.

This 15% difference adds approximately 9.5p/kWh to the cost of using a rapid charger and 6.75p/kWh at a slower unit. According to analysis by Zapmap, equalising the VAT rate would save a driver reliant on public charging an average of £145 per year.

Jacob Briggs, a senior consultant at Cornwall Insight who led the analysis, said: “The UK’s charging network is a real success story… But our analysis shows that the increase in average public charging prices is a challenge that could slow progress towards an EV-driven future. High energy prices, rising network charges and the higher rate of VAT on public charging ultimately means that drivers are paying the price.”

The report shows a clear correlation between rising operator costs and what drivers pay at the charger. In fact, the financial pressure is so intense that some charging sites are currently loss-making, with underlying costs up to 60% higher than the price paid by the driver, demonstrating the limited ability for operators to absorb these hikes.

A Three-Point Plan for Affordability

In response, ChargeUK has put forward a three-pronged strategy for government and regulators, designed to tackle these structural costs at their source.

1. Tackle Prohibitive Energy Costs: The primary call is to accelerate regulatory reforms already under consideration (known as DCP420/454) to provide urgent relief from the crippling standing charges caused by the TCR. The group also wants policy levy exemptions extended to the charging sector, recognising its strategic importance.
2. Boost the Charging Business Case: ChargeUK is urging the government to include EV charging in the Renewable Transport Fuel Obligation (RTFO) scheme. The RTFO is a market-based mechanism that incentivises the supply of renewable fuels, but currently excludes renewable electricity. Its inclusion, which is common practice in the EU and USA, could generate an additional 2.5p to 8.5p/kWh in revenue for operators at no cost to the taxpayer, helping to fund network expansion and keep consumer prices competitive.
3. Eliminate the VAT Penalty: The final, and most direct, measure would be to reduce VAT on public charging to 5%, matching the rate for home charging. This would provide an immediate and tangible saving for millions of drivers and remove a key barrier to EV adoption.

Vicky Read concluded: “The Government has already recognised that affordability is key to this EV transition, and has taken action, launching the Electric Car Grant. We now need ministers to focus on addressing the business costs impacting affordability of charging, so that we create the best possible conditions for drivers to make the switch.”