UK businesses are facing extremely challenging times at the moment. A fragile economy, increasing National Insurance contributions and other inflationary pressures are making it difficult to balance the books. Adding to the situation is the ongoing problem with rising energy prices, a cost many businesses rank as their second largest expense after wages.
We talk to Khaled Osman, Head of Sales and Service at My Energy Consultants on why developing a long-term strategy can help businesses reduce their energy costs.
Why are energy prices high?
High energy prices can be attributed to a number of factors including geo political forces outside of the UK.
The ongoing conflict in Ukraine and unrest in the Middle East have created vulnerability in energy supply chains to drive up gas prices. Meanwhile maintenance on Norwegian gas infrastructure, along with required investments in the UK network have added to the fragility in supply.
The lack of output from renewable energy sources has also played a part with repeated droughts across Europe diminishing hydroelectric output while low winds in the UK have increased our reliance on gas reserves. One last factor that is driving up prices is the competition across the globe with demand for Liquefied natural gas (LNG) growing in emerging markets such as Asia.
Will energy prices drop in the UK?
While we have limited control over how external forces impact energy costs, proposed moves in the UK toward decarbonisation will help to shield us from volatile fossil fuel prices. By 2027, the UK aims to introduce a new import carbon pricing mechanism that will support the drive for decarbonisation and encourage businesses to pursue carbon-neutral energy sources.
However, the cost reductions may not be seen for some time in our energy bills. Following guidance from the government, GB Energy is focussing its efforts on wind farms. This presents a couple of problems. First, a wind farm will take between four to eight years to complete but it also raises concerns about relying heavily on one renewable energy source. If, as we have recently experienced, we have extended periods of low wind, the UK will need to revert to other forms of energy.
There is also an issue with the current level of renewable energy and how it will expand. The emphasis on decarbonisation is expected to raise the costs of grid balancing. This shift will move supply away from large centralised carbon-based generation, towards smaller, more widespread, and intermittent renewable sources. The expenses associated with maintaining a stable frequency on the power grid will consequently rise.
How can businesses minimise energy costs?
While the global energy market remains uncertain and reliance on UK renewable energy takes time to implement, are there ways for businesses to control their costs? Of course, but you need to review your current provision and then put a clear energy strategy in place to reduce the bills.
The first step is to review your energy usage and bills. Energy purchasing should be seen as a continual process enabling businesses to review the market. Never wait until your renewal date to sign up to a new energy policy, instead review the markets and look to secure contracts at optimal times. At the same time, your contract terms need customising to meet your business’s needs, rather than focusing solely on prices. Businesses should also implement an energy management process that identifies areas of waste, for example heating unused rooms or identifying areas that have issues with humidity, Finally, check your bill carefully. It’s estimated that one in five energy bills contains errors, and each one can add significantly to overall costs. If, like a lot of businesses, you juggle many meter points or find utility bills complex to read, then work with an energy partner who can provide a bill checking service.
Once the bills are in order, you should also consider the feasibility of implementing onsite renewables. Solar and wind on-site renewable energy sources are the most effective solution if a business has the capacity and set-up. Not only does it demonstrate a clear commitment to sustainability, but it can significantly reduce energy overheads.
However, to maximise the gain, you need to implement an effective solution that meets demand. For example, a battery energy storage system (BESS) can store energy for discharge when needed. Be aware, to ensure you maximise your return when opting for renewable energy with a BESS, you may need to look at whether a grid connection can be made at a commercially viable cost. This will become increasingly important as the share of renewables in the UK’s power generation mix rises.
How can an energy consultant help your business?
Before making any changes to your energy requirements, it is always advisable to consult with experienced professionals. Companies like My Energy Consultants can evaluate the best approach and ensure the shortest return on investment.
An energy consultant will help you to put a long-term strategy in place, reduce wastage, find the best energy deals and then continue to monitor the market to ensure you don’t overpay. Some, like My Energy Consultants, also provide a bill-checking service that reviews commercial energy bills against over 120 variables. We can also identify discrepancies over the past six years, regardless of the supplier, to ensure you have not overpaid and handle any refunds you are entitled to.
Lastly, in a constantly shifting market, energy consultants can help you improve your energy infrastructure and discuss whether renewables will benefit your business. They can also check you are meeting your energy compliance obligations to avoid financial penalties.
If you need help with managing your business energy requirements why not get in touch with My Energy Consultants by emailing us at info@myenergyconsultants.co.uk or visiting our website at www.myenergyconsultants.co.uk
