Who is paying the price and what can be done long term?
You can’t do much at the moment without hearing about the skyrocketing energy costs, not only across the UK but throughout Europe and wider afield. And for good reason – alongside rapidly rising inflation, the sharp spike in energy prices is having a significant impact on the cost of living for most UK residents.
But it is not just domestic households affected by the UK’s energy crisis. The nation’s businesses – especially the 5.3 million micro-businesses that total 95% of the country’s business sector – are also facing steeper energy bills, which may pose real problems for their bottom line.
So, what is the “Energy Crisis”?
October 2021 saw the first major energy price increase with the price cap increasing by 12%. In the UK there will be a further rise in prices in April of 2022 as the price cap increases to 54%, and there is continued speculation that due to ongoing events worldwide, this could raise again by 30-50% in October of this year. From April many households will see an average increase of approximately £700 in their energy bills.
And what has caused these monumental increases? A massive rise in the cost of wholesale natural gas has had a significant impact on the UK energy market. A cold snap across Europe at the end of 2021 entering 2022, paired with ongoing global demand and supply chain issues from Russia, came together to drive costs up.
Many energy suppliers in the UK were unable to pass these increased costs to their customers as they were locked into fixed-term contracts, or were protected by the price cap. This forced these suppliers out of business. The remaining energy providers will gradually be passing this increase in costs on to their domestic customers, who could now be facing an average annual energy bill of £2,000.
Much of what we have seen, read, and experienced has been around household costs and what we can do in our own homes to help combat the price hikes, but what about UK businesses? How are organisations of different sizes affected by the surge, and what can be done to reduce costs at work?
The Impact on Businesses
Many of the ways in which UK businesses are affected by the energy price increase mirror the difficulties faced by households across the country. The long and short of it is all businesses will be paying much more for their energy than they had been previously.
The main worry for business owners and operators is that they do not benefit from the same protection as households, Namely, the energy price cap does not apply to the nation’s businesses, regardless of their size.
Business energy contracts are typically longer than their domestic counterparts, potentially lasting up to five years. So, for the moment, some businesses that have existing contracts will be shielded from rising prices.
However, there will be lots of businesses that need to renew their contacts this year, as well as others that will be on variable tariffs that are already seeing their bills increase.
What Can Businesses Do?
Ensure you are being billed correctly
This goes for both domestic and business billpayers. While you can expect higher energy bills in the coming months you should still take steps to ensure you are being billed correctly. This is especially important if your supplier is only estimating your usage, rather than basing your bill on accurate meter readings or, better yet, a smart meter.
Improve your buildings energy efficiency
A key aspect of reducing energy costs is increasing the energy efficiency of your place of business. Thankfully when it comes to increasing efficiency there is no need to reinvent the wheel, many of the energy-saving tips you implement at home can also be used in the workplace.
Simple actions like turning off electrical items overnight, switching to LED bulbs, checking your insulation, and monitoring your heating can all have a significant impact on billing.
See if you have a business energy claim
Although a business energy claim itself won’t cut your bills, it might help you find some extra money for your payments.
If you believe you were mis-sold your business energy bill by an energy broker – for example, if they were not upfront about how they were getting paid, or you were pressured to choose a specific tariff or supplier, you may have a claim. You can get more information on business energy claims here.
Check if you are eligible for any business energy grants
There are numerous different grants available that can potentially help you cover some of your business energy bills.
This can range from supplier incentives to make your business more energy efficient to government and local council schemes designed to help small businesses in general. Ofgem, the Office of Gas and Electricity Markets, have a great resource on the different grant options, find out more from them here.
Reduce your consumption
This may seem overly simple, and rather similar to increasing efficiency, but it is surprising the amounts of homes and businesses that jump to renewable energy or implement poorly structured policies as a first attempt at saving money on their bills.
The first port of call should be identifying areas you are over-consuming energy, this will give you immediate areas for saving, and a basis for introducing employee behavioural change. Drilling down deeper into what pieces of equipment are left on when not needed, or what assets require replacing in favour of more energy-efficient ones, will open businesses up to savings they didn’t realise were possible.
At Mindsett we are committed to reducing the needless waste of energy and resources with our unique asset level IoT technology. Our PRISM device, once installed, can give you detailed breakdowns of your energy consumption and identify potential savings. Mindsett PRISM has been proven to save between 15% and 55% across multiple sites on energy bills. Most clients can see a payback in just 10 months, but it’s so much more than that. Our technology helps clients to run their business in a more sustainable way, we help internal cultures by influencing positive behavioural change, and we bring the future to their businesses with the PRISM enabling predictive maintenance within a year of installation.
If you are looking to reduce costs, get time back to spend on other parts of your business, further your journey to Net Zero, and get in on the cutting edge of IoT technology, get in touch with us here.
For more useful information, and to check out the sources used in this blog click through to:
https://www.bbc.com/news/business-58090533
https://www.ofgem.gov.uk/information-consumers/energy-advice-businesses/find-business-energy-efficiency-grants-and-schemes
https://commonslibrary.parliament.uk/research-briefings/cbp-9491/
https://edition.cnn.com/2022/04/01/business/energy-prices-uk/index.html
https://www.nerdwallet.com/uk/business-energy/uk-energy-crisis-businesses/
