Why have energy costs increased for UK businesses?
Even before the Russian invasion of Ukraine and its implications for oil and gas prices, the meteoric rise in UK energy costs was dominating the national media.
A gigantic rise in energy wholesale costs led to the collapse of 28 energy companies in 2021, prompting the surviving energy suppliers to significantly increase their tariffs in order to stay in business and manage the shared industry cost of these failures.
Domestic energy customers are offered some protection by an energy price cap which is set by the industry regulator Ofgem. The price cap sets a maximum cost that energy companies can charge their customers who are on their standard variable tariff.
Unfortunately for business owners, there is no such price cap in place for commercial energy tariffs. This means that there is no upper limit to the rates that can be set by energy companies for their commercial tariffs.
A business which is still under a fixed term contract will be insulated from these price increases for the duration of their contract. However, once the fixed term ends business owners will be faced with a shocking rise in costs when they come to negotiate a new contract. Research shows that since August 2021, out of contract rates have increased by an average of 100%.
What this means is that small business owners must accept that their energy costs are going to increase dramatically, regardless of which supplier they are with or how much they try to shop around for the cheapest deal.
Some smaller companies may have to increase the price of their goods or services in order to absorb the higher operating costs brought on by the energy price spike. This creates a greater difference in cost between SMEs and some larger multi-nationals who can ride out the storm, adding further pressures on UK small businesses.
Energy is an unavoidable and essential cost involved with running any business, and unless a well-planned long-term energy strategy is implemented, the current increase in rates could force some SMEs into insolvency.
What Government support is available to help Sussex business owners with energy costs?
If Brighton & Hove business owners had hoped for a lifeline from the Chancellor in his Spring Statement they would have been sorely disappointed.
Armed with the knowledge that both residential and commercial energy customers were facing an unheard of hike in energy costs, the UK Treasury proposed a series of small measures that offer little relief to the millions in fear of spiralling energy debts.
For households, a £150 tax rebate and a £200 loan were the only solutions on offer.
For business owners, aside from some minor changes to business rates, the Government has presented no new support whatsoever.
With no cheaper tariffs on offer and no Government schemes to protect business, the only solution is to take action to improve the energy performance of business premises, and to start generating on-site renewable energy wherever possible.
Reducing costs by improving the energy performance of business premises
The best way for any business to insulate themselves from volatile global energy markets is to introduce energy saving measures to reduce energy demand, and to meet as much of the remaining demand as possible with their own on-site renewable energy generation.
Improving the energy efficiency of business premises is a relatively simple and long-lasting exercise which will not only help to drive down ongoing energy costs for decades but will simultaneously deliver improved warmth and comfort for staff and customers.
Typical energy efficiency improvements that can be implemented in most properties are the introduction of low energy lighting (eg LEDs), maximising loft and wall insulation, ensuring all windows are double or triple glazed, and installing more sophisticated monitoring and control technologies.
Alongside the greater rollout of renewable energy technologies like solar PV and onshore wind power, improving energy efficiency is widely considered to be the most effective route to keeping energy costs down and meeting the UK’s net zero carbon commitments.
Securing long-term affordability with on-site renewable energy technologies
Once all efforts have been made to reduce the amount of energy needed to heat and power your business premises, you may wish to consider introducing micro-renewable energy generation options such as solar PV panels, air source heating, or energy storage technology.
The best renewable energy option will depend on the individual circumstances of your premises, with location, property type, and lease terms all having a big influence.
Most renewable energy technologies such as solar panels and air source heat pumps have an operational lifespan of greater than 20 years, meaning the investment you make today will deliver rewards for literally decades to come.
BHESCo have worked with dozens of small businesses to finance and install energy saving and renewable energy technologies and we would love to partner with your business to help alleviate the pressures being felt because of the energy crisis.
Case Study - Junction Studios, Brighton
How can small business owners pay for the upfront cost of energy saving or renewable energy technology?
Thankfully for small business owners, there are a number of support mechanisms already available to support the development of energy efficiency and renewable energy projects.
You can find both local and national schemes by searching on the Government’s ‘Finance and support for your business’ webpage, which details over a dozen energy efficiency and low-carbon energy grant schemes.
In addition to the grants and loans available from Government and other bodies, small business owners in Sussex may wish to take advantage of BHESCo’s ‘Pay as You Save’ finance initiative.
BHESCo can design, finance and install energy saving and renewable energy technologies on behalf of our customers using money that has been invested by our co-operative members.
This means that for no upfront cost your small business will receive a brand new bespoke low-carbon energy system that will start delivering immediate cost savings.
Under the terms of a lease agreement, a portion of the monthly savings achieved on your energy bill goes towards paying BHESCo back for the upfront cost of your energy equipment.
After an agreed number of years, the total upfront cost is repaid and ownership of the energy saving and renewable energy system passes to your business.
In this way, through our ‘Pay As You Save’ financing, BHESCo makes the transition to low-carbon energy accessible to everyone.
If you are interested in working with BHESCo to revolutionise the way that your business pays for it’s heat and power then please provide your details in the form below and a member of our Projects Team will get back to you to discuss next steps.
Project Contact Form