The Covid-19 pandemic brought about the virtual shutdown of the global marketplace, causing oil and gas prices to plummet as economies wound down and people stayed at home.
However, once the crisis faded and things returned to normal, there was suddenly a great demand for energy resources and prices began to skyrocket. The Russian invasion of Ukraine added further disruption to already stretched supply chains, and energy prices in Europe accelerated to unprecedented and (for many) unmanageable levels.
To protect both domestic and commercial energy customers the UK Government intervened as it had never done before, making £34 billion available to help households and businesses through the worst of it.
Thankfully, most energy experts believe that prices have peaked and will start to fall in the second half of 2023. In response, the UK Government is gradually withdrawing its support for both domestic and non-domestic energy customers, in the belief that billpayers can manage on their own.
But even as energy costs come down, they are likely to remain much higher than they were before the pandemic.
So what does the future hold for energy prices and what can your business or organisation do to protect yourself from high energy costs in the future?
Are high energy prices here to stay?
Whilst energy costs are expected to come down from July 2023, it is unlikely that they will reach the levels experienced before the pandemic and the war in Ukraine.
Anders Opedal, the CEO of Norway’s state oil company Equinor, has warned that high gas and electricity prices are here to stay and that consumers should not expect them to return to the levels seen before Russia’s invasion of Ukraine.
Tom Edwards, a Senior Modeller at Cornwall Insight (the leading consultant on energy markets) said:
“While prices will reduce, our modelling shows that pre-2021 prices are not making a comeback this decade and likely beyond.”
A key reason that electricity prices will remain high is due to the antiquated way that the UK energy market operates, where electricity prices are determined by gas prices.
As long as global demand for gas remains high (which it will as countries like China and India continue to grow their economies) then gas prices will remain high, and so will electricity prices.
Some businesses in Sussex have already been forced to close as a result of high energy costs, such as Paradox Place in Brighton.
Unlike in the domestic energy market, commercial energy tariffs are not protected by an energy price cap that is set by the industry regulator Ofgem.
This means that businesses are very exposed to shocks in the price of gas, which can be caused by an especially cold winter (e.g. the ‘Beast from the East’), another pandemic, or disruptions to supply chains caused by conflicts or trade wars.
This is why it is so important for businesses to take action to reduce the amount of heat and power their operations need, and to generate their own on-site renewable energy wherever possible.
How can your business future-proof itself against increasing energy prices?
Until the UK energy market is reformed, businesses will remain exposed to volatile international energy markets.
Therefore the best course of action to insure your business against a spike in prices is to introduce a modern energy strategy which improves the efficiency of your property and maximises the potential for renewable energy generation.
By adding efficiency improvements such as insulation and LED lighting you can drive down the amount of energy that is required to meet your heat and power needs. Not only will this help to reduce ongoing costs, but in most cases will achieve greater levels of comfort and satisfaction for both customers and staff.
You may wish to introduce modern smart technologies such as power-down plugs, motion sensor lighting, and remote heating controls in order to better manage your heat and power usage. Combining such technologies with a smart meter can give you access to data insights which inform your long-term energy strategy, providing a detailed understanding of the energy demands of your building and your business.
If your property is well insulated with a high degree of thermal efficiency then it could be worth considering replacing your existing gas-powered heating system with a heat pump. Grants are available to support the installation of heat pumps, which can be cheaper to run than gas-boilers over the long-term.
The most effective way to protect yourself from global prices shocks is to start generating your own on-site renewable energy. If your business can generate its own electricity through ground-mounted or roof-mounted solar panels for example, then you will cut down on the amount of energy you need to purchase from your energy supplier. Not only will this result in a significant reduction in annual energy costs, but you will also be taking action to significantly reduce your carbon emissions, something which is of increasing important to customers and employees alike.
How can BHESCo help your business reduce energy costs?
BHESCo was established with the goal of helping businesses like yours reduce their long-term energy costs and carbon emissions.
BHESCo is a highly experienced energy consultancy which can design, finance, and project manage the installation of low-carbon energy measures on your behalf.
Following an on-site survey of your property, our Energy Saving Team will produce a bespoke energy strategy designed to reduce heat and power consumption and maximise renewable energy potential.
Where appropriate, BHESCo can finance the upfront cost of your energy improvements through our innovative ‘Pay As You Save’ initiative. The capital expenditure is covered by the members of our co-operative who want to use their money to tackle climate change.
Case Study
In 2019 BHESCo delivered a project to install 99kWp of rooftop solar PV at Brunswick Primary School.
In the year following the project installation the school saved £5,759 on energy bills.
The cost is then paid back to BHESCo and its members over an agreed number of years using a portion of the savings achieved from your business’ monthly energy bills. In this way there is no upfront cost to you, meaning that your business starts to enjoy savings immediately.
If you have any questions or want to find out more, please provide your details using the contact form below and a member of our Energy Saving Team will get back to you soon.
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