Energy Costs — how to deal with the relentless rise in prices
Businesses and domestic users across the UK have seen energy prices rise significantly in recent years. Energy bills increased by a record 54% in April with another major spike in October, followed again by another in January 2023.
The unprecedent rise in energy prices is due to a combination of factors, mainly relating to international markets. The war in Ukraine, increased post-Covid demand for fossil fuels and a slow recovery in the refineries industries are some of the factors that have forced energy prices up to unprecedented levels.
Unlike residential users, businesses on commercial energy tariffs are not protected by Ofgem’s price cap, meaning tariff prices are more vulnerable to rising global energy prices.
A poll conducted by Tyl by Natwest indicates that nearly two thirds of businesses in the UK spend between 5% and 20% of their total business costs on energy. For businesses, dealing with rising prices is a balancing act — whether to accept smaller profit margins or pass the extra costs on to customers. Around 70% of SMEs believe that the cost of their energy bill reduces business growth.
The Tyl survey also shows that the rise in prices is encouraging as many businesses are taking the lead on energy efficiency to deliver real cost-savings. Around 72% of small business owners are currently taking action by adopting energy efficiency measures within the workplace. A separate study by Centrica found that around half (52%) of all businesses surveyed are implementing energy efficiency measures.
Energy saving is an investment in future proofing businesses against rising fuel costs. A separate study by Centrica Business Solutions, found that over 50% of all businesses surveyed are implementing energy efficiency measures.
Energy-saving solutions There are three basic ways businesses can improve energy efficiency in building stock.
Manage and control energy-using equipment — improving functionality and efficiency is best maintained through routine maintenance.
Use heating systems, appliances and lighting effectively — low energy appliances, thermostats and timers allow better controls during times of occupancy.
Retrofits buildings — often referred to as “fabric first” is about improving building envelope performance through better insulation in walls, roofs, windows and floors.
This guide covers a number of simple low-cost ways to improve business energy efficiency.
Know your EPC Emissions from buildings account for around 34% of total UK greenhouse gas emissions, of which commercial buildings account for about one third. The first task for most businesses seeking to reduce energy costs is deciding where to start and what energy efficiency measures to prioritise to deliver the best results.
An Energy Performance Certificate (EPC) contains information about the energy efficiency of a building, based on minimum energy efficiency standards (MEES). Certificates are graded on a rating scale of A–G — with A being the most efficient and G being least efficient, depending on factors such as the insulating properties of fabric used in construction, the efficiency of heating, ventilation and air conditioning systems (HVAC), and lighting.
The benefit of an EPC and the rating system is that it provides information on the energy performance of commercial buildings and makes recommendations on how to improve energy efficiency. The measure of energy performance of a building relates directly to the amount of carbon dioxide (CO2) produced, based on a standard index, which further illustrates how energy savings reduces greenhouse gases (GHGs) .
All commercial properties will be required to achieve an EPC rating of at least B by 2030. A more recent consultation proposes an interim target of C rating by 2025 may be required. Some industrial sites, workshops and agricultural buildings do not require an EPC, but office premises do.
Staff awareness Energy awareness is integral to improving efficiency in the workplace and staff are often better placed to know what measures might work best. There are several tried and tested ways of engaging staff in energy efficiency including, for example:
assembling an energy team or assigning responsibilities to key employees
setting objectives to allow departments to take ownership of reducing energy use
running an awareness campaign, including posters and promotional material
organising incentives such as staff bonuses as a percentage of money saved from reducing energy use.
Knowing how your organisation currently uses energy should underpin any campaign. The Carbon Trust’s “Creating an awareness campaign” offers a comprehensive guide to running a successful energy efficiency programme — details are available here.
No cost options There are various no cost options to consider.
Check your energy tariff — are there cheaper rates?
Check meter readings regularly to assess energy performance in key areas or at certain times to identify opportunities for improvement.
Switch off lights and all office equipment when not in use — standby mode still uses energy.
Most electrical appliances have an “eco” mode which helps reduce energy use.
On the factory floor, switch off motors during breaks and optimise air pressure equipment, including checks for leakage.
Check timers are set appropriately.
Improve heating efficiency by:
having reflectors fitted behind radiators reflect heat back in the room; always turn off radiators in unoccupied rooms
setting thermostats to appropriate temperatures
ensuring timers are set correctly
servicing boilers regularly to run efficiently and reduce running costs.
Improve cooling efficiency by:
regularly defrosting fridges and freezers to reduce energy loss
ensuring ventilation systems are working efficiently
reducing drafts — particularly around doors and windows.
Smart meters Smart electricity and gas meters help businesses cut their bills. Smart meters give live readings and comparisons which show instantly how much energy is being used. This can help operators to identify peak use times and allows businesses to take advantage of cheaper rates for off-peak usage.
Readings are also automatically sent to the supplier, which means bills should always be accurate and not based on estimates. There are also numerous smart meter apps that can both record energy performance and allow users to reset thermostats, etc.
Other meters, such as half hourly meters, record how much energy is used every 30 minutes, which is useful for analysing energy-use patterns, whilst sub meters allow businesses to monitor specific areas or processes.
Investing in energy efficiency Investing in energy efficiency can save money and reduce emissions.
Lighting — inefficient lighting is a major contributor to a low score on EPC ratings, partly because offices, shops and other commercial buildings often compliment poor quality natural light with more electrical lighting. According to some estimates, converting existing lighting to LED lighting systems can save up to 50% on your lighting costs.
Insulation — poor quality insulation reduces EPC ratings significantly. U-Value calculations are used to quantify the amount of heat that is transferred and lost through walls, floors and roofs. A low U-Value means less heat is lost and energy efficiency is improved. Well-insulated walls and loft spaces will reduce heating bills and improve working conditions.
Double glazing — windows often take up around 20% or more of building’s fabric and are a major source of heat loss. Double glazing has a much lower U-Value than standard single panes and can be even more effective when replaced with low emissivity glass filled with Argon gas — reducing the amount of energy lost by up to 75% according to some estimates.
Businesses may also want to consider investing in more energy efficient appliances for the office, canteen and workshops. Energy labels which were introduced in the ‘90s to make people aware of how efficient an appliance was. Those labels were replaced in 2021 with a more accurate A to G rating system that better reflects energy performance of most electrical appliances. Details are available here.
Managing energy efficiency The low-cost options described above will help to reduce energy costs but setting priorities and monitoring performance requires a more systematic approach. Energy management systems take account of every functional aspect of energy use in a building and provides quantifiable performance improvements that support sustainable solutions in the long term.
The international standard ISO 50001 can help achieve energy use reduction in a systematic way by providing a clear picture of current energy consumption against which objectives and targets can be set, monitored and achieved.
A guide to ISO 5001 energy management systems, how to conduct energy audits, set objectives and targets, establish monitoring programmes and prioritise action is available here.
For businesses that want to focus mainly on building energy performance, a Building Energy Management System (BEMS) may be more appropriate. BEMS are used to monitor and control a wide range of power systems and lighting. The UK Building Research Establishment (BRE) provides a number of best practice guidance for energy management in buildings.
A word about renewables and funding… The UK is one of the world’s leaders in the production of green energy, driven largely by renewables and mainly wind and solar power. Renewables’ share of total generation was over 45% in the first quarter of this year and a major contribution to reducing carbon emissions.
Renewable energy is undoubtedly the best way to reduce emissions, but it doesn’t reduce energy consumption and isn’t a substitute for energy efficiency. The Government recently cut its funding support of the Renewable Heat Incentive (RHI) and other renewables options and there are very few government-funded energy efficiency schemes for businesses. Ofgem does, however, provide a list of business energy efficiency grants and schemes, available here.
Summary Using energy more efficiently is one of the easiest, most cost-effective ways for businesses to save money, minimise greenhouse gas emissions and reduce growing energy demand.
The “feel good factor” is that when companies invest in improving the energy efficiency they also contribute to a more sustainable low-cost, low-carbon future that reduces the risk of catastrophic climate change.
Contact Ashored for more information and support on Energy Costs.
