As the cost of living soars, businesses across the UK are facing increasing energy bills, whilst energy providers are struggling to stay afloat amidst rising energy costs.
As a net-zero consultant and business energy manager, Tariff.com has been following the energy market closely. In this blog, we’ll be examining the causes of the energy crisis and the current situation for businesses across the country. We’ll also be discussing what action is being taken to solve the crisis, as well as how the energy markets could look in the upcoming months and years.
Energy prices and supplies can be affected by a number of both domestic and international factors. In short, there’s no one thing to blame for the current energy crisis. Let’s take a closer look at some of the main factors that have contributed to higher energy prices:
In the UK, over half of the gas we use is imported. This exposes the country to fluctuations in both supply and price. Whilst gas was already in short supply, the war between Russia and Ukraine has also put on a strain on gas supplies. Only around 5% of the UK gas provision previously came from Russia. However, as the British and European gas markets are closely linked and around 30-40% of Europe’s gas comes from Russia, our gas supply and prices are still impacted by this factor.
The lack of gas storage in the UK has also negatively impacted the price and supply of gas across the country. The UK’s capacity to store gas is very low when compared to other countries. In 2017, British Gas’s owner, Centrica, closed down the Rough gas storage facility in the North Sea because of safety and economic concerns. The country now holds enough gas to meet the demand of four to five winter days. This lack of storage has left gas prices vulnerable to fluctuations and market volatility.
In the UK, around 50% of our electricity is generated in gas-fired power plants, which means that higher gas prices also push up the price of electricity bills. In later 2021, there were also a series of problems with the UK’s electricity system which also contributed to increased dependency on gas. This included unplanned outages in nuclear power plants and the closure of the main import cable from France due to a fire.
Over the course of 2021, 31 energy companies went bust as wholesale gas prices increased by over 300%. As Ofgem placed a cap on how much energy suppliers could sell gas for, companies had to set their prices lower than the wholesale prices. This caused small energy suppliers to go out of business and left consumers will little choice but to find a new energy provider.
Now that the new, higher Ofgem cap has come into effect, bills have risen across the country. A study carried out by Cornwall Insight discovered that gas prices increased significantly for small and medium-sized businesses in the first three months of 2022, in comparison to the same period last year. SMEs have faced an average gas bill increase of more than 250%.
It’s safe to say that things are looking bleak at the moment. But what is being done to resolve the issue? According to the British energy security strategy published on 7 April, here are some of the measures that are being taken to ease the energy crisis.
This scheme compensates energy intensive industries for indirect emission costs in electricity prices.
It’s estimated that heating bills could be reduced by around 20% if efficiency was improved. Many government schemes offer loans, grants or subsidised energy-saving measures to support small businesses with reducing their impact on the environment. The available grants and schemes can be found here.
In order to reduce dependency on imported fossil fuels, the Government plans to better utilise its North Sea reserve and storage. Despite this, gas consumption will still have to be reduced by over 40% by 2030 in line with the UK’s net-zero strategy.
The UK aims to be a leader in wind power, increasing both onshore and offshore wind provisions. By 2030, it is hoped that an extra 50GW of wind power will be generated on offshore wind farms, as well as up to 5GW of innovative floating wind. Onshore wind farms still remain controversial and their development depends on the approval of local communities.
Nuclear energy already supplies around 15% of our electricity. The Government aims to be a global leader in nuclear energy and plans to invest around £2 billion in new nuclear energy, including a £100 million investment in Sizewell C, and £210 million allocated towards small modular reactors.
It’s clear that the future of the energy crisis still looks uncertain. Whilst some measures have and will continue to be implemented to ensure the country’s energy future, there’s no telling when we’ll start to see energy bills reduce again.
In the meantime, it’s important that your business is saving money where it can. Reducing your gas and electricity bills at the moment will be difficult but there is still an area where you could decrease your business utility bills: water.
Did you know you could save 5-10% on your water bills by switching suppliers? If you’re looking to save your business some money during this difficult time, get in touch with Tariff.com today. Our team will take a look at your current water bills and find your business a better tariff and a better price. Contact our friendly consultants to see how much you could save.
At Tariff, we’ve made a firm commitment to helping businesses of all sizes and industries go net-zero ahead of the Government’s 2050 target. As one of the UK’s leading energy switch providers, we’re in the ideal position to prepare your business for the future.
Whether you’re uncertain of how net-zero policies will impact your business, or you’re seeking a more affordable solution for your business’ green energy needs, we’ll provide a bespoke package that covers everything from finding the right provider, to organising all the paperwork, to finalising that switch over.
Get in touch today to find out more about how Tariff can help your business begin its green journey.