How Businesses Can Adapt to Rising Energy Costs

John Thompson is a seasoned energy consultant with a deep commitment to environmental sustainability.

With an Oxford education and over 15 years in the industry, John’s expertise lies in simplifying complex energy concepts to help businesses reduce consumption and save money.

An avid hiker and bird-watcher, John brings his passion for the outdoors into his work.

In recent years, the UK has experienced a significant increase in energy costs, posing challenges for businesses across various sectors. These rising energy costs can have a profound impact on a company’s bottom line, reducing profit margins and potentially creating competitive disadvantages. 

Therefore, it becomes crucial for businesses to adapt and implement strategies to mitigate the effects of these rising costs. This article aims to provide practical advice and actionable tips for businesses in the UK on how to navigate and adapt to the challenges posed by increasing energy costs.

In this guide

• Understanding the Factors Driving Rising Energy Costs
• Conducting an Energy Audit
• Implementing Energy-Efficient Technologies and Practices
• Employee Engagement and Energy Conservation Programs
• Exploring Renewable Energy Options
• Negotiating Energy Supply Contracts and Tariffs
• Monitoring and Tracking Energy Consumption

• Collaboration and Partnerships for Energy Efficiency

Understanding the Factors Driving Rising Energy Costs

Several factors contribute to the upward trajectory of energy costs in the UK. It is essential for businesses to comprehend these factors to effectively address the challenges they pose. The primary drivers of rising energy costs include:

• Increasing energy consumption in rapidly developing countries: As nations with large populations like China and India continue to industrialise and urbanise, their demand for energy rises. While these nations already have substantial economic influence, their ongoing development and modernisation processes lead to a surge in energy demand, subsequently affecting global energy supplies and prices.
• Fluctuating fuel prices: The cost of fossil fuels, such as oil and natural gas, is subject to significant volatility. This is influenced by a range of factors, including geopolitical events, supply and demand dynamics, and climate-related disruptions. For instance, in 2020, the onset of the COVID-19 pandemic caused oil prices to temporarily dip into negative territory due to a sharp drop in demand. On the other hand, production cuts by OPEC and its allies can lead to a surge in prices. These fluctuations can have a direct impact on energy costs for businesses.
• Energy market regulation and policies: Changes in energy market regulations and government policies can have a significant influence on the cost of energy for businesses. For example, policies aimed at reducing carbon emissions, such as the UK’s Carbon Price Support (CPS) rate, can increase the cost of fossil fuel-based energy. In addition, the introduction of the EU Emissions Trading System (EU ETS) has led to increased costs for businesses that exceed their carbon emissions allowances. The UK has also introduced its own Emissions Trading Scheme (UK ETS) following its departure from the EU, which can impact energy costs.

These factors have a direct impact on businesses, resulting in increased operational expenses, reduced profit margins, and potentially placing them at a competitive disadvantage. Understanding these drivers can help businesses strategise more effectively to mitigate the impacts of rising energy costs.

Conducting an Energy Audit

Conducting an energy audit is a pivotal first step before implementing any energy-saving measures. An energy audit provides a thorough analysis of a company’s energy use, highlighting areas of wastage and identifying opportunities for savings. Below are the steps that businesses should follow to conduct a successful energy audit:

Gather and Analyse Data: The first step in conducting an energy audit is data collection. Businesses should gather data from utility bills, metre readings, and equipment specifications. This data should then be analysed to get a clearer picture of how, when, and where energy is used in the business. Businesses should focus on establishing a baseline energy use and identifying any obvious areas of wastage or inefficiency.

Conduct an Energy Walkthrough: After gathering and analysing data, the next step is to physically inspect the site. This involves walking through the business premises, looking at all the key energy-using areas, including HVAC systems, lighting, office equipment, machinery, and building envelope (walls, windows, roofs, and other elements that separate the interior of the building from the exterior). The purpose of this walkthrough is to understand the condition and operating characteristics of these systems, to identify any noticeable inefficiencies, and to generate a list of potential energy efficiency opportunities.

Identify Opportunities for Improvement: Once the energy walkthrough has been completed, the next step is to identify potential energy-saving opportunities. This could include anything from upgrading to more energy-efficient lighting or machinery, improving insulation, fixing leaks, modifying employee behaviour, to redesigning processes to be more energy-efficient.

Quantify Potential Energy Savings: The next step is to quantify the potential energy savings for each identified opportunity. This involves calculating the difference between the energy currently used and the energy that would be used after implementing the proposed efficiency measure. Businesses should also calculate the payback period, which is the amount of time it will take for the energy savings to cover the cost of implementing the energy-saving measure.

Develop an Action Plan: Based on the findings from the energy audit, businesses should develop an energy management action plan. This plan should outline the energy-saving measures to be implemented, the estimated cost and savings, and the timeline for implementation.

Implement, Monitor and Verify: After the action plan has been developed, the energy-saving measures should be implemented. After implementation, businesses should continue to monitor and verify their energy consumption to ensure the energy-saving measures are delivering the expected savings.

By following these steps, businesses can conduct a comprehensive energy audit that will provide valuable insights into their energy consumption and provide a roadmap for achieving significant energy savings.

Implementing Energy-Efficient Technologies and Practices

To adapt to rising energy costs, businesses should consider adopting energy-efficient technologies and practices. These can significantly reduce energy consumption, saving money and enhancing sustainability.

Upgrading to Energy-Efficient Lighting Systems: Lighting can account for a significant portion of energy consumption in businesses. Consider switching from traditional incandescent or fluorescent bulbs to Light Emitting Diodes (LEDs) or Compact Fluorescent Lamps (CFLs). LEDs, for instance, use up to 75% less energy than incandescent lighting and last 25 times longer. Additionally, integrating control systems like motion sensors, daylight sensors, or timers can optimise lighting usage, turning lights off or dimming them when they’re not needed.

Investing in Energy-Efficient Appliances and Equipment: Old, inefficient machinery and appliances can be a major source of energy wastage. When equipment needs replacing, opt for energy-efficient models. Look for certifications such as the Energy Star label, which signifies the appliance is in the top 25% of energy-efficient products in its category. While these products may be more expensive initially, the energy savings they offer often make them more cost-effective in the long run.

Optimising Heating, Ventilation, and Air Conditioning (HVAC) Systems: HVAC systems can be one of the largest energy consumers in businesses. Ensure these systems are regularly maintained and tuned for optimal performance. Replacing old HVAC systems with high-efficiency models, adding insulation to reduce heat loss, installing programmable thermostats to adjust temperature settings based on occupancy and time of day, and zoning heating and cooling (which involves controlling temperature independently in different building areas) can all lead to substantial energy savings.

Implementing Smart Energy Management Systems: Smart energy management systems leverage technology to provide real-time monitoring and control over a business’s energy usage. For example, these systems can provide data on the energy consumption of individual appliances, identify patterns of energy waste, and even automate energy-saving measures. They can also generate alerts for abnormal energy use, which might signify a problem with a piece of equipment.

Improving Building Insulation: Proper insulation reduces the need for heating and cooling by decreasing the amount of heat that escapes during winter and enters during summer. Assess the quality of the building’s current insulation and consider upgrades if necessary.

Transitioning to Green Computing: IT infrastructure can consume a considerable amount of energy. Strategies for green computing include server consolidation, improved data centre layout design, energy-efficient servers, cloud computing, and power management features on desktop computers.

By integrating these energy-efficient technologies and practices, businesses can significantly cut their energy consumption, thereby lowering their energy costs and enhancing their overall sustainability.

Employee Engagement and Energy Conservation Programs

For energy efficiency efforts to be truly successful, active participation of employees is necessary. Their day-to-day activities and behaviours can contribute significantly to energy conservation. Here are some strategies:

• Providing Education and Training on Energy Conservation: Conduct detailed training sessions and workshops that discuss the importance of energy conservation. Educate employees on the environmental impact of energy wastage and provide practical tips for energy-efficient practices in the workplace. This could include turning off devices when not in use, optimising printing and copying, and adopting energy-saving behaviours during breaks and after working hours.
• Encouraging Employee Suggestions and Feedback: Encourage employees to share their ideas and suggestions for improving energy efficiency. This could be through a dedicated online portal, suggestion boxes, or regular brainstorming sessions. Actively involve them in the decision-making process, and ensure that their contributions are acknowledged.
• Recognising and Rewarding Energy-Saving Behaviours: To incentivise energy-saving practices, implement recognition programs that appreciate employees demonstrating these behaviours. This could be through monthly awards, bonus points that can be redeemed for rewards, or showcasing their efforts on the company bulletin board or newsletter.

Engaging employees in a culture of energy conservation can drive collective efforts towards substantial energy savings and create a more sustainable workplace.

Exploring Renewable Energy Options

Switching to renewable energy sources can be a sustainable and cost-effective solution for businesses. Here are some options, along with additional details:

• Solar Power: Businesses with access to ample sunlight can consider installing solar photovoltaic (PV) panels on rooftops, parking lots, or open spaces. Solar power is a clean, renewable source of energy and, with dropping costs and government incentives, it has become increasingly accessible.
• Wind Power: Depending on the geographical location and local wind resources, businesses can explore installing on-site wind turbines. Alternatively, power purchase agreements (PPAs) with wind farms can be an option to buy wind-generated electricity.
• Biomass and Bioenergy: These are generated by utilising organic waste or biomass materials. This could include waste from agriculture, forestry, and certain industrial processes. Biomass boilers and anaerobic digestion systems can convert this waste into heat and electricity, providing renewable energy solutions for businesses.
• Geothermal Energy: For businesses situated in geologically favourable locations, geothermal energy can be a viable option. Geothermal heat pumps can provide efficient heating and cooling solutions by tapping into the stable temperatures of the Earth’s crust.

In deciding to switch to renewable energy, businesses need to consider the availability, feasibility, and cost-effectiveness of these options. Local and national government incentives such as feed-in tariffs, tax credits, or renewable energy grants can further aid in making the switch to these cleaner energy options.

Negotiating Energy Supply Contracts and Tariffs

Businesses can explore various strategies when negotiating energy supply contracts and tariffs to mitigate rising energy costs. Consider the following tips:

• Shopping around for competitive offers: Engage with multiple energy suppliers to compare prices, contract terms, and additional services. This allows businesses to secure the most favourable rates and terms for their energy supply.
• Considering fixed-rate contracts: Fixed-rate contracts provide stability by locking in energy prices for a specified period. This shields businesses from market fluctuations and potential price increases.
• Exploring flexible purchasing options: For larger energy consumers, flexible purchasing options, such as purchasing energy in bulk or participating in demand-response programs, can provide cost-saving opportunities. These options require active monitoring and management of energy consumption patterns.

Understanding the energy market and tariff structures is essential for businesses to make informed decisions when negotiating energy supply contracts.

Monitoring and Tracking Energy Consumption

Continuous monitoring and tracking of energy consumption are essential for businesses aiming to optimise their energy usage and implement energy-efficient practices. Here’s a more detailed approach:

• Importance of Ongoing Energy Monitoring and Tracking: By consistently tracking energy consumption, businesses can keep an eye on their usage patterns, identify energy-guzzling appliances or processes, and track the effectiveness of implemented energy-saving measures. It also helps in identifying deviations from the expected energy usage, which could indicate system malfunctions, wasteful behaviours or inefficiencies that need addressing.
• Utilising Energy Monitoring Tools and Software: To monitor energy usage effectively, businesses can leverage several technological tools. Smart metres can provide real-time information about electricity usage, and advanced versions can even break down the usage by individual appliances or systems. Energy management systems and online platforms can monitor, control and optimise the use of energy across the entire business. There are also software solutions that can provide detailed energy consumption data, analyse usage patterns, and provide actionable insights to improve energy efficiency.
• Tips for Analysing and Interpreting Energy Consumption Data: It’s essential to have a system in place to effectively analyse the collected energy data. Key Performance Indicators (KPIs) and benchmarks can be established to measure progress and assess the effectiveness of energy efficiency measures. These KPIs could include energy use per employee, energy use per unit of product manufactured, or comparisons with industry standards. Regularly analysing these metrics will help to identify trends, spotlight areas requiring attention, and allow for continuous improvement in energy efficiency.

Remember, what gets measured gets managed. By regularly monitoring and evaluating their energy consumption, businesses can make informed decisions about energy-saving strategies and constantly refine their practices for better efficiency.

Collaboration and Partnerships for Energy Efficiency

Working in concert with other businesses, industry associations, and energy consultants can present businesses with unique opportunities to boost their energy efficiency. Here are some strategies for fostering such collaborations:

Joint Energy Efficiency Projects: Businesses within the same industry sector or geographical region can join forces to execute energy efficiency projects. This collaborative approach may involve sharing the best practices for energy efficiency, jointly investing in energy-saving technologies, or negotiating energy supply contracts as a collective to gain better terms. Additionally, companies can combine resources for research and development efforts aimed at uncovering novel energy-saving strategies or technologies.

Knowledge-Sharing Networks: By participating in industry associations, forums, or networks with a focus on energy efficiency, businesses can share their experiences and gain from others’ insights. Such platforms facilitate peer-to-peer learning, exchange of innovative ideas, and discussions on the latest trends and practices in energy conservation. They can also present opportunities to get advice from industry experts, energy auditors, and sustainability consultants.

Energy Management Partnerships: Establishing partnerships with energy consultants or service providers specialising in energy management can offer businesses a wealth of expertise. Such partners can provide valuable advice, conduct comprehensive energy audits, help set energy efficiency goals, and develop tailored action plans to optimise energy usage and reduce costs. They can also assist in implementing energy-saving technologies, monitoring energy consumption, and providing ongoing support to achieve energy efficiency goals.

• Partnerships with Energy Supply Companies: Some energy supply companies offer partnerships or programs to help their customers reduce their energy consumption. These might involve offering reduced rates for off-peak usage, providing smart metres for more accurate energy tracking, or assisting with energy audits and efficiency upgrades.
• Government and Non-Governmental Organisation Partnerships: Government agencies and non-governmental organisations often run programs or offer grants to encourage businesses to improve their energy efficiency. By collaborating with these entities, businesses can get financial assistance, access to resources, and guidance on making their operations more energy-efficient.

Through strategic collaborations and partnerships, businesses can leverage collective resources and knowledge, thereby speeding up their energy efficiency efforts and driving down costs. By working together, businesses can play a significant part in creating a more sustainable and energy-efficient future.