UK Energy Crisis - Tips for Lowering Company Energy Costs

Posted in ManufacturingOperations on Nov 25 2022, by Pamela NewenhamPamela Newenham

UK Energy Crisis - Tips for Lowering Company Energy Costs

All of the UK's energy suppliers have announced immense increases in their gas and electricity prices over the past few months and more price hikes look to be on the way. A perfect storm of market forces has thrown the UK's energy system into disarray, threatening to rip through the economy from home energy suppliers to heavy industry, from factories to farmers.

Why is there an Energy Crisis?

Rising gas prices on world markets have been driving up Irish energy costs since spring 2021. Utilities in the United Kingdom have been fighting to stay in business since September 2021, despite historically high wholesale gas and power prices. These had resulted in at least 25 utility bankruptcies by the end of December, with more expected in 2022.

Energy prices have also spiralled in the past year, with European gas surging some 600 per cent.

Why Are Energy Prices Increasing?

Global forces have been the dominant forces in play, as explained in further depth below:

1. The price of fossil fuels on wholesale markets has skyrocketed

The consequences of the energy crisis extend beyond rising energy bills and struggling suppliers. Large steelmakers, chemical plants, and manufacturers are all vulnerable to the impact of rising energy prices and are already feeling the financial consequences.

Steelmakers are already halting work during peak power demand hours, according to the steel industry association UK Steel, in order to avoid record high prices. Due to the rising cost of gas, two fertiliser companies in Teesside and Cheshire have closed for the winter, and another in Hull has reduced production by 40%.

This has ramifications for agriculture, meat production, and the food and beverage industries. Carbon dioxide is a by-product of fertiliser factories that are used to make fizzy drinks and dry ice to keep food cold during transportation.

The government is under increasing pressure to address the issue of overpriced energy before it undermines the UK's post-COVID economic recovery. The UK may not run out of gas, but a lack of inexpensive gas would be a concern.

2. Several power plants have been out of action

The worldwide gas shortage is especially terrible news for the United Kingdom. Around half of the UK's energy is produced by burning fossil fuels in gas-fired power plants, a pattern that has grown more entrenched in recent months as a result of a succession of difficulties in the UK electrical system.

Ageing nuclear power reactors have been forced to shut down for unscheduled maintenance, a vital power connection used to import energy from France has been shut down due to a fire, and the UK's wind turbines have slowed amid some of the windiest months since 1961.

3. There has been a lack of wind output.

The wind in the North Sea has ceased blowing precisely when Europe needs energy the most, pushing regional energy markets to search for gas reserves to heat homes and power companies.

This has had expensive consequences.

The problem is particularly extreme in the United Kingdom, where wind presently accounts for just 7% of the country's energy mix, a significant decrease from the 25% it produced on average between 2010 and 2020.

The offshore wind industry in the United Kingdom has been a success story of the energy transition, substantially reducing emissions by installing 24GW of wind power over the last decade—enough to power 7.2 million households. However, as wind power has slowed and the price of carbon credits has reached new highs, the energy market has seen significant volatility.

Tips for Lowering Your Company’s Energy Costs

The size of the overnight increase is likely to ripple well beyond vulnerable customers to affect the wider economy into next year, says Emma Pinchbeck of trade body Energy UK.

That is why we are guiding you with our recommendations about short-term ways to mitigate the increase.

  • Get an energy broker such as CoolPlanet. On average we save our clients 11% off their energy bills.
  • Energy optimisation software such as CoolPlanet’s Clarity software can help you identify savings and become more efficient.
  • Change your light bulbs. Energy-efficient light bulbs such as LEDs use up to 80 per cent less energy.
  • Participate in a demand response programme and get paid to reduce electricity usage during periods of peak demand.
  • Consider solar power.
  • Consider commerical battery storage.

Now is the time for an Energy Broker

In the midst of such regulatory wrangling, UK business has become more anxious about growing energy bills. Many companies in energy-intensive sectors have already begun to restrict output, cease operations, or make other adjustments.

Now is the time to find a Trusted Advisor. Decisions are impossible to make at the moment if you don't know the energy market. The wrong decision could be costly.

With recent, more robust support for new nuclear and the announcement of a new finance model to reduce the cost of new nuclear power stations, the government is also addressing the underlying reason the UK (and many other countries) has been vulnerable to the energy crisis of 2021: the need to provide businesses with the certainty they need to move forward with the energy transition. Failure to recognise such problems risks making the 2021 market gyrations seem less like a crisis and more like the initial tilt into an uncomfortable new normal.

In these perilous times, a truth-seeking organisation like the CoolPlanet is essential. CoolPlanet has almost 15 years of experience in the market, working across the GB, NI, Germany, and Ireland.

CoolPlanet will provide context and detail about the market, how it is made up and how it functions.

CoolPlanet will explain all the different contract types and how they work and why some may NOT be suitable for the customer or prospective customer.

CoolPlanet will guide the business owner through the turbulence to a place where they know the decision, they are making is the correct one.

If you want to know more, schedule a call today.