Energy prices have been in turmoil over recent years, with factors such as the pandemic, Russia’s invasion of Ukraine and bad weather impacting the fluctuations and creating what we now refer to as the ‘energy crisis’.
As we’re finally able to move forward from such grave uncertainty, many businesses have now found themselves in a situation of naivety – unaware that the price they locked in at for gas and electricity a year or two ago may be exceptionally high compared to today’s rates in comparison to the crisis now that the market stabilises.
Here are some interesting stats we’ve found that were included in the Department for Energy Security & Net Zero Quarterly Energy Prices Statistical Release from September 2024*
Between Q2 2023 and Q2 2024 the average electricity price in cash terms excluding CCL (Climate Change Levy – an energy tax payable on supplies of electricity, gas, liquified petroleum gas and solid fuels to businesses and public sector organisations) in the non-domestic sector fell by 6 per cent to 25.7 pence per kWh.
Prices increased between Q1 and Q3 of 2023, however since the latter part of 2023, average non-domestic electricity prices have fallen.
Between Q2 2023 and Q2 2024, the average gas price in cash terms (excluding CCL) in the non-domestic sector decreased by 12 per cent to 5.13 pence per kWh.
Energy prices in the manufacturing sector
Heavy fuel oil consumers in the manufacturing industry in Q2 2024 paid on average, in cash terms, 10.3 pence per kWh based on provisional estimates.
Between Q2 2024 and the same period in 2023, the average price paid by electricity consumers in the manufacturing industry, in cash terms (excluding CCL), decreased by 6.7 per cent or 1.3 pence per kWh to an average of 18.2 pence per kWh.
Compared to the previous year, in Q2 2024, the average price for gas consumers in the manufacturing industry, in cash terms (excluding CCL), decreased by 11 per cent or 0.5 pence per kWh, from 4.6 pence per kWh in April to June 2023 to 4.1 pence per kWh in the same period in 2024.
Interestingly, renewable electricity generation increased 19 per cent on the second quarter of 2023 with the share of generation from renewable sources reaching a record high at 51.6 per cent of total generation, the third consecutive quarter where renewable generation has exceeded fifty per cent.
With prices now much more favourable post energy crisis, many businesses are breathing a sigh of relief and getting back to the day job, but are energy contracts now being put on the back burner at a price?
We’re coming across many businesses, particularly in the hospitality and manufacturing sector, where we believe this is the case. The consequence of this resulting in energy bills which when in comparison to recent years seen fair, but without a deeper dive businesses risk paying thousands (in one case millions) in higher rates, hidden charges and fees.
This has led us to look at the 5 common misconceptions of businesses around energy contracts that we’re uncovering when talking to new customers.
- Businesses assume they are on a good rate – With such uncertainty around energy prices over recent years its no wonder that businesses were relieved to sign on the dotted line at a lower rate post energy crisis, however, when you look at how energy prices have continued to steadily fall, there is a huge opportunity to go back out to market and see what’s on offer.
We experienced a recent example of this with a client who runs a large hotel chain. They were content with the price they were paying, until we did a quick audit and found several suppliers offering better contracts and rates.
A quick bit of mental arithmetic and they worked out that they’d paid thousands more than they’d needed to, had they reviewed their energy contract sooner rather than wait until renewal.
Businesses can actually look to renew their energy contract ahead of the game. We’re currently working on a contract for a client for April 2027.
- Services, suppliers and prices are the same, wherever you go
Another common misconception is that all business energy suppliers offer the same services, number of suppliers and prices. This is not true.
- They don’t need an energy procurement strategy
When you look at areas of a business that have a strategy, energy doesn’t usually come into the equation, but it should.
Energy costs are in the top 10 overheads for business, and if you’re a manufacturer or high energy user, they probably appear in the top 5.
The benefit of a strategy is cost avoidance over cost saving, with better planning meaning a business avoids unnecessary leaving themselves exposed.
Linking an energy strategy into wider business plans such as acquisitions and business growth is essential.
- An energy contract is like any other contract
As with many contracts, they can be quite lengthy and contain a fair bit of technical jargon – often leading to businesses skipping the small print.
Deciphering an energy contract may time a bit of time and expertise, but it is always worth the investment. If you don’t have the resource or knowledge, we are able to do this for you and highlight any red flags – or provide you with an alternative range of quotes.
- Clean energy is more expensive so not a consideration
With renewable generation now exceeding fifty per cent of shared energy generation, its popularity has been boosted by businesses discovering that it’s not as expensive as you might think.
With the introduction of technological advancements and government incentives, the initial setup costs of renewable energy systems has reduced.
Longer term, businesses can make significant savings on energy costs, thanks to lower operational expenses associated with renewable sources, and demonstrate their green credentials and commitment to CSR in the process.
If you’re considering switching to renewable sources, our Net Zero Implementation division, Ennovus Solutions, can provide valuable advice.
Hopefully this has helped you to understand more about the potential pitfalls of putting your energy contract to one side. Taking a proactive approach now could result in significant cost savings next year and beyond.
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