Many businesses across the United Kingdom (UK) face price increases, cutbacks, or potential closures as they grapple with rising energy costs.
The utilities market is facing its biggest challenge. It is set to be under scrutiny for a long time - with a supply shortage, inflation, rising demand and the Ukraine war, all lifting prices to unprecedented levels.
As we enter a new, challenging environment this winter, the government has released its new Energy Bill Relief Scheme to help UK businesses, the public sector, and not-for-profit organisations with their energy bills.
The scheme, initially a six-month programme from the 1st of October 2022 to the 31st of March 2023, will see the government provide a discount for those on a non-domestic contract. It will base the calculated savings on the estimated wholesale portion of the ‘unit price’ of energy this winter and provide an automatic discount compared to its baseline ‘government-supported price.’
It estimates that the wholesale prices for gas and electricity could reach up to £600 MWh and £180 MWh for electricity and gas, respectively.
Eligibility for the scheme will vary, depending on when the business’s fixed price contracts were agreed upon and variable tariffs. Businesses will likely receive their first bill in November, so they will only know then what benefit they will get.
As the Energy Bill Relief Scheme is new to businesses across the UK, how much can they expect to save? And which businesses will it benefit the most?
Energy crisis: Understanding the picture across the UK
To recognise which sectors the government scheme is likely to have the most impact on, SAS has undertaken analysis to understand the industries that are saving the most money per building on energy costs.
SAS has reviewed ONS data from over 1,600,000 business-used buildings in nine sectors in the UK to reveal how much industries consume non-domestic gas and electricity.
SAS then compared this with the current government non-domestic price cap and the expected wholesale price for winter 2022 for England, Scotland and Wales to understand how businesses are likely to be affected.
Which industries will likely be affected the most by the energy support scheme?
The healthcare industry stands to benefit the most from the energy cut. There are 26,000 business-registered buildings in the health industry, according to the Non-domestic National Energy Efficiency Data-Framework (ND-NEED) 2022 in England and Wales. On average, the industry consumes 3,000,000 MWh of electricity annually - an average of 115.38 MWh per building owned.
The British Medical Journal warned that some hospitals were facing extra spending of upwards of £2million per month on energy before the government announced support for non-domestic energy customers.
The health industry could see a potential bill reduction of 62% under the new framework - compared to if they faced the previously expected winter fees. Anticipated wholesale prices average £138,460 per year for each health-based business-registered building. The scheme could reduce their cost increase in bills by up to £44,880 on electricity - and a further £40,380 on gas.
Education has the second-highest reduction in potential bills, with a drop of 61%. Against the challenging backdrop of energy bills and inflation, analysis by the House of Commons Library found that school energy prices rose by 83% in the first quarter of 2022, compared with 2020/2021.
The industries with the most significant potential reduction (%) in their energy bills:
|Industry||Electricity consumed per building (MWh)||Gas consumed per building (MWh)||Energy cost per building with new price cap (£)||Energy cost per building with expected wholesale price (£)||Potential bill reduction per building (£)||Potential bill reduction %|
|Education and schools||125||325||50,750||133,500||82,750||61%|
|Arts and Leisure||57||96||19,490||52,110||32,610||60%|
Interestingly, predominantly public sector organisations appear to benefit most from the scheme, with health, education and emergency services taking the top three spots. Meanwhile, art, leisure and hospitality are likely the biggest winners in the private sector, with a potential bill reduction of 59%.
Which industries are using the most energy overall?
With the most significant overall expenditure on energy, businesses in the emergency services industry could reduce their bill by up to £149,750 on average for gas and electricity. Buildings in the industry use an average of 750 MWh of gas and electricity combined per year. Under wholesale prices, this could add up to £240,000. Under the new proposals, they face a potential bill of £90,250.
This category includes disaster response companies, the police force and fire and rescue services. Energy is often essential for emergency services in that a reliable power supply can be vital to saving lives.
Amid calls for support for the high street to have a boosted energy package, the retail industry will benefit from the bailout, which may help keep the prices of items down. The average store unit consumes 30 MWh of energy, and under the new scheme, business owners could reduce their bill by over £13,000 per building each year.
The industries with the biggest potential reduction (£s) in their energy bills:
|Industry||No. of businesses with registered buildings||Electricity consumed per business building (MWh)||Gas consumed per business building (MWh)||Avg. cost per building with new price cap (£)||Avg. cost per building with estimated wholesale price (£)||Potential bill reduction (£)|
|Education and schools||40,000||125||325||50,750||133,500||82,750|
|Arts and Leisure||52,000||58||96||19,490||52,110||32,620|
Government data reveals that more than half of UK businesses with 10 or more employees have reported rising energy costs as the main reason they’re considering increasing their prices in October 2022.
David Ferguson, a risk management specialist at SAS UK & Ireland, said:
“The energy crisis has dominated the news agenda in recent months, and for a good reason, as consumers and businesses alike are concerned about how to tackle rising costs. Understandably, some businesses were - and potentially still are - worrying, as they could pay over £100,000 extra annually for energy when budgets are already tight.
“The level of price reductions will vary across businesses, depending on their contract type and circumstances. Our research highlights how much businesses could spend on energy - and the importance of using technology to manage energy consumption.”
Utility providers and businesses collect a wealth of data every second of the day. Artificial Intelligence and analytics can extract insights from this data to improve efficiency, lower energy costs, and gain a deeper understanding of energy expenditure.
For example, USG corporation uses analytics to drive more efficient manufacturing production processes, reducing energy consumption.
These technologies can also help businesses to connect siloed data sources to discover hidden insights, in turn, better understanding energy use across the enterprise. Companies can use forecasting to analyse large-scale and hierarchical data to plan effectively for the future by identifying peaks in usage to mitigate excessive consumption.
Smart meters, for example, can help businesses and homeowners across the UK better understand their real-time energy consumption, leading to more accurate billing.
Using utility analytics can also help to ward off and detect fraudulent claims, as the Energy Bill Relief Scheme risks being exploited due to the programme's infancy.
SAS analysed the metered non-domestic building gas and electricity consumption of 1,627,000 business-used buildings, according to the Non-domestic National Energy Efficiency Data-Framework (ND-NEED) 2022.
SAS then compared the weighted MWh use per industry listed in the framework. It created an average energy cost per business-registered building with a new price cap (£) based on the number of buildings registered to each industry.
SAS then calculated the estimated spend for gas and electricity based on the new government-supported price and compared this to the expected winter wholesale prices to understand the difference. Data was taken from the Energy Bill Relief Scheme Guidance.
Numbers have been rounded up or down to the nearest decimal place. Where currency is mentioned, numbers have been rounded to the nearest £10.
**Data is up to date as of October 2022.**