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A guide to large and industrial business energy
This guide explains how to manage large or industrial energy, the various types of contracts available and energy efficiency measures to help reduce consumption.
Switching your energy contract or provider is usually a key way to save money on your bills. Our specialist Major Business team can help – fill in the form to get started.
What qualifies as a large business?
With energy, it’s your consumption level in the first instance, that determines whether your business is classed small, medium or large. The energy needs for those classed as large differ significantly from small and medium businesses.
Any business that consumes more than 55,000 kWh of electricity per year, or more than 200,000 kWh of gas per year is considered large or industrial.
Whether your business is gas-intensive, electricity intensive, or both, it’s likely your energy bills account for a large proportion of your overheads.
To make sure you're getting a fair price, you'll need to work closely with your supplier or energy broker to build a bespoke contract that meets the needs of your business.
If you would like to learn more about reducing your business's consumption, visit our business eco guide.
Types of contracts for large and industrial businesses
Your increased consumption could make you eligible for a multi-meter supply, meaning you'll need numerous electricity or gas meters, each with their own supply. Costs can spiral, so working with your supplier or energy broker to create a bespoke contract suitable for your needs.
Typically, both high gas and electricity users are offered two contract options: fixed and flexible contracts.
A fixed contract allows you to fix the price you pay for the wholesale cost of your gas or electricity for a specified period – usually between one to four years. This will protect you from fluctuations in energy market prices, although your bills will naturally vary depending on how much energy you use.
Your supplier can provide a forecast of what they expect third-parties to charge during this time – this includes maintenance and environmental costs. A fixed contract means you’ll be able to estimate your outgoings for the length of your contract manage your overall budget more easily.
A flexible contract allows you to closely monitor the energy market and change the rates you pay according to price fluctuations.
On the plus side, you have control over your energy bill, along with price transparency, but the drawback is that you’ll need to spend more time managing your energy bill.
You will however, have the option to fix your rates and unfix them when you choose, depending on what you’ve observed from energy market conditions.
Interruptible contracts give the National Grid or your local distributor the authority to temporarily cut off your supply during peak times and periods of high demand.
There are pros and obvious cons to this contract. They are cheaper than standard contracts but the fact your energy supply can be stopped, could have a significant impact on your business activities. If you operate during those peak times, you may also end up with a considerably high bill.
Large site peak day demand
Large site peak day demand is the sum of Supply Offtake Quantity (SOQ) for large sites.
Also know as the Maximum Daily Quantity (MDQ), the SOQ is the maximum daily consumption allowed for any one supply point. A supply point is the meter at which the National Grid or your local distributor makes energy available for your energy supplier.
SOQ refers to the maximum daily amount of energy – both electricity and gas – that you’ll be allowed to consume from any one meter. If you exceed your SOQ (measured in kWh), your supplier may charge you a penalty. To prevent this, you may qualify for a ‘large supply point’, which makes available energy that is equal to or exceeds 732,000 kWh per year.
Peak demand is the highest daily or monthly consumption across the network in a set period and for big business energy customers, often dictates the price of energy.
When peak demand rises, energy prices tend to rise with it as it costs energy suppliers and distributors more to supply energy to everyone at periods of high demand. However, businesses that consume significantly large amounts of energy may benefit from lower prices, as suppliers are inclined to offer cheaper business gas and business electricity rates in an effort to secure high-consuming customers.
Reducing what you pay for energy
Any way in which you can reduce the amount that you pay for energy - or the amount of energy that you use - can have a significant impact on your business’s bottom line. Here are a few ways in which you can control your business energy bills more closely.
Offsetting your business energy bill
The government’s Feed-In Tariffs (FITs) and Renewable Heat Incentive (RHI) schemes applies to businesses and households that install renewable or low carbon technologies at their property. The FIT scheme is dedicated to electricity-generating technologies while the RHI scheme is dedicated to heat-generating technologies.
With the FIT scheme, your chosen FIT Licensee will pay you for the electricity you generate, and you can also sell back any excess electricity to the National Grid, using this income to offset charges on your electricity bill. With the RHI scheme, the government will provide a fixed subsidy payable over twenty years provided you have installed renewable technologies eligible under the scheme.
Exemptions for the climate change levy
Your business energy bill will include the Climate Change Levy (CCL) – a government-imposed charge for all business energy users using 33kWh or more of energy each day. The CCL is designed to encourage businesses to reduce their carbon emissions and to take steps towards energy efficiency. If your energy use involves mineralogical and metallurgical processes, you are 100% exempt from paying the CCL.
You may also be able to apply for an exemption from the CCL if you take steps to improve energy efficiency by signing up to the Climate Change Agreements (CCAs) or the CRC Energy Efficiency Scheme (CRC Scheme). CCAs are voluntary agreements taken by energy-intensive businesses to receive up to a 90% reduction in the CCL if they agree to meet certain energy efficiency targets as agreed with the government. The CRC Scheme is designed to incentivise energy efficiency and reduced carbon emissions in large energy users.
If you get your energy from eligible renewable sources or use combined heat and power (CHP), you may also be exempt from the CCL. Alternatively, you could look for a supplier that only provides low-carbon energy, helping you qualify for CCL exemption.
Our Business Energy Efficiency guide has more information about saving energy as a large or industrial business.
Visit Ofgem's website for more information on the business energy market
To ensure you’re getting the most from your energy contract, speak to our Major Business team. We can ensure that you’re on a great bespoke deal, based on your needs and could save you money in the process.
Fill in the form to find out more or call 0800 140 4659
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