A guide to energy for large businesses
Make It Cheaper's bespoke business energy procurement service for major UK businesses.
If your firm is considered a large business - or you work in an energy-intensive industry - your gas and electricity needs are likely to be different to those of small and microbusinesses.
The fact is, all businesses have unique needs when it comes to energy, which is why supply contracts can differ hugely between businesses - especially those with high consumption rates.
If a business consumes more than 55,000 kWh of electricity per year, or more than 200,000 kWh of gas per year, it’s likely that it will be considered a large business or enterprise. This means that you may be eligible for a multi-meter supply - essentially, you'll need numerous electricity or gas meters, each with their own supply. Needless to say, things can get confusing.
To make sure you're getting a fair price for all your meters, you'll need to work closely with your supplier or energy broker to build a bespoke contract that meets the needs of your business. To help, we’ve put together the below guide to energy for large businesses to help you identify the best deal for your company.
High gas users
If your business is considered to be a high gas user, your business’s energy affairs are particularly important as they can have a significant impact on your finances. Given how much money you’ll be spending on gas, you’ll want to make sure you’re getting a fair deal for your supply – and that means taking the time to negotiate reasonable prices, or using an energy broker to do this for you.
What’s more, if you have other sites to manage, you’ll also be faced with having to procure energy for these sites as well – sometimes with different rates and dates to consider.
High electricity users
Electricity-intensive businesses tend to include those in the industrial sector - typically those working with chemicals, steel and cement industries - or those in more commercial sectors, such as construction, leisure or hospitality.
If your business is regarded as a high electricity user, you probably need to dedicate a large percentage of your income to paying your energy bills. This makes it especially important to manage your business’s energy usage and bills in order to ensure you’re continually paying a reasonable amount for your electricity use.
Large business contract types
Typically, both high gas and electricity users are offered two contract options: fixed contracts 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 of time – 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 predict your outgoings for the length of your contract, making it easier to manage your overall budget.
A flexible contract allows you to closely monitor the energy market and change the rates you pay for energy depending on fluctuations in prices. This gives you more control over your energy bill, along with price transparency, but it does mean you’ll need to spend more time managing your energy bill. You’ll have the option to fix your rates and unfix them when you choose, depending on what you’ve observed from energy market conditions.
As a high energy user, you may be on an interruptible contract, which gives the National Grid or your local distributor the authority to temporarily cut off your supply during periods of high demand.
There are pros and cons to this contract – they are cheaper than standard contracts but you will be faced with energy unpredictability, which can 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
Larger businesses who are organising a new contract for their gas and electricity will more than likely come across the term ‘large site peak day demand’. Essentially, this refers to the sum of Supply Offtake Quantity (SOQ) for large sites. Also referred to 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.
As such, the SOQ refers to the maximum daily amount of energy – both electricity and gas – that you will be allowed to consume from any one meter. If you exceed your SOQ (measured in kWh), your supplier may charge you a penalty. As a large business energy customer, you may be able to use a ‘large supply point’, which makes available energy that is equal to or exceeds 732,000 kWh per year.
Peak demand is an important aspect for bigger business energy customers, as it can often dictate the price of energy. When peak demand – the highest daily or monthly consumption across the network in a given period – rises, energy prices tend to rise with it. This is typically because 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 the amount that you pay for energy
Being a high energy user, any way that 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. Below we explore some measures that you can take to gain more control of your business’s energy bills.
Certain industries, such as factories, large offices or hotels will often use half hourly meters to ensure that they're not paying over the odds for their power. These are specialised kinds of electricity meter that automatically sends updated readings to energy suppliers every half hour.
This eliminates the need to submit manual meter readings, and the frequency of these automatic readings results in accurate and up-to-date energy bills. You can also get a detailed breakdown of when you are using the most power, which can help you to be more energy efficient and reduce your usage during peak hours of operation.
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.
Visit Ofgem's website for more information on the business energy market.
Energy efficiency for high gas and electric users
You can also take some behavioural measures to drive down your electricity consumption and make further savings. Depending on the industry you’re in, this could include:
- Increasing your business’s use of efficient lighting is an effective way to lower energy bills.
- Replace incandescent lighting with compact fluorescent lighting indoors and outdoors.
- CFL is almost four times as efficient as incandescent bulbs and lasts about twelve times longer.
- For outdoor lights, use a timer or photocell so they turn off automatically during the daylight hours.
- For indoor lights, adjust lighting levels to your needs with three-way lamps and dimmer switches.
If your business relies on motors, you could increase efficiency by taking measures to reduce the amount of energy they use:
- Replace inefficient motors with premium efficient motors. This can result in significant cost savings over the lifetime of the motor, with the additional benefits of reduced down-time and increased productivity.
- Consider using a variable speed drive motor system instead of traditional motors when loads vary significantly over the course of daily use.
- Make sure the voltage of the motor, found on the nameplate, is as close to the design limits as possible.
- In industries that require compressed air, approximately 10% of the total energy is used by the compressor, making it one of the most expensive components. You can reduce compressed air costs by analysing compressor operations and reducing leaks.
- Compressors can be staged with controls to optimise performance.
- Implement a company-wide compressed air management policy to co-ordinate usage with supply and demand to eliminate unnecessary use.
- Smaller compressors can be used to operate during unoccupied periods.
HVAC (Heating, ventilation and air-conditioning):
- Heating, ventilation and air-conditioning (HVAC) can account for approximately 30% of a business’s energy usage.
- Set zones to turn off exhaust fans when not needed and control the temperature of spaces at night.
- When purchasing new equipment, select units that are Energy Star qualified.
- Consider energy recovery ventilation systems to reclaim waste energy from exhausts and use it to condition the incoming air.
- Add a dehumidification component to your HVAC system to reduce the need for larger equipment.
There are many simple measures that can be taken to reduce the amount of energy your business’s refrigeration system uses.
- Regular maintenance of refrigeration components such as coils, fans and seals will help keep the system running at its optimum level of efficiency.
- Check temperature settings to ensure they are not lower than necessary.
- Keep refrigeration systems away from direct sunlight or areas that have frequent fluctuations in temperature.
- Install a variable speed drive to control the level of refrigeration necessary to keep items cool.
- Defrost cycles can be reduced by adding a sensor at the evaporator and by running defrost at night.
- Use air curtain technology to seal in cool air and keep dust and other contaminants out.
All of the measures above can help your business save energy and reduce the amount you're spending, but another effective way to reduce costs is to switch your energy. You can do this yourself, or save time by switching with a business energy broker.
To help you ensure that you’re getting an energy broker who has your business’s needs as their priority, we have created a handy printable version of the questions above. Click here to download.
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