How Companies Can Offset Rising Business Energy Prices

Guest blog: How companies can protect themselves from high business energy prices

Fred Hartshorn, Sales Manager UK, gives his views on rising business energy prices in light of the cost of operations squeeze and assesses what options are available to businesses looking to avoid increasing energy costs.

UK Business Energy Prices Market Update

Wholesale gas prices are at all-time highs in the UK and across Europe (see chart below), driven by seasonal demand, a lack of adequate reserves (because of the closure of Rough) and a resurgence in demand as economies rebound on the hope that we have seen the worst of the pandemic. However, this has led to huge increases in commercial energy costs with some businesses already experiencing as much as a 2x increase in their energy bills, depending on their contract type. For example, between June and October 2021, some businesses’ power bills increased from a Day/Night pence per kWh rate of around 11p/9p to 25p/19p. Now, when your energy demand is ~5,000,000 kWh / yr, this is quite an increase (from c.£65,000 to £145,000 per month) in business energy prices. So, given gas and electricity prices could rise even further, what does this really mean for UK businesses?

Above: European gas prices surge past record highs over 2021 (source Refinitiv and FT)

The Guardian reported the Federation of Small Businesses’ survey which noted that “some businesses [are] realising they cannot continue as is, either by trying to slash costs or….lose people. The prevailing view of many UK small business owners in 2021 was that we would be unlikely to see a return to normal trading before summer 2022. Even when you look at it on a global level, where global consumer trends have changed for good, this will have an effect on businesses energy usage too (think increased warehouse storage to cope with greater online retail). This potential structural change should be of major concern to those who must think about the long-term viability of local and national infrastructure where short term solutions are not always the right answer.

Ways to Reduce Business Energy Prices

So, are there any solutions to improving power supplies and bringing stability to commercial energy bills? Yes there are, but many are still under discussion or are only just being implemented, and there are others about which we know very little. Some of those we know include Smart Grids, which are being developed to enable greater connectivity and better distribution of renewables instead of fossil fuel-based energy. At a macro level, there is currently a debate in the UK Parliament about adjusting tax levels on energy bills or even providing direct payment to suppliers to reduce end-user’s exposure to rising prices, but not everyone feels this is a suitable or fair solution. Looking on a local level, Cambridge City Council is offering a Green Business Grant of up to £10,000 to help local businesses make improvements on their premises, such as including solar panels, that can help to reduce reliance on the grid and save on bills. These are only a selection of the potential ideas being discussed but given how energy policy (in the UK particularly) has developed over the last few years, and with the transition to Net Zero, there needs to be a solution that can not only address supply and reliability issues for renewable electricity, but also be cost effective in the long run.

One solution companies can use to combat rising business energy prices is to install a solar system with a vanadium flow battery alongside. This allows you to shift the excess solar-generated energy from the daytime to the evening to avoid peak pricing, resulting in larger savings as it avoids using the most expensive power from the grid. Secondly, by using a Vanadium flow system with unlimited cycling capabilities – unlike a Lithium battery which can only do 1 cycle a day to preserve battery life – this allows for additional cycles that can assist frequency response with future dynamic regulation services (due to be released in March 2022) and bring beneficial revenue to the battery owner. The fact that more solar could be added to existing sites mean that these benefits will be enhanced as business energy prices rise further.

Above: Chart showing power pricing bands (peak price in red) for the South Eastern district in the UK which bulk-shifting energy from other bands can help to avoid.

Overall, energy storage allows us to greatly improve the reliability and maximise the output of the many renewable generators (particularly solar plants, but also wind farms and tidal arrays) that have been installed but are afflicted by intermittency and constrained grids. This is of particular importance to commercial and industrial businesses for whom energy costs make up a significant proportion of their operating expenditure. For example, Scottish Water, aided by renewable developers Absolute Solar & Wind, recently installed 4 flow batteries alongside a solar array at one of their treatment plants near Perth to help cut their overall energy costs, reduce carbon emissions, and enable EV charging at the site. Local Authorities are also considering how to secure their energy future as EV adoption continues to rise – we recently energised the UK’s largest flow battery as part of the Energy Superhub Oxford, helping to support the electrification of the city’s transport network (buses and taxis) as well as provide secure power to help decarbonise home heating. Over in the USA, Governor Kathy Hochul is doubling New York State’s energy storage target from 3GW to 6GW by 2030 and California has doubled its budget for energy storage projects to $380m as part of their respective commitments to use greater amounts of renewable energy in their state’s electricity generation mix.

As the Energy Superhub Oxford project shows, Local Authorities can move relatively quickly. Glasgow City Council has recently announced that the roof of a multi-storey car park will have solar panels installed with a 500 kW battery. Energy developers can also lead the way given their expertise in the sector – Vital Energi is working with hospitals to install a range of energy solutions, including battery storage, that will help to minimise their costs and reduce their carbon emissions.

Control Rising Business Energy Prices With Battery Energy Storage

In summary, energy price volatility is here to stay, at least in the medium term, and businesses (particularly larger ones) and developers need to find their own ways to hedge their exposure or directly reduce it. Many will benefit from installing flow batteries alongside renewables, allowing them to produce their own low-cost, low-carbon power on-demand. At a policy level, governments can continue to ramp up policy support for these measures by introducing new grant schemes and incentives to help enable end-users to take additional control of their power generation and consumption. Finally, at a network level, the more utility scale battery projects come online, with emphasis increasingly shifting towards longer duration, high throughput energy storage technologies, these networks will create the ‘baseload’ renewable energy we require to reach Net Zero.

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