The announcement of the Energy Bill Relief Scheme was a welcome lifeline, but with the assistance offered by the scheme likely to be cut substantially after 31 March, many operators in the hospitality sector may be forced to shut. A recent report for the British Beer and Pub Association shows that bills returning to their regular rate after March would put pubs and breweries at a 20% loss. Energy prices continue to be one biggest challenges for the sector – we look at how else you might be able to lower your energy bills.
What is the Energy Bill Relief Scheme and how does it work?
The scheme is a government-backed discount on energy prices for non-domestic energy users.
Under the scheme, the government provides a discount on the wholesale element of gas and electricity unit prices, which means that component of the bill will be lower than it would otherwise have been. The total amount of your bill will still depend on the business’s actual usage and other costs such as network charges, which can vary year to year.
How else can you lower your energy bills?
Having a proper energy procurement strategy can pay dividends.
Procuring your energy supply contracts through brokers or third-party intermediaries (TPIs) won’t necessarily lower your energy bills, because commissions are often built into the supply contracts (i.e. passed on to you, the customer). You should ask for a costs breakdown from the broker and consider whether paying them a one-off fee might be cheaper.
You can also approach energy suppliers direct to compare costs and avoid brokerage fees/commissions altogether.
If you buy green electricity, check that it is genuinely green (sourced by your energy supplier from renewable generators) rather than brown power (non-renewable) with green certificates stapled to it. Don’t pay a green premium for electricity which isn’t truly green.
Energy efficiency and demand reduction
Operators should look at measures to improve energy efficiency, particularly in relation to heating and lighting.
- Require managers to carry out regular housekeeping walks to shut windows, turn off lights, unplug electrical devices;
- Communicate regularly with staff to engage them in energy saving such as closing doors, turning off lights and switching off kitchen and bar equipment.
On-site generation can reduce reliance on electricity from the grid and exposure to increasing wholesale market prices and volatility.
If you are looking to avoid upfront capex, third party funding is an option. The third party provider would typically recoup its expenditure by charging the business for the generated energy through a power purchase agreement (PPA). The price for electricity supplied via such a PPA tends to be lower than grid, and the term of the PPA can be fairly long (often between 5 and 15 years) thereby fixing the price and insulating the business from wholesale price volatility.
Corporate power purchase agreements
If your site does not have suitable space for installation of on-site generation assets, you could seek to buy energy direct from a generator via a corporate PPA. This is becoming increasingly popular in the renewable energy market where businesses buy electricity direct from solar farms or wind farms, thereby securing fixed price energy over a relatively long term (in the same way as on-site PPAs) and also bolstering their ESG credentials by buying green.
Demand side response
If you can provide flexibility to the grid e.g by turning down energy demand for a period of time (even a few minutes) when asked to do so by National Grid, you can receive a revenue via a service called Demand Side Response (DSR). Similarly if you operate electric vehicles you may be able to provide flexibility where fleets of light commercial vehicles are plugged in overnight and are not required until morning. This is known as vehicle-to-grid or V2G and, again, is a paid-for service.
If you can receive hot water and/or space heating via a district heat network (rather than generating your own heat using a gas boiler) this can come with the benefit of fixed price heat and can also be more efficient than conventional heating.
How Freeths’ clean energy team can help
There is no one-size-fits-all approach. Different measures will be right for different businesses. Trying to secure the best value energy can be a complex and daunting task, but the Freeths energy team is here to help.
The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.