There are a multitude of reasons responsible for energy prices being pushed up to unprecedented levels, including:
However it’s important to note that the energy price rise is fundamentally a global issue. The UK as a country has almost no ability to change or affect energy prices, since both fuels and generated electricity are a globally traded commodity.
There are 5 essential components which contribute to a consumer’s energy bill:
Wholesale costs (around 36%)
The wholesale price of electricity and gas fluctuates throughout the year but is currently as an all time high, due to the reasons outlined above.
Network Costs (around 24%)
Energy companies build and maintain the equipment needed to distribute energy across the UK and are ultimately responsible for getting gas and electricity into our homes.
Operational Costs (around 20%)
These include things like billing, customer service and IT systems.
Government, environmental and social schemes (around 13%)
Energy companies are obliged to contribute to various government schemes, including, Warm home discount, Feed-in tariff and Energy Company Obligation.
These programmes are essential but obviously come with a cost.
Unfortunately, experts aren’t expecting a change in energy prices soon.
Chris Bowden, founder and CEO of clean energy company Squeaky, said, “Without doubt, the future of energy prices is uncertain, and costs will remain historically high and volatile for some time to come…..The next two years could require nearly all of the world’s spare oil and gas production capacity as demand rises above pre-pandemic levels.”
Some pundits have blamed faltering energy supplies on the increasing role of renewable energy. In the UK, the North Sea wind slowed this Summer, reducing wind power production.
However, the truth is that energy prices would be even higher without renewables. At any moment, the price of electricity is determined by whichever fossil fuel-based power plant has the highest cost, and that is almost always a natural gas or oil-based facility. This means that electricity prices generally are set by whatever is happening to the price of natural gas, oil or coal.
The only effect that renewables can have on energy markets is to lower electricity prices, which in turn will cause natural gas and coal prices to fall.
Here are a few practical tips for reducing consumption and energy costs in the workplace:
If your business is concerned about the rise in energy prices, and the effect it will have on your bills, give our expert team a call. With our detailed energy consultation, Boxfish can assess how energy efficient your business really is and advise on recommendations and next steps to ensure you maximise your energy savings and reduce your bills.
Get in touch via the contact form below or give us a call on 0141 226 8525 and we’ll take it from there.