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Energy Price Rises: FAQ

Worried about paying bigger bills, switching supplier or what happens if your supplier fails? Boxfish are here to have a look at some of the frequently asked questions and try to get to the bottom of what’s causing the issue.

Why are energy markets so high?

There are a multitude of reasons responsible for energy prices being pushed up to unprecedented levels, including:

  • A cold winter in Europe putting pressure on supplies and reducing the amount of gas stored
  • A relatively windless summer in 2021, making it difficult to generate wind energy
  • Increasing demand from Asia, especially China
  • The invasion of Ukraine by Russia, which has seen sanctions put in place which will limit the supply of Russian gas to Europe and kickstart a chain of events that will see energy bills climb even higher.
  • Wholesale European prices for gas rising by more than 300% after the pandemic, pushing up the cost of electricity and driving around 30 providers to go bust in the UK alone
  • A recent fire at the EU-UK power connection site resulting in substantial downtime and a halt on the UK importing electricity. Although normal service has now resumed, this downtime resulted in an increase in electricity prices across the UK

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.

What costs make up my energy bill?

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.

When will energy prices come down?

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.”

Is the move to renewables increasing prices?

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.

What can I do to cut my energy costs?

Here are a few practical tips for reducing consumption and energy costs in the workplace:

  • Consider installation of renewable generation, such as solar PV, to reduce your reliance on the grid and minimise the cost of consumed energy. Depending on the application and technology, you may even be able to export excess generation and create a revenue stream for the business.
  • Invest in staff training to make them aware of the cost of energy and provide the tools for them to be able to spot and report inefficiencies. This should also focus on the carbon impact and how decreasing consumption will help deliver a more sustainable future.
  • Switch lighting to LED equivalents. Older style, florescent tube lighting can consume 60% more energy than LED bulbs so upgrading your fittings and fixtures can have a significant impact especially if combined with smart occupancy and lux level controls.
  • Invest in renewable heating technologies such as heat pumps to reduce gas and electric based heating systems.
  • Monitor your usage. If you don’t measure you cant manage, and investing in smart meters is a useful step to better understand how, where and why you’re using energy across your operations.

How can Boxfish help?

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.

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