When the cost of commercial energy rises, the initial reaction of many CFOs and FDs is to first compare suppliers to find a better deal and second, get quotes from installers for solar panels and on-site batteries.
Both are the right reactions, but the most effective way to start an internal drive to reduce business energy costs in your company is to understand why they’re high in the first place.
How can you reduce business energy costs?
Take these four steps to reduce your business energy costs:
1. Find out what you're really paying for
There are two broad parts to a bill: charges based on how much electricity you use and other costs, such as the standing charge and any maximum-demand or agreed-capacity charges.
To calculate the energy-use charge, your supplier multiplies the electricity you use, measured in kilowatt-hours (kWh), by the unit price.
Businesses on flat-rate tariffs pay the same unit price throughout the day, while businesses on time-of-use tariffs pay different prices at set times. If you’re on a wholesale price-tracking tariff, your unit price can change every half hour as wholesale prices rise and fall.
Next, check your bills, supply contract and any solar export statements for:
- Standing charge: The fixed daily amount you pay even when the site uses no electricity.
- Maximum demand: If this appears on your bill, find the highest power reading and the amount charged for it.
- Agreed capacity: If you pay for power reserved for your site, check the agreed level and the fee. Your bill will normally show the capacity in kVA.
- Taxes: Check the Climate Change Levy and VAT rates, along with any relief or exemption that applies to your business.
- Contract dates: Check the end date, notice period and renewal window.
- Solar export payments: Note down the rate and amount you receive for electricity sent to the grid. If your business uses the solar electricity itself, you save money by buying less from your supplier. If you send it to the grid, you receive an export payment instead. Make sure not to count both for the same electricity.
You’ll need to know what each charge is for and when each unit price applies before moving to the next step. Ask your supplier or broker to explain anything you don’t understand.
2. Match the meter data to what happens at your site
Once you understand the different charges that make up your bill, ask your supplier for a full year of half-hourly readings. The meter at your site records how much electricity it takes from the grid during each 30-minute period.
Compare the readings against your opening hours, shift times, production runs, cleaning times, holidays and shutdowns. Look for:
- Out-of-hours use: Any equipment that’s switched on when the site is closed that doesn’t need to be running.
- Sharp jumps: Some tariffs include a maximum-demand charge based on the highest amount of power your site draws at one time. One busy half-hour when several machines, heaters or chargers are running together could push up this charge for the whole billing period.
- High use during expensive periods: If your unit price varies throughout the day, find out what was running when you bought the most electricity at the highest rate.
The people who run the site day to day can explain many of these readings. Ask them what was happening at the times you’ve marked and which equipment was switched on.
3. Take action
Now you know what’s pushing the bill higher, there are three actions you can take:
| Example | What to do | |
|---|---|---|
| Out-of-hours use | A warehouse closes at 6pm, but its electricity use barely falls. The lights, ventilation and chargers stay on overnight because the timers still follow an old shift pattern. | Find out what stays on after the site closes. Reset old timers, remove overrides and use these simple low-cost jobs to cut waste. Repair air leaks and damaged door seals, and check that heating and cooling aren’t running together. |
| Sharp jumps | A factory switches on its heating, compressors, production machinery and EV chargers when the shift starts at 8am. The half-hour from 8am to 8.30am becomes its highest reading of the month. | Switch the equipment on at different times or limit the power available to EV charging. If everything must start at 8am, a battery can supply some of the power so the site takes less from the grid. This is known as peak shaving. |
| High use during more expensive periods | Delivery vans arrive at 5pm and start charging straight away, even though the tariff is cheaper overnight and the drivers don’t need them until 7am. | Delay charging until the cheaper rate begins, leaving enough time for every vehicle to be ready. Look for other work that can wait without affecting customers, safety or production. When comparing tariffs, price the same 12 months of electricity use against each one and include the standing, demand and capacity charges. |
Give each task to a named person, whether that’s resetting a timer, moving vehicle charging into cheaper hours or setting different switch-on times for large equipment. Set a date for completing it, then compare the half-hourly readings with similar days from before. You should see overnight use fall, charging move into cheaper hours or the highest reading come down.
Then check the next bill. A lower meter reading only saves money if it reduces a charge you pay. If it keeps the site within its connection limit or lets you postpone electrical work, record that separately rather than calling it a bill saving.
4. Install a solar and battery storage setup
An increasing number of businesses in the UK and Ireland are investing in solar and battery setups to combat higher electricity costs.
Solar allows you to generate your own electricity while batteries let you store that electricity for later use. Paired together, they reduce how much electricity you buy from the grid and how often you buy it at the highest price.
Ask for the saving from solar on its own, the extra saving from adding a battery and any income from exporting or trading electricity. Keeping these figures separate will show you where the return is coming from.
Solar panels replace electricity you would have bought
Solar panels generate electricity during daylight. Use that electricity when you generate it so you buy less from the supplier.
How much you save depends a lot on how much electricity the site uses while the panels are generating. A warehouse or factory that’s open during the day will usually use more of its solar electricity straight away than, say, a large distribution depot that loads its vehicles overnight.
When calculating potential savings, start with your daytime electricity use. Factor in how much roof space you have and how much electricity a system of that size is likely to generate.
Earn money from spare solar electricity and battery trading
If your solar panels generate more electricity than you can use or store, you can send it to the grid. Your export provider will pay you at the rate in your agreement.
A suitable battery in Great Britain may also earn money through flexibility trading. This is where your business is paid for changing how much electricity it takes from or sends to the grid at a particular time.
For example, your battery may be due to charge from the grid. A trading provider could arrange for that charging to stop when a network or system operator wants businesses to use less electricity. Your site then takes less from the grid than expected and may earn a payment without exporting any electricity.
You agree how much electricity must remain in the battery for your site. The trading provider should also check your battery, meter, electricity contract and grid connection before estimating what you could earn.
Act now and invest soon
Begin with jobs that cost little or nothing. Correct faulty timers, switch off equipment that doesn’t need to be running and stop large machines starting at the same time. Check the meter readings afterwards to make sure the work actually brought down your electricity use.
After that, compare tariffs and get quotes for solar panels, batteries and any EV chargers you need. Give every shortlisted installer the same 12 months of electricity readings. Otherwise, one option may look better simply because it was tested against a cheaper or quieter part of the year.
For every quote, ask:
- Which charge on the bill should fall?
- What do you pay for it now?
- What should you pay after the work is done?
- What will you spend on equipment, installation, software, maintenance and finance?
- Does the figure include export payments or battery trading income?
- Will anything affect production, comfort, safety or staff time?
- Which readings and bills will show whether it worked?
Why battery control software makes such a difference
When getting battery quotes, don’t just compare the battery’s size and price. Find out whether it will follow a fixed timer or receive new instructions throughout the day.
Basic control software might charge the battery from 1am to 4am and supply the site from 4pm to 7pm every day. It repeats that routine until someone changes it. The battery could start a sunny day full, leaving no room to store spare solar electricity. It could also empty at 7pm even though grid electricity costs more at 8pm.
More flexible software reads your tariff prices, solar forecast, meter readings and how full the battery is. It can leave room for the next day’s solar electricity, keep electricity stored until the highest-priced hours or tell the battery to supply part of the power when several large items of equipment are switched on together.
Find out how much GridVolt could save you
GridVolt Energy Manager works with compatible batteries, solar panels and EV chargers supplied by other companies.
Every 15 minutes, it uses your tariff, meter readings, solar forecast and battery charge to calculate whether the battery should charge, supply your site or keep electricity stored. It can also turn compatible EV chargers down when the rest of the site needs more power and increase them again later.
Send us a year of half-hourly readings, your tariff and details of your equipment. We’ll check compatibility and estimate the saving after the cost of the service.
For suitable businesses in Great Britain, we can also check whether a compatible battery could earn trading income through GridTrade.
Fill out the form on the right or contact GridVolt to discuss your site.