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Energy Insights

Cost impost outweighs short term energy security concerns for businesses

Recent Energy Action research into small and large commercial energy users reveals that 86% of businesses are expecting energy prices to increase over the next six to 12 months, with only 7% expecting a decrease and the same number expecting prices to remain flat.

The survey, conducted after many retailers had already announced their July 1 price increases, signals that businesses expect pricing conditions to deteriorate further, and that it is expected to have the most impact on businesses short term cost base.

When asked about their top challenges, 57% those expecting further price hikes cited the impact on investment levels and growth was their top concern, with only 8% prioritising short term energy security and potential shortages.

In addition, around one in four (26%) businesses also cited that longer term stability of the network was their top concern, with only 9% flagging a lack sufficient political and market support for increasing use of renewables.

Despite these concerns only around three in 10 businesses (31%) indicated they would be highly likely to undertake an energy audit to better understand their usage and areas to reduce consumption and costs. This increased moderately to 33% of businesses suggesting they would be somewhat likely to consider an energy audit.

In light of further expected price increases, businesses were also asked about their procurement strategies, specifically around their intentions on energy security over the medium term. The research shows that amongst those expecting an increase, only around two in five businesses (42%) were procuring energy out to the end of 2018 or 2019, and of these only 20% have reviewed their current energy contract.

To effectively manage a higher energy price environment, there are immediate steps businesses can take to better understand their precise energy needs to reduce usage, and look at a longer-term view for energy procurement. This can help businesses address the ongoing risks associated with pricing volatility and ultimately manage costs.

Beyond assessing their current contract, businesses should also consider reducing demand levels and use technology to better monitor and manage energy usage. For many multi-site operations where energy costs can be a significant proportion of a businesses overall cost base, this can be crucial to ensure ongoing operational sustainability.

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