Why is energy in the UK currently so expensive?

15 May 2023

Why is energy in the UK currently so expensive?

Utility supply used to be a marginal consideration for building managers but has now risen to the top of the agenda. Over the past twelve months, both commercial and domestic users have seen a significant increase in energy supply costs. As many fixed-rate deals for businesses expired in October 2022, thousands of firms were exposed to increased costs that rose by four or five times or more.

The UK produces a high proportion of its electricity from gas turbines and, as much of the UK’s gas supply was previously imported from Russia, the Russian invasion of Ukraine caused prices to rise sharply. At the time of writing (May 2023) the UK is producing around 35 percent of its electricity from gas turbines.

Both wholesale gas and electricity prices have however been falling steadily since December 2022, but that drop has not been carried over to consumers. This is because wholesale energy costs fluctuate greatly and so energy firms buy gas and electricity well ahead of when it’s needed. This means that current energy bills do not reflect today's prices, but rather the wholesale cost at the time the supplier paid for the energy. Whilst energy costs are expected to fall further this year, they are unlikely to return to the levels seen in 2021 and before.

However, the future looks promising, as in its Powering up Britain Strategy (March 2023), the UK Government has set out its ambition to scale up green energy and has pledged that by 2035 the UK will be powered entirely by cheap clean electricity.

Energy costs for commercial buildings in the UK can be higher compared to residential or industrial sectors due to a number of factors:

  • Commercial buildings typically have higher energy demand, requiring lighting, heating, cooling, ventilation, and lots of electrical equipment to support operations. So large office spaces, retail stores, hotels, and restaurants consume significant amounts of energy, leading to higher energy bills.
  • With buildings often operating for extended hours, sometimes 24/7, continuous energy consumption is required, and this prolonged usage puts additional strain on energy systems and so increases overall energy costs for commercial premises.
  • Non domestic buildings often have peak demand periods when energy consumption is highest and utility companies charge higher rates during peak hours to manage the increased load on the grid.
  • Also, many commercial buildings face energy efficiency challenges. Olde buildings often have outdated infrastructure and inefficient equipment that consume more energy. Retrofitting such buildings with energy- efficient technologies and smart control systems can significantly reduce a buildings overall energy consumption and associated costs. Now is the time to consider such investment as, whilst energy costs are so high, the efficiencies made will ensure the return on investment is much shorter.

Minimum Energy Efficiency Standards (MEES) 2018

Commercial buildings must comply with various energy efficiency and environmental regulations. This includes meeting specific energy performance standards, implementing energy-saving measures, and obtaining certifications such as Energy Performance Certificates (EPCs).

Minimum Energy Efficiency Standards (MEES) 2018 are regulations which require a minimum energy efficiency standard to be met before commercial properties in England and Wales can be let or sold. From 1 April 2023, landlords of commercial properties in England and Wales are prohibited from granting a new lease or continuing an existing lease unless the property has an EPC rating of E or higher (except where certain exemptions apply). Also, buildings cannot be sold unless they meet these standards. Read our Guide to MEES for more information.

Making buildings more energy efficient

The Building Energy Efficiency Survey 2016 reported that 67 percent of energy consumption in commercial buildings is used to provide building services including lighting, heating, ventilation, cooling, and hot water. Therefore, making these elements more energy efficient has the potential to make considerable energy saving gains.

There are significant savings to be made by making your building more energy efficient, with numerous options available including, replacing fixed speed drives with variable speed drives, fitting voltage optimisation devices to control and optimise supply voltage, replacing existing belt driven fans with highly efficient direct drive plug fans and upgrading lighting to low energy LEDs to name just a few. Read our Top 5 Energy Saving Tips for more information.

Smart building automation

Investing in a smart building automation system can help to optimise energy usage by automatically adjusting temperature settings, lighting levels, and other systems based on occupancy and usage patterns.

As the ventilation, heating and cooling needs of a building are constantly changing, the control system is vital in ensuring the efficient running of HVAC plant to deliver the required occupant comfort levels. Smart building controls can adapt to these changing circumstances, processing real-time data from IoT sensors and adjusting the HVAC system automatically. This delivers greater energy efficiency, cost reductions and occupant wellbeing over the long term.

An AI-based solution, like Evotech’s myBEMS, uses non-linear control techniques instead of a rule-based approach, processing real-time data from sensors and adjusting the system automatically. Constantly analysing the data inputs using advance machine learning algorithms, it notices the subtlest of changes in outdoor temperature, weather forecast and occupancy and adjusts the BMS and HVAC settings accordingly, monitoring multiple parameters, specifying set points, turning units on or off, and performing a number of other actions. All this happens autonomously, to keep building occupants comfortable whilst significantly reducing energy consumption and carbon emissions. Read how Evotech’s myBEMS AI technology for commercial HVAC systems is making significant energy savings for commercial building owners and managers alike.

To mitigate the high energy costs for commercial buildings, implementing energy-efficient measures, optimising building design, utilising smart energy management systems, and negotiating favourable energy contracts can all help reduce energy expenses. Additionally, Government initiatives, financial incentives, and support programs aimed at promoting energy efficiency in commercial buildings can help lower overall energy costs in the long term.

Each building is unique and will need bespoke solutions. Evotech Technical Services’ experienced building performance engineers are on hand to help you in your net zero journey. Contact John Lumb or Richard Watts on 033 207 4245 for more information.