How Energy Works for a Business
Every business uses energy differently.
A small office may mainly use electricity for lighting, computers and heating.
However, a café may also have ovens, fridges and coffee machines running throughout the day.
A workshop could use much larger machines.
So, there is no single energy plan that suits every business.
The first step is to understand how your business uses energy.
Once you know that, it becomes much easier to understand your bills, compare contracts and reduce costs.
Is Business Energy Different From Household Energy?
Yes.
The electricity and gas are the same.
However, the way they are bought and sold can be very different.
At home, you can normally choose from the tariffs available to household customers.
Business energy is different.
Prices may depend on things such as:
- How much energy you use
- When you use it
- Where your business is
- Your meter
- The length of the contract
- The wider energy market
Therefore, two similar businesses may be offered different prices.
Business Energy Contracts Work Differently
One of the biggest differences is the contract.
A household customer can often move between tariffs fairly easily.
However, business contracts can tie you in for an agreed period.
For example, you might agree to buy electricity at a set price for:
1 year
2 years
or perhaps:
3 years
During that time, you may not be able to leave without a charge.
Therefore, the cheapest-looking price is not always the best choice.
You also need to understand the contract behind it.
We will explore this in Business Energy Contracts and Prices.
What Happens When a Contract Ends?
This is an important date for any business.
Your supplier may contact you before the contract ends and offer a new deal.
However, you do not have to accept the first offer.
Instead, this can be a good time to compare the market.
The key is to start early.
If you leave it too late, you may have fewer choices.
Also, if you move into business premises without arranging an energy contract, you may find yourself paying a deemed rate.
These rates can be expensive.
Therefore:
Know when your contract ends.
It is one of the simplest ways to stay in control of business energy.
Your Bill Can Look Different Too
A business energy bill may contain charges that you do not normally see on a household bill.
For example, you may see:
VAT
and
Climate Change Levy
Larger electricity users can also face charges linked to the amount of power available to the site.
At first, this can make a business bill look complicated.
However, most of it can be broken into smaller parts.
That is exactly what we will do in Understanding Your Business Energy Bill.
kW, kWh and kVA
Business energy also introduces some terms that many people have never needed to think about before.
Three common ones are:
kW
kWh
kVA
They look similar.
However, they mean different things.
Let’s make the first two simple.
A kilowatt (kW) measures power.
A kilowatt-hour (kWh) measures energy used over time.
Imagine a 2 kW electric heater running for one hour.
It uses:
2 kWh of electricity
Run it for five hours and it uses:
10 kWh
That is the type of energy use your supplier charges for.
So What Is kVA?
For many small businesses, kVA may never become an important issue.
However, businesses with larger electricity supplies may come across it.
In simple terms, kVA relates to the electrical capacity available to a site.
Think of the electricity supply like a road.
A small shop may only need a normal road.
However, a factory running several large machines at the same time may need something much wider.
That extra capacity can cost money.
Therefore, a business can sometimes pay not only for the electricity it uses, but also for the size of the electrical supply it needs available.
We will explain this properly in Business Electricity Supply, kVA and Maximum Demand.
No engineering degree required.
When You Use Energy Can Matter
How much energy you use is important.
However, when you use it can matter too.
Consider two businesses.
The first is a small office.
Most of its electricity is used between 9am and 5pm.
The second is a bakery.
Its ovens may start before most people are awake.
Both businesses use electricity.
However, their pattern of use is completely different.
For some businesses, understanding that pattern can open up ways to reduce costs.
Start With What Uses the Energy
Before trying to save energy, work out where it goes.
In an office, the main users might be:
- Heating
- Lighting
- Computers
- Air conditioning
However, in a restaurant they could be:
- Cooking
- Refrigeration
- Hot water
- Ventilation
- Heating
Meanwhile, a workshop may have motors, compressors or other machinery.
Therefore, energy-saving advice needs to match the business.
Telling a restaurant to switch off a few computer monitors will probably make little difference if its main cost comes from cooking and refrigeration.
Look at Hours as Well as Power
A machine does not have to be very powerful to waste a lot of energy.
It may simply run for a long time.
For example, imagine equipment using:
500 watts
That is:
0.5 kW
If it runs for ten hours, it uses:
5 kWh
Now imagine it does that every working day.
The cost soon builds.
Therefore, when looking for waste, ask two questions:
How much power does it use?
and
How long does it run?
This simple idea can reveal a surprising amount.
Small Changes Can Add Up
A business does not always need an expensive energy project to save money.
Sometimes, the first savings come from everyday changes.
For example:
- Heating empty rooms
- Lights left on
- Equipment running overnight
- Poor heating controls
- Doors left open
- Old refrigeration
- Unneeded hot water
- Heating and cooling fighting each other
One small saving may not look impressive.
However, repeat it every day across several pieces of equipment and the result can become significant.
Bigger Changes Need More Thought
At some point, you may consider a larger investment.
Perhaps:
- Solar panels
- Battery storage
- A heat pump
- Better insulation
- New lighting
- More efficient equipment
These may reduce energy costs.
However, the right question is not:
“Will this save energy?”
Most efficiency measures will.
Instead, ask:
“Does this make sense for my business?”
A £20,000 project that saves £500 a year is very different from one that saves £5,000.
Therefore, cost and payback matter.
Business Energy Is Also About Risk
Energy prices can change.
That creates another decision for a business.
Do you fix a price for longer and gain more certainty?
Or do you choose a shorter contract and accept that prices may be different when it ends?
There is no perfect answer.
However, the choice becomes easier when you understand:
How much energy you use
What it costs
When your contract ends
How important price certainty is to your business
Business energy is therefore not only about finding the lowest number today.
It is also about managing future costs.
Home-Based Businesses
Not every business operates from a shop, office or factory.
You may work from home.
If so, you might not need a separate business energy contract at all.
For example, someone using a laptop from a spare bedroom has very different needs from a business running commercial equipment from the property.
Therefore, do not assume that starting a business means you automatically need a business energy tariff.
Instead, check how the property and energy are actually being used.
A Simple Way to Understand Your Business Energy
Start with five questions.
1. What energy do we use?
Electricity, gas or perhaps another fuel?
2. Where does it go?
Heating, lighting, machinery, cooking or something else?
3. When do we use it?
During office hours, overnight or around the clock?
4. What are we paying?
Check the bill and contract.
5. When does the contract end?
Make a note of the date.
Once you know those five things, you have a much clearer picture of your business energy.
In Short
Business energy does not need to be complicated.
Start with the business itself.
What do you use?
How much do you use?
When do you use it?
What are you paying?
When can you change your contract?
From there, we can look at bills, contracts and even technical subjects such as kVA.
However, we will always bring them back to one simple question:
What does this mean for your business?
That is the approach we will use throughout this section.
Next, we will look at one of the biggest differences between household and business energy:
Next: Business Energy Contracts and Prices →
Energility
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