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Your Ultimate Guide To Business Energy
We’re here to answer all of your business energy questions with this ultimate guide.
No matter the size of your business or the industry you work in, your business relies on energy to power your operations. Whether it’s a call centre with 100 computers or one of those bars where they serve you a 9% IPA in a mason jar, a reliable business energy provider is crucial.
There’s a lot to learn about business energy, though. Who are the main players, what tariffs should you opt for, and how can you reduce your carbon footprint? Well, we’re here to answer all of this and more with our ultimate guide to business energy.
Why Do I Need to Compare Business Energy Providers?
Like all other aspects of your business, you want to ensure you get the best deal possible. So why should your energy be any different?
When you consider that some businesses pay approximately £12,000 per year for gas and electricity, it hammers home how these costs can slowly eat into your budget.
Cost Savings
The most common reason for switching is reducing energy costs. Switching providers can reduce your bills by up to 6%. Now, this may not seem like a lot on paper, but considering that the average annual cost of energy increased by 5.5% in 2024, reducing your costs by 6% looks pretty good.
Avoid Unnecessary Overpayments
Are you on a deemed or default tariff? As we mentioned earlier, these can often be more expensive than their fixed counterparts. In fact, Ofgem estimates that they are 80% higher than contracts with negotiated rates. There’s no reason to pay more than you have to.
If you’re on one of these deemed tariffs, look around for a fixed contract, see how much you’re overpaying, and make the switch!
Better Customer Service
Is there anything worse than your energy going out, your workday grinds to a standstill, and then you’re stuck on hold for hours? Well, yes, there are, but for this point to work, let’s pretend there’s not. Switching could not just slash your bills, but also your wait time to speak to someone when things go wrong.
Checking out sites like Trustpilot or our nifty guide, where we compare the top 6 business energy providers in the UK, can help you get the best customer service possible.
More Favourable Terms
This could be anything that benefits your specific needs. Some common things you may want to change include:
- Contract length (longer for security or shorter for flexibility)
- Cheaper rates (per kWh, standing charge, other charges)
- Better guarantees for resolving downtime
- Usage bandwidth
- Adjusted exit fees
Environmental Reasons
Environmental sustainability is a hot topic (if you’ll excuse the pun). Because of this, providers like Octopus are heavily investing in green technologies. With the UK government’s commitment to net zero in 2025 and a range of incentives to go green, now could be the perfect time to switch!
Who Are The Big 6 Energy Providers?
“The Big 6” may be a term you’ve heard of before when it comes to energy suppliers, but what does it mean? The Big 6 is a group of, shock horror, six providers that dominate the British energy market. There’s been a bit of chopping and changing of who makes up this elite group since they were formed in the 1980s after the privatisation of the energy sector.
Today, however, they consist of the following businesses:
- British Gas
- Octopus Energy
- E.ON Next
- OVO
- EDF Energy
- ScottishPower
Together, they control an 87.6% market share of electricity supply and 87.1% of gas, powering millions of homes and businesses nationwide.
Types of Business Energy Contracts
Just like with your home energy supplier, business energy contracts come in various shapes and sizes. It’s good to familiarise yourself with these types and figure out which one works best for your business. Below, we’ve outlined the different types and highlighted the pros and cons of each one.
Fixed Rate Tariffs
The price per unit of energy is locked in or “fixed.” This means that regardless of market fluctuations (and trust us, they can happen quite a bit), you will always pay the same amount for the duration of your contract, which can be up to 5 years.
Pros
You’re protected against any market changes. So, if prices skyrocketed like they did in 2022, you won’t be affected during the length of your contract. This certainty allows for better forecasting of expenses and budgeting.
Cons
While you won’t pay more if the market rate rises, you also won’t benefit from cheaper rates if it goes the other way. These will typically have early exit fees that you will have to pay if you want to leave before your contract is up.
Standard Variable Tariffs
Opposite to fixed tariffs, your price per unit will be determined by the market conditions. These prices will typically change every 3 months, with reviews taking place in January, April, July and October.
If the market price drops, happy days, so will your bills. This does, however, work both ways. If the price increases, you’ll be out of pocket more this quarter.
Pros
When the market cost of energy drops, you will benefit from these savings. Variable tariffs don’t usually come with exit fees, so you can leave anytime without penalty.
Tracker Tariffs
Similar to standard variable tariffs but with one large difference. While wholesale prices determine both tariffs, tracker tariff prices are calculated daily, as opposed to each quarter.
So, if prices drop, you can save on your costs immediately. But again, if they rise, things can get very expensive very quickly. Typically, you’ll find that individual providers will have their cap, so you have some sort of protection against rising costs.
Pros
If the price drops, you will benefit immediately as these are calculated daily. You could save more than on other tariffs if the price drops very low on certain days.
Cons
If prices go up, your costs immediately rise, which could be much higher than other tariffs. The uncertain nature of these changes means it can be difficult to budget accordingly.
Blend and Extend (Rolling Contract)
Sometimes known as a rolling contact. These “blend” the rate on your current contract with a new rate reflecting the current market value. This is on the condition that you “extend” your contract with the provider, giving you a new average cost.
Pros
If market rates are higher than your current contract, the blended rate will be cheaper than entering a new contract altogether. The longer contract brings certainty regarding the price you’ll pay.
Cons
If the market prices drop after you “blend and extend,” you will miss out on savings. Longer contracts can also be more difficult to leave. You may have to pass on, or at least pay an exit-fee, to take advantage of better deals that became available during your contract.
Green Energy and Sustainability in the UK
There’s no consistent definition of green energy, but according to the Utilities Act 2000, green energy is defined as a “source of energy other than fossil fuel or nuclear fuel.” In layman’s terms, energy that is better for the environment.
To create cleaner energy for UK consumers and businesses, the UK Government is commited to Net Zero 2050, which is a commitment to balance the emissions created with an equivalent amount removed from the atmosphere by 2050. The idea is to mitigate climate change, with a transition to renewable energy sources a large part of this.
Benefits of Using Green Energy
Positively Impact the Environment
The most obvious benefit is the positive impact switching has on the environment. Burning fossil fuels increases carbon dioxide in the atmosphere, which wreaks havoc on the environment and ecosystems. These emissions also contribute to poor air quality, which has been linked to a series of respiratory diseases.
Switching to green energy significantly lowers how much emissions your business is responsible for, contributing to a cleaner future.
Financial Benefits
Advancements in green technology have made leaps and bounds in the last twenty years. For example, in 2004, solar panels only produced 4 gigawatt hours of electricity. By 2023, this had skyrocketed to 15,225 gigawatt hours, accounting for 3% of the country’s energy production.
If you combine this with installing your own solar panels at your premises, you can benefit from even more savings. It’s estimated that over 25 years, businesses could save up to £62,500 (or £2500 per month) on their energy bills.Tax breaks, grants, and other benefits can all help your bottom line.
Boost Your Reputation
According to a recent study, reducing your carbon footprint is one of the most appealing things you can do for potential customers. Proudly announcing on your website, in your shop, or wherever you’re an eco-friendly business could do wonders for your reputation.
Maintain Adherence to Compliance
Transitioning to green energy helps you meet certain environmental obligations. These include the Climate Change Levy (CCL) and the Energy Savings Opportunity Scheme (ESOS). If you fail to meet these requirements, you could be faced with some pretty hefty fines of up to £50,000!
Government Green Energy Incentives
Green Gas Support Scheme (GGSS)
This is an incentive set up by the government in 2021 that runs until 31 March 2028. Its aim is to increase the number of green gases (particularly biomethane) made from organic waste. The government will then pay you for this green gas to add to the gas supply.
Industrial Energy Transformation Fund (IETF)
Set up in 2020, this fund aims to improve efficiency and reduce carbon emissions in the production and manufacturing industries. It supports businesses looking to upgrade their current equipment to more economically sustainable ones. Depending on your location, it covers 30%—85% of eligible project costs.
Climate Change Agreements (CCAs)
Climate Change Agreements (CCAs) are voluntary agreements between UK businesses in high-energy-use industries (manufacturing, etc.) and the government to reduce energy use and carbon emissions. You can receive up to 90% off your Climate Change Levy (CCL) bill in exchange for hitting the agreed efficiency or carbon reduction targets.
What Effects Your Energy Costs?
There are a few things that come into play when you need to consider when determining what will impact your energy costs. Here are six key ones to consider:
Type of Business
It goes without saying that the more energy you use, the more you pay for it. However different industries require different amounts of energy to function.
Seasonal Variations
In the winter, you’re more likely to use more energy to heat your workspace. That’s not to say you won’t spend money on air-con in the summer. But even something as simple as opening a window can help reduce the temperature inside.
Even if it’s double-glazed, shutting a window will only get you so far in the colder months.
Energy Efficiency Measures
Speaking of double glazing, this is a great way to improve insulation, keep more heat in, and reduce the heating you need. Conduct energy audits to find and rectify inefficiencies in your appliances. Also, just turn devices off at the mains when you’re not using them; your energy bill will thank you.
Location
Location, location, location. Never has this been more true than when calculating your energy costs. In 2024, for example, electricity unit costs for businesses vary from 27.3p/kWh in London to 30.8p/kWh in areas such as North Wales, Merseyside, and Cheshire.
Market Fluctuations
There’s no need to worry about this one if you’re on a fixed tariff (unless it’s coming to an end and you need a new one, of course). But if you’re on a variable or tracker tariff, then market conditions will impact the price you pay for your energy. For better or for worse.
Compliance and Taxes
Extra costs such as VAT and Climate Change Levy (CCL) must be accounted for when determining how much you pay for energy.
Understanding Your Energy Costs
When you sign up for a supplier, there will be a lot of terms and acronyms you may never have heard of before. These can seem confusing at first, but don’t worry about that; we’ve got you covered. This way, when you switch providers, you’ll be armed with all the knowledge you need to make the right choice.
- Standing Charges: A fixed daily fee covering the cost of maintaining your energy supply, including infrastructure and administrative services.
- Unit Rates: The cost per kilowatt-hour (kWh) of energy you consume.
- Pass-Through Costs: Charges that suppliers pass on to customers to cover expenses like network distribution, environmental levies, and government obligations.
- Metering and Maintenance Costs: Fees associated with the installation, maintenance, and reading of energy meters.
- Green Levies (Policy Costs): Charges imposed to fund renewable energy initiatives and subsidies.
- Regional Variations: Differences in energy costs based on geographic location are influenced by factors like distribution expenses and regional policies.
- Late Payment Fees: Additional charges incurred when energy bills are not paid by the due date.
Other Costs
- VAT: Value Added Tax applied to energy bills, typically at 20% for businesses; this can be reduced to 5% if you use less than the minimum threshold of 33 kWh of electricity or 145 kWh of gas per day.
- Climate Change Levy (CCL): An environmental tax on energy delivered to non-domestic users aimed at encouraging energy efficiency; businesses can reduce their CCL liability by entering into Climate Change Agreements (CCAs) to receive discounts on the levy.
How Can I Switch Energy Provider?
Hopefully, that’s cleared up some questions that you may have about business energy and why switching can help your business. The last question you most likely have is, ” How can I switch my business energy supplier?”
Thankfully, the process couldn’t be more straightforward; all you have to do is tap the “Start Free Quote” button to compare prices. This is a FREE service, and there’s no obligation to commit, so tap the button, follow the prompts, and get comparing now!
FAQs
Are business energy prices capped?
Unlike residential energy, business energy prices are not capped. This makes it essential to find a competitive deal as soon as possible. Using a business energy comparison tool can help identify the best tariffs available.
What Is the difference between business and residential energy?
Business energy works similarly to residential energy but with key differences:
- Business tariffs often come with cheaper rates.
- VAT on business energy is 20%, compared to 5% for domestic energy, though some businesses qualify for lower rates.
- Businesses also pay the CCL, while homes do not.
What is an energy audit?
An energy audit evaluates your building’s energy consumption. It aims to identify inefficiencies and recommend improvements to reduce energy use and costs. Conducting an energy audit can lead to reduced energy bills and increased energy efficiency.
What is green energy?
Green energy is energy produced from natural sources that are environmentally friendly and sustainable, such as wind, solar, and hydroelectric power. These sources generate electricity with minimal environmental impact, reducing greenhouse gas emissions and promoting sustainability.
How much can I save by switching?
Because of all the different factors that come into play when determining the price of energy, it’s hard to give an exact answer. However, if you use our FREE service, you can compare energy quotes from various energy providers in the UK! All of our quotes are no obligation, so if you don’t like what you see, you can just walk away.
