The rising energy costs have been the talk of the decade. The Boris Johnson administration saw energy prices soar due to a range of factors, most notably a surge in demand after COVID-19 lockdowns, a spike in gas prices, the Ukraine invasion, and Ofgem increasing the price cap for energy. Manufacturing businesses were deeply affected. The Office for National Statistics reported that between 2021 to 2022, UK businesses experienced a 36% increase in electricity expenditure and a 50% rise in gas-related spending.
Johnson was criticised for not acting sooner to support SMEs with The Energy Bill Relief Scheme for businesses, which was not announced until September 2022, after Johnson resigned. Though the government has implemented measures to support manufacturing businesses facing rising energy prices, such as the Industrial Energy Transformation Fund, experts say the industry is still suffering.
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The Challenge of Rising Energy Costs
Sixty percent of manufacturers have said that businesses are still under threat due to the challenges of soaring energy prices, according to Resolve Energy. To tackle this, manufacturers have been told to switch to renewable energy to manage costs, but this transition results in a lengthy queue to connect new projects to the grid—once again halting manufacturers' chances in finding cheaper alternative renewable energy.
Phil Thompson, CEO of Balance Power, notes how hard it is to access renewable energy as a business and the ways in which rising energy costs are impacting manufacturers.
“Large energy consumers are struggling to get reliable power out of the network, meaning that businesses are struggling with expansion challenges,” he says. “If a business needs greater energy requirements, it is generally not there, or it is very difficult and costly to access.”
Thompson says that the general forecasts suggest that energy bills for businesses are going to get more expensive.
“Large energy users are keen to cut costs and protect themselves against rising costs into the future. They want costs to be reduced immediately and for it to be certain in the future that costs will remain low,” he says.
The Struggle of Accessing Renewable Energy
Balance Power is a UK-based energy equipment and solutions provider. They collaborate with landowners, land agents, DNOs, and financial institutions to help deliver various energy projects.
Thompson says that there is a problem on both sides of the energy system—with grid connection becoming a huge issue. He says that as decarbonisation has become a larger focus for businesses, people have become victims of green washing by signing green energy contracts but are doing little to help these manufacturers transition.
“The grid is still needed to distribute power from a solar farm that may be 200 miles away from the end user,” he said. “So, businesses cannot access renewable energy if they have this grid connection problem.”
Thompson says that his company is tackling this issue by pushing power in the grid. “We are speaking to energy users and asking relevant questions, such as what we will do if we find a piece of land as near as possible to build that solar farm and put a dedicated cable in so that project effectively doesn't touch the grid at all,” he said.
“So, the challenge is that businesses want to decarbonise, but they are struggling to find a solution that is coming through the grid. What we are doing is almost bringing the solution directly to the business to try and achieve it that way,” he says.
Behind-the-Meter Developments as a Solution
Thompson says behind-the-meter developments can help companies manage their energy costs while becoming more renewable. This involves a partnership between businesses and a clean energy developer, who will find the best method for generating renewable energy on the premises or nearby land.
Thompson says that behind-the-meter acts as a business grid connection on-site. “Behind the metre simply means we are on the customer's side of that grid connection,” he says. “We do not touch the network or the grid side of it.” The energy generated is supplied directly to the business through a private wire.
Thompson says that because this method bypasses the grid, businesses can avoid third-party costs and additional charges.
“We can provide the client a price that is much lower than they can get from an existing energy supplier, or any other means of getting it, traditionally through the grid,” he says.
The Disadvantages of Behind-the-Meter Developments
Thompson says that the challenge to this approach is needing to put the private wire in for the solution to work.
“We need to dig up the road to bring that solution in,” he says. “So, our challenge is finding a project as close as possible to the business that needs the power, because for every metre of road that we need to dig up costs more money.”
He also says that renewable energy is not a catch-all solution. “Renewable solutions do not generate power all the time compared to other solutions that are connected to the grid that provide power requirements 24/7,” he says.
“You can only provide solar energy when it is sunny or wind energy when it is windy. So, a business will still need an existing energy supplier,” Thompson says.
Despite this, Thompson says that the aim of the solution is to save as much money as feasibly possible.
“With our solutions, we aim to save 30% of a company’s annual needs. Our focus is to make a solution that saves them the modest amount—30% of the time,” he says.
The Road to Net Zero and Energy Resilience
UK businesses are putting in measures to try and help the country reach net zero by 2050. The Sun reported that British Gas, in collaboration with Heata, is conducting a trial where excess heat from data processing units is used to provide free hot water to households. This initiative aims to reduce energy bills and carbon emissions.
The government has also pledged to allocate £190 million to assist industries in reducing emissions and energy costs, according to GOV.UK.
Thompson says that Balance Power is also putting forward initiatives to reach net zero but says that the government needs to do more.
“We're pushing for some policy changes to direct businesses to these behind-the-meter solutions,” he says. “The government needs to do a much better job at speaking to businesses, saying ‘you should be doing what you can to generate your own energy and consume it, because that is going to cut your costs. It is going to decarbonise your business. It is going to make you more energy resilient,’” he says.
Thompson comments on how hard the industry is finding it to decarbonise—and how businesses are not aware that support is out there.
“The solutions are out there. But the industry is finding decarbonisation challenging—we do not know how to do it.”
“If we were to have a request to the industry it is to engage with businesses like us, who are willing to almost give free consultancy and help businesses identify solutions. That way, businesses know what the options are to save money and become more sustainable,” he says.
