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Business energy: 54% of UK energy supply is wasted


A new report reveals that £9.5 billion of commercial energy is lost every year, with UK business energy costs potentially £570 million lower. How and why?

A report released today shows how more than half of commercial electricity is lost before it reaches homes and businesses.

Wasted business electricity

The analysis, led by the Association for Decentralised Energy (ADE) finds that wasted total loss of energy equals the power generated by: 37 nuclear power stations; a landmass the size of England of bioenergy crops; or wind turbines covering 40% of Scotland.

The waste dwarfs nearly all proposed efficiency measures, with the report claiming it undermines efforts to create a competitive, modern economy as both consumers and businesses are faced with higher energy costs.

Ageing power stations, inherited from the public system of the 1960s and 70s, are one of the most glaring issues. Less than 10% of UK power stations currently recover waste heat, a missed opportunity to save £2 billion annually.

The UK’s electricity network’s efficiency also leaves much to be desired. Network efficiency has not improved since 1990. If UK transmission and distribution losses were equivalent to those in Germany (the best in Europe), energy users would save £605 million a year.

There are some incentives: UK networks are required to reduce losses as far as ‘reasonably practical’ or economically viable and the regulator, Ofgem, can reward network companies for reducing losses up to £32 million over the next five years. Yet this is insignificant compared to the Capacity Market, which will potentially add more than £1 billion onto consumer bills to build new power generation every year.

Of most relevance to small to medium sized businesses is the revelation that long term policy support could cost-effectively reduce business and public sector bills by £570 million.

Best business electricity suppliers

The 14 organisations that have collaborated to publish Less Waste, More Growth: Boosting energy productivity, including representatives of industrial manufacturers such as EEF and environmental groups such as Greenpeace, claim that there are immediate, practical and cost-effective ways of reducing this waste, which could save the equivalent of more than £3 billion a year.

Louise Kingham, chief executive of the Energy Institute (EI), said the EI’s own research among its members highlighted the need for a systemic and more efficient approach to generating energy and therefore reducing waste – better balancing the energy system as a whole, across both supply and demand. “There is also a call for greater policy continuity to ensure there is a long term ambition by Government to achieve those goals. It is a huge challenge, but one that, together, I believe we can meet for the benefit of all.”

The report outlines three main recommendations to help achieve these savings:

  1. Government should aim to improve energy system productivity year on year as is done in countries like the US and Germany, with the purpose of reducing energy costs for users.
  2. Electricity generators, networks and businesses should be able to contribute to a strong, more productive economy. For business, this means combining a revised energy tax regime with clear, simple and investable policy to leverage improvements in energy productivity.
  3. Government should enhance the natural market direction with a more solution-based approach to its energy policy assessments, allowing the demand side and the supply side to compete equally.

Finding cheap business energy

Many UK SMEs may understandably be frustrated to realise that much of their business electricity tariff or business gas rates are in fact due to wastage.

As Paul Raynes, EEF Policy Director, said: “British firms and British consumers are paying swingeing surcharges on their power bills whilst these far lower cost options remain untapped. The sinful waste of energy before it before it even reaches those bill payers isn’t fair on them, or the planet.”

Tim Rotheray, Director at the Association for Decentralised Energy, shared similar sentiments: “The fact that we waste enough energy to pay half the electricity bill of every home in Britain should be a national embarrassment. Wasted energy reduces our productivity, undermines efforts to create a competitive economy on a global level and causes unnecessary emissions.”

SwitchMyBusiness.com agrees that the Government and business energy suppliers can and should cut business energy waste. However, despite the report’s identification of its recommendations as straightforward, we believe that in the current straitened economic circumstances, the necessary investments will take time to materialise.

In the meantime, making business energy efficiency savings will help, as Dr Douglas Parr, Policy Director at Greenpeace UK, said: “Cutting energy waste wherever possible should be a no-brainer. You can lower energy bills, cut carbon emissions, and boost energy security at a single stroke.”

Switch business energy supplier

However, the easiest way to reduce spending on business energy is almost always to switch business energy suppliers, especially as an array of unpredictable events can influence business energy bills.

Even those locked into a long contract could find that paying the exit fees still leaves them significant savings. And doing this comparison doesn’t have to be onerous: to compare business energy suppliers can take just 20 minutes: give us a call on 0330 0100 251 (or request a call back using our form).

Our dedicated pages have lots more information about business gas and business electricity.

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