Jamie Langrish is dreading his next energy bill. Desperately trying to save money at the three pubs he runs in northwest England, last month he closed the kitchen at the Bakers Vaults in Stockport because his bill had leapt from £16,000 a year to £46,000. He simply could not make enough money from serving food to cover the difference. “It’s a horrible calculation, but there’s just no point in keeping it open,” he said.
Langrish is just one of thousands of business owners worried about soaring costs. This week, the government is expected to put flesh on the bones of its plan to help firms survive a winter of huge energy bills. That may take the form of a cap on prices similar to the support already announced for households from October, or a discount on energy rates. It will last for six months, and then be reviewed to decide which sectors still need help. But it may not kick in until November, with payments being backdated to October.
The wait for details is tortuous for firms wondering whether they can afford to keep the lights on. Many are already taking matters into their own hands to shave costs where possible. From launderettes to precision tool makers, companies are ticking off their own checklist of emergency measures.
Lights out
Perhaps wary of stoking blackout fears, the government has been reluctant to talk about lowering energy consumption — unlike in Germany, where firms have been warned that their power might be cut.
Nonetheless, it is sensible to examine every bit of energy use. Langrish, for example, has changed his back-office lightbulbs to energy-saving LEDs. And he is not switching on his front-of-house lights until a minute before opening time. “It works OK for now,” he said, “because we’ve got natural light from the windows. But come winter, that’s not going to be so easy to do.”
Chris Rea, managing director of Rotherham-based seal maker Aesseal, knocked thousands of pounds off his energy bills by installing a voltage optimiser that reduced the amount of electricity his factories took from the grid to better match the voltage of his appliances. He recommends other firms “do the little things — make sure you have the LED lights, work out what will give you a return on investment”.
Chill down the office
The International Energy Agency recommended earlier this year that households across Europe turn down their thermostats by 1C to conserve gas. The same principle applies at work. The Broadway Initiative, a project promoting sustainability that is backed by trade bodies such as the CBI, recommends a temperature no warmer than 19C in offices. It also proposes that workplaces adopt a “dead band”, so the heating shuts off at 20C and air conditioners start at 24C.
Sort out your bills
Firms must understand their energy contracts, as many expire in October. For households, the government has proposed a price cap of 34p per kilowatt hour (kWh). For companies, that may be higher — perhaps about 40p — but still below the 80p per kWh that some energy companies are charging.
Stephen Cross at energy broker Brownlow Utilities said he was advising smaller firms to move to a floating-rate tariff when their contracts expire, so they are not committing to buying a certain volume of energy at a fixed price. Previously, small and medium-sized enterprises (SMEs) were better off fixing their prices — but now such deals are few and far between, and usually require a big deposit. “For the first time, we’ve been getting smaller clients flexible agreements, which they can use until hopefully the market has calmed down,” said Cross.
Solar
The energy crisis has inspired a boom in solar panels in the commercial sector, according to trade body Solar Energy UK, which reported that the number installed during the first half of this year was almost double the amount for the same period last year.
Aesseal is installing 2,300 solar panels and has even replaced the roof of one of its facilities to strengthen it to bear panels and to add insulation. Rea reckoned this would save £630,000 a year in energy costs.
Heading into winter may not be the ideal time to install solar panels, but it may help firms that have “hedged” or fixed their prices until early next year, and face a cliff edge in the spring.
Get smart
Matthew Farrow at the Broadway Initiative said firms should find out where their costs lie. “Understanding your consumption is really important,” he explained. “SMEs need to know what is it about their business that is using the most electricity or gas.” This could entail using a smart meter or a sub meter, which measures consumption on an individual appliance.
The Broadway Initiative is trying to pool cross-industry and sector-specific advice in one place on its Zero Carbon Business website. “Firms need advice that is both centralised and credible enough that they can trust it and easily find it,” Farrow added.
Maintenance and insulation
Out-of-date equipment can be a drain on a firm’s energy resources, so maintaining it and insulating premises could make incremental improvements to bills. Mark Derry, executive chairman of Brasserie Bar Co, said that as an alternative to using refrigerators, his restaurant group was looking at specialist wine chillers that cool wine in two minutes. He may also try replacing gas hot-tops in the kitchens with induction hobs, as well as installing solar panels and heat-recovery systems to use heat from the cookers for central heating in the winter.
Derry said: “We’re desperately trying to reduce our energy usage — perhaps we can cut 10 per cent, maybe even 20 per cent. But the prices are going up 500 per cent. That’s how serious this situation is.”
Tackling refrigeration costs can help cut energy bills, with Zero Carbon Business recommending keeping fridges no more than 75 per cent full, repairing door seals and clearing them of frost.
Chris Young, of Derbyshire parts maker Labone, said he was looking at upgrading the energy-intensive moulding machines used by the firm to keep costs down. But he acknowledged: “That requires cash. There’s a limit to how much investment you can make based on future payback when you’re already sitting on additional outgoings.”
Cut hours
A more drastic option is to cut output or, where possible, change working patterns to avoid the peak hours of 4pm to 8pm, when electricity prices are highest.
Charlotte Childs, national officer for manufacturing at the GMB union, said a number of firms were dropping from three shifts a day to two, totalling 16 instead of 24 hours, to save on energy — although workers were being kept on full pay. “Some small and medium-sized manufacturers are dropping shifts and will look to make up production at a later date,” she said.
Langrish, in Stockport, is considering closing on quieter days of the week in January and February, which are always tough months for pubs. He said there was a limit to the price rises he could push through to customers who will be struggling to pay their own bills. “We’ve put a winter plan in place, but we need to wait to see how much help we’re going get,” he said.
Like others, he is hoping that the government does not drag its heels in detailing support. “It’s just exhausting — to think we just went through the pandemic,” he added. “There’s no way we’re going to make any profit at the moment. We’re just hanging in there.”