How industries are facing different energy challenges this winter 

Many businesses across the UK are facing uncertainty as bills rise again. The government released statistics in November revealing that the number of company insolvencies remains much higher in 2024 than those seen during the pandemic, and the five years prior to that.

As companies grapple with rising costs, some pass on those prices to the end user - the customer. But others are unable to do this, especially in the public sector, and one major factor in all this is energy costs.

While wholesale energy prices have decreased since 2022 and 2023, when the previous government introduced the Energy Bill Relief Scheme, the base rate for electricity and gas for businesses has still risen this winter compared to summer prices. Rates remain high due to ongoing global factors, including the war in Ukraine and broader geopolitical tensions, which continue to disrupt energy markets.

How will this price rise impact companies in the colder months of the year?

As of October 2024, electricity prices have been capped at 24.5 pence per kWh, and 6.24p per kWh for gas, with a 31.6p standing charge. This is up from 22.36p per KwH for electricity, (60.1p standing charge), and 5.5p per kWh for gas, and a 31.4p daily standing charge.

The winter rise in energy prices often creates a ripple effect across various sectors, all of which face their own unique challenges and adaptations that they need to look at in order to become less energy-intensive. In retail, for instance, they often need to grapple with higher heating and lighting bills, especially during extended opening hours over the busy Christmas season.

In the hospitality and leisure industry, restaurants, cafes and hotels see an inevitable spike in usage, from running ovens and fridges to keeping indoor spaces warm for customers, as winter months often coincide with their busiest times.

Businesses can use technology such as Artificial Intelligence (AI) to help them lower their energy costs over time, and improve the efficiency of their utilities usage. Some tools can analyse energy consumption patterns, and identify inefficiencies such as overuse of certain appliances which may be energy-intensive.

Predictive maintenance, powered by AI, can also flag potential equipment failures before they occur, ensuring that the machinery runs efficiently with no down-time. It can also align your energy consumption with off-peak periods, to take advantage of lower rates through dynamic pricing and improve energy forecasting and revenue planning.

Energy: Understanding the picture across the UK

To understand which sectors may benefit the most from technology to reduce their energy consumption, SAS has undertaken analysis to establish how much industries could be seeing their energy prices rise this winter.

SAS reviewed ONS data from over 1.7 million business-owned buildings in nine sectors across the UK to understand how much energy (gas and electricity) is being consumed by each industry per month.

We then took the average energy consumption (in kWh), for each building, by month and by industry. This led to a typical cost per month based on the average base rates up to September 2024, and then the cost per month based on the new base rates after the change in October 2024.

Which industries may see the biggest growth in energy costs?

For overall energy consumption, manufacturers that work in factories producing food, drinks, textiles and metals, are likely to see the biggest growth in cost per month, as their usage is almost double that of any other industry. Per business-owned building, each factory consumes around 30,000 kWh of electricity per month, and 200,000 kWh of gas.

Working out at around £20,057 per month, per building, manufacturers may see an average increase of £2,180 in their energy costs, by factory, depending on the business rate they are on. The heavier consumption is likely due to activities such as the extra heating, cooling and chemical processing required to manufacture items which require substantial power.

Additionally, many manufacturers may operate on a 24/7 schedule to maximise production, leading to constant energy consumption in a large facility. And unlike retail or office spaces, factories depend heavily on both electricity and gas for production.

With manufacturing analytics software, factories and other similar businesses can reduce their energy-related production costs by an average of 10%, by comparing current and retrospective production runs showing the key drivers of energy consumption, alongside carbon footprint reduction.

Interestingly, retail saw one of the largest increases in expected electricity usage and bills (£620 per month), per building, but was the lowest of all industries analysed based on gas expenditure.

This is likely due to retailers relying more heavily on electricity, due to longer opening hours as Christmas approaches, providing heating for workers and customers, and also festive displays including lighting and decorative set ups. On top of this, retailers experience more foot traffic in December, leading to more frequent use of energy-intensive equipment such as escalators, and even electronic payment systems.

Buildings used by the emergency services may also expect to see a substantial increase in monthly spend this winter, with rises of £1,228 for gas and electricity leading to an average cost of £12,000 per building. With the industry needing to work around the clock and requiring constant heating to maintain comfortable conditions for staff and patients, the continuous demand in the colder months will inevitably lead to higher gas consumption.

And with sanitation of utmost importance in hospitals and fire stations, they may also require more hot water for cleaning and patient care, often powered through gas.

Overall increase in expected energy bills, by building-use in the UK 

Overall increase in expected gas bills, by building-use in the UK 

Educational organisations are likely to see all energy prices rise by an average of £700 per month - despite the fact that they’re usually closed for some parts of the Christmas period. There are over 5,000 listed school buildings in the UK, which often require substantial energy consumption for warmth, straining already tight budgets.

Universities face added pressure from energy-intensive facilities such as laboratories, which may lead to other cost-cutting measures. Artificial Intelligence (AI) and IOT analytics in the education sector could help higher and further education leaders to make predictions about energy demand and peak times, conserve energy and operate in a more cost-effective way.

Overall increase in expected electricity bills, by building-use in the UK 

Many businesses can expect to see substantial growth in electricity bills, with offices also seeing an expected increase of over £380. Though this may subside slightly if staff are able to work from home in the winter, heating becomes more of a priority with staff likely to stay inside for longer and perhaps take shorter breaks, and the shorter daylight hours also mean offices require artificial lighting for longer periods.

Duncan Bain, Senior Energy Advisor at SAS UK & Ireland, said:

"The energy crisis has placed significant pressure on businesses, forcing many to navigate the challenge of rising costs amidst constrained budgets - and unfortunately this could lead to some facing administration or liquidation."

“While it’s understandable that some may worry about increased energy bills, the impact will vary widely, based on business size and consumption patterns. Our research sheds light on the projected energy costs for businesses this winter and underscores the importance of leveraging technology to monitor and optimise energy use, since it’s not clear when prices will stabilise after the volatility of the last few years."

“That said, these findings only represent industry averages – businesses will face higher or lower costs depending on their operational needs and energy efficiency measures."

Utility providers and businesses generate vast amounts of data daily, from energy consumption patterns to operational metrics, offering opportunities to enhance efficiency and reduce costs. AI and advanced analytics transform this raw data into actionable insights, optimising energy use and minimising waste. By identifying inefficiencies, forecasting peak demand, and providing tailored energy management solutions, AI not only reduces costs but also improves resilience and supports sustainability goals.

ENDS

Methodology

SAS took the data from the Non-domestic National Energy Efficiency Data-Framework (ND-NEED) 24 (England and Wales), published on 9 August 2024.

It then took data from the sheet based on non-domestic electricity consumption by building use, and took the most recent use, in TWh, before converting it to kWh. It then took the number of buildings by industry, and found an average kWh per year, and per month, by industry, for both electricity and gas.

To understand how prices may fare in winter 2024, SAS took the new unit rates for electricity and gas, before comparing them with the units in September 2024, to understand how each sector could fare.

Data correct as of October 2024. 

Duncan Bain
Senior Energy Advisor at SAS UK & Ireland