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Energy Industry News

Spring Statement: Government scraps business rates on ‘green’ technology

Chancellor Rishi Sunak’s latest Spring Statement has produced headline-grabbing announcements such as a cut to duty of 5p per litre on petrol and diesel.

Although a cut to fuel will undoubtedly help many small business owners, he also announced two new business rates reliefs will be brought forward by a year to come into effect in April 2022. 

There will be no business rates due on a range of green technology used to decarbonise buildings, including solar panels and batteries, whilst eligible heat networks will also receive 100% relief. Together, the government says these measures will save businesses more than £200 million over the next five years.

The Chancellor also reduced the VAT on energy-saving materials such as solar panels, heating pumps and roof insulation from 5% to zero for five years, helping families become more energy efficient.

A typical family having rooftop solar panels installed will save more than £1,000 in total on installation, and then £300 annually on their energy bills. 

At the time of writing, it is unsure whether these measures will also be available on energy-saving measures for commercial premises.

Why are commercial energy prices continuing to rise?

Global energy prices were volatile even before Putin’s invasion of Ukraine and remain much higher than pre-pandemic levels. Increased global demand for energy, short-term supply disruptions in major oil-exporting economies, weather patterns in Europe and Asia affecting both the supply of renewable energy and the demand for heating and lower gas storage balances have all contributed to higher prices. As the OBR explains, the UK is “a net energy importer with a high dependence on gas and oil”, meaning higher energy prices have led to a deterioration in the UK’s terms of trade – the relative prices of the UK’s exports compared with its imports.

Following Putin’s invasion of Ukraine, energy prices have risen further amid disruptions to the supply of Russian energy to global markets. Global oil prices rose 9.3% between the week beginning 14 February (the last full week before the invasion) and the week beginning 14 March, and UK and European wholesale gas prices increased by more than 30% over the same period. 

By the beginning of March, gas price were more than 20 times higher than they were just two years ago.

While the Office for Gas and Electricity Markets (Ofgem) energy price cap protects consumers from the rapid changes observed in the wholesale energy market in the short term, this cap is increasing by 54% in April and is expected to rise further in October. 

The rise in oil prices has already affected petrol pump prices in the UK, which are now at record highs having increased by almost 12% over the past month.

The Institute for Fiscal Studies (IFS) recently warned that rises in energy prices since the Russian invasion of Ukraine could increase the hit to households to around £43 billion.

How else is the government planning to tackle rising commercial energy prices?

The government will soon be setting out an energy security plan. This will include measures across hydrocarbons, nuclear and renewables to support energy resilience and security while delivering affordable energy to consumers. Building on the Prime Minister’s Ten Point Plan for a Green Industrial Revolution, the government is raising its delivery ambitions across energy technologies to end the UK’s dependency on hydrocarbons from Russia.

What can businesses do to reduce their energy costs in the meantime?

Commercial energy customers would usually be encouraged to shop around to secure the best deal on their business energy contracts. However, in the current climate switching is not always possible and this is being exacerbated by several small energy suppliers collapsing amid soaring costs.

If you are unable to switch energy deals or have been moved onto a higher business tariff, there are other ways to help reduce your commercial energy consumption. 

Our previous blog outlines a series of way businesses can save money on their energy bills in the current climate.

Energy efficiency improvements, such as having a smart meter installed, can save businesses around 10% on their annual fuel. Improving the efficiency of your heating system and ensuring solid wall and floor insulation can also make a big difference.

How can Enexus help?

Enexus Energy develops bespoke, innovative strategies to optimise the way your business purchases, generates and consumes energy.

We can help you take proactive measures for your 2022 business energy contracts. We can track the market on your behalf, source the very best prices and suggest alternative contract structures to ensure you buy energy in the most cost-effective way. We can also help you reduce consumption and guide you to lasting savings on your energy costs. 

To see how we can help, please get in touch:

Email: info@enexusenergy.co.uk

Tel: 01253 966 960


Emma Grimshaw

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