Paying for business energy can be a hassle. The problem is due to the energy market’s high and volatile energy prices in the market.
The price increase news in business energy is not as shocking anymore. You can say that it is because many energy resources are close to depletion and severe exhaustion.
The volatility in prices affects many businesses. Due to this, many companies employ business energy-saving machinations to mitigate the effect. For instance, Business Energy Comparison helps save money when switching energy suppliers.
A business must cut expenses that can affect and add to its daily operational costs. Thus, a venture must know the different factors that affect the business energy prices:
Supply and demand for business energy
Supply and demand have a direct relationship with the increasing business energy prices.
In part of economics, you can understand that the higher the demand, the higher the business energy prices. On the other hand, a small or low supply can increase business energy prices.
Moreover, knowing the equilibrium can determine the business energy prices in the market. You can establish a market price when you know about the equilibrium point. It is the point where the buyer and producer are willing to meet for the energy. Further, demand and supply were the necessary factors that can influence the business energy prices.
When many businesses demand more energy, you can expect that the prices will go higher. Consequently, when there is a limited supply, the market prices of business energy will also increase.
Temperature and weather conditions
Temperature and weather conditions affect the market prices for business energy. For instance, during winter, the electricity demand can go up.
One reason for this is you generate more electricity using heaters and gas. During summer, you can expect your business to use energy for air conditioning and cooling devices.
It is necessary to take note of the incoming La Niña and El Niño, where you can expect high business energy prices. As a business should expect, extreme weather conditions influence the business energy prices in the market.
In some parts, the weather conditions can also mitigate business energy costs.
For instance, during the rainy and wet seasons, you may see that there will be low-cost hydropower generation. Thus, this will be favorable to businesses because the energy prices will be lower.
However, during summer and drought, the energy supply will be lesser. So, expect the business energy prices to rise.
Global uncertainty and world events
Oil and gas, which are necessary for energy generation, rely heavily on the world and global events.
Today, we can note the current war that is happening that affects gas and energy prices around the globe. For example, the United Kingdom imports gas and energy from other countries.
However, the UK will have a lower energy supply due to different import conflicts and restrictions. Thus, this prompts the UK to pass the burden to consumers. Such as increasing the business energy prices.
You can take note of the political crisis that happens within the different parts of the globe. The sanctions that countries impose on one another can also affect the market prices for business energy.
Natural world events like natural disasters also affect business energy prices. Catastrophic cyclones and typhoons can damage the energy distribution lines.
These events can directly affect the business energy supply and prices. Further, during these times, the energy demand will also be higher.
Transmission and distribution systems
Business energy prices go high when the transmission and distribution line from the plant is far from your business location.
Your business should know that transmission and distribution lines give added costs to the price you pay for business energy. These lines have construction, operation, and maintenance costs that energy suppliers pass to consumers.
Different countries also have different prices for transmission and energy lines. Some countries have higher tax levies on energy prices due to higher distribution and transmission costs.
Take note that the farther your business location is from the plant, the greater the distribution and transmission cost you pay. Thus, your business must employ efforts to lessen energy consumption to save money.
Regulations and taxes
Another factor that affects business energy prices is different regulations imposed by the government and central authorities.
For example, the Energy Bill Relief Scheme aims to stop high and volatile gas prices. Thus, UK businesses and consumers will pay a fairer price for their electricity during winter. Due to the EBRS, there will be a discount on wholesale energy prices for businesses.
The discount price will comprise £211 per megawatt hour for electricity and £75 per megawatt hour for gas. Thus, many ventures can take advantage of lower energy prices for their business.
Taxes are also a burden that can affect the business energy prices. Many countries have energy levies collected at the expense of consumers.
Currently, the standard value-added tax employed in the UK is 20 percent on top of a business’s energy bill. The tax added is problematic to many companies that want to save more money on their energy bills.
However, in some circumstances, the 20 percent VAT can go down to 5 percent. Your business may be eligible for a reduced VAT on energy bills. The reduction will be possible when your business complies with requirements set by the government.
The bottom line
Business energy prices change from time to time. Though many factors increase the business energy prices, a business will need energy for its daily operation.
The market is highly unpredictable and volatile. Thus, every business must find creative ways to mitigate business energy costs.
Saving energy does not only help a business save money. It also enables more energy supply for different business ventures. With the continuous and collective effort of many industries, you can ensure that the energy supply will suffice.
Most of the time, price control relies on energy suppliers. However, as a business and a consumer, you should have sustainable efforts to help lessen energy prices.