Is now the right time for businesses to invest in renewable energy?

As energy prices rise and the world shifts towards sustainability, now could be the perfect time for businesses to invest in renewable energy.

The Rising Cost of Traditional Energy Sources

Business energy prices in the UK are expected to rise in January 2025 due to increased wholesale costs. This trend is alarming for businesses of all sizes, from micro to large enterprises. The increased costs are primarily driven by the volatility of fossil fuel prices, which are influenced by international politics and the complexities involved in obtaining, transporting, and storing these energy sources.

Here are some average business energy prices by business size:

• Micro

Up to 5,000 kWh annual usage, unit price per kWh of 25.5p, and standing charge of 60.7p

• Small

5,000–15,000 kWh annual usage, unit price per kWh of 25.1p, and standing charge of 75.9p

• Medium

15,000–25,000 kWh annual usage, unit price per kWh of 24.9p, and standing charge of 84.1p

• Large

25,000–50,000 kWh annual usage, unit price per kWh of 25.3p, and standing charge of 84.1p

Most businesses are charged VAT at the current rate of 20% for business gas and electricity. However, some businesses may be eligible to pay the lower, domestic VAT rate of 5%. (Data from https://www.businessenergy.com/business-electricity/, correct as of December 2024).

Given these uncertainties and expected cost increases, relying solely on traditional energy sources could pose significant financial risks for businesses. The standing charges and unit prices for electricity have been climbing, and with VAT rates adding to the burden, businesses are looking at higher operational costs in the near future.

Financial Benefits of Switching to Renewable Energy

Renewable energy sources like solar and wind have become increasingly affordable and efficient. In fact, solar energy emerged as the most cost-effective renewable power source in 2021. By investing in renewable energy, businesses can significantly reduce their energy costs over time.

• Heat Pumps.Heat pumps offer a renewable option to conventional gas or oil boilers by extracting energy from the environment to heat your home or business.They are approximately four times more efficient than gas or oil boilers, making them a cost-effective and sustainable choice. 

Additionally, many governments offer incentives and subsidies to promote the adoption of renewable energy. These financial benefits make the transition not only feasible but also economically advantageous for businesses aiming to optimise their operational expenses.

Predictable Energy Costs and Business Benefits

One of the most compelling reasons for businesses to invest in renewable energy is the predictability of costs. Unlike fossil fuels, which are subject to price fluctuations due to geopolitical tensions and supply chain issues, renewable energy sources offer more stable pricing.

Renewable energy plays a crucial role in the de-carbonisation of the power sector by significantly reducing carbon emissions, which are a major contributor to global warming and climate change. By shifting from traditional fossil fuels like coal, oil, and natural gas to cleaner energy sources such as solar, wind, and hydroelectric power, we can drastically cut down the amount of carbon dioxide and other greenhouse gases released into the atmosphere. This transition not only helps in mitigating the adverse effects of climate change, but can also have a positive representational effect on your business.

Strategic Advantages and Competitive Edge

Investing in renewable energy is not just a cost-saving measure; it also offers strategic benefits. Businesses that adopt renewable energy can differentiate themselves from competitors by showcasing their commitment to sustainability and innovation.

Many government departments, local authorities, and businesses associated with them have increasingly stringent requirements for their suppliers to demonstrate strong renewable energy credentials in their tendering process. This means that companies looking to secure contracts must not only show a commitment to sustainability but also provide evidence of their investments in renewable technologies. These credentials are often a deciding factor in the awarding of contracts, as they align with broader governmental and organisational goals to reduce carbon footprints and promote environmental responsibility.

Without investing in renewable technology, your business could find itself at a significant disadvantage, potentially excluded from tendering for new work. This exclusion could result in missed opportunities for growth and collaboration, as more entities prioritize partnerships with environmentally conscious suppliers. Therefore, integrating renewable energy solutions into your business operations is not just a matter of compliance but a strategic move to ensure continued access to lucrative contracts and partnerships in an increasingly eco-focused market.

This proactive approach can enhance a company’s brand reputation, attract environmentally conscious customers, and even open up new market opportunities. In a world increasingly focused on sustainability, businesses that act now will gain a long-term competitive edge.

Sustainability and Long-Term Growth Opportunities

The transition to renewable energy aligns with global efforts to combat climate change and reduce carbon emissions. By reducing dependency on fossil fuels, businesses can contribute to a more sustainable future while also benefiting from the economic advantages of renewable energy.

Moreover, the current energy crisis presents an opportunity for businesses to innovate and grow. By investing in renewable energy, companies can transform this challenge into a catalyst for long-term growth and sustainability, ensuring they remain resilient and competitive in the years to come.

For more information on financing renewable energy projects, feel free to contact our team.