Energy Prices Are on the Rise: It’s Time to Start Metering!

Two weeks ago, the BBC published the headline: “Energy bills to rise by at least £139 for millions of households.” Whilst this is certainly an alarming statistic, it fits a more gradual trend in energy prices over the last two decades. In fact, the average household bill for gas was 221% higher in 2019 than in 1999, with electricity costs inclining upwards by 193%. But why? And what can we do to minimise our energy costs, both in commercial and residential properties?

There are several factors which could explain rising energy prices. One explanation for the most recent rate increase is that behavioural changes have put greater demand on energy services. 

During the pandemic, people were at home using more electricity for heating, entertainment, hot water and cooking. As one Which? article explains, “People rushed to buy hot tubs in last year’s heat wave” whilst “electric patio heaters have been popular throughout lockdown for outdoor gatherings when indoor entertaining was off limits.” Hot tubs have been estimated to cost anywhere between 75p and £1 per day in electricity whilst a single, electric patio heater uses a considerable 2 KW per hour -or just under 30p every hour. As such, it’s easy to see how some of the money people have saved on frequenting bars/restaurants and attending real-world events has been funnelled into energy.

Another factor to consider is the wholesale price of gas, which goes up and down based on supply and demand, alongside contracts within the commodity futures market wherein prices for future deliveries of oil and gas are agreed. Wars, natural disasters and political unrest within oil-rich regions all play part in growing wholesale rates within the UK. 

Environmental abnormalities also affect gas and oil prices. A longer winter recently disrupted gas storage and contributed to a rise in energy prices.

Finally, regulation is an important factor in determining energy prices. When it costs more to obtain gas, suppliers raise their prices in accordance with Ofgem’s price cap. This limit has been reviewed twice within the last year and at both opportunities, the cap was raised. Despite it’s function of regulating the energy market, many of the leading suppliers are setting their prices at the cap’s maximum limit. As such, further reviews could indeed mean more sudden price increases. 

Metering a Better Deal

With rising energy prices comes even more reason to implement energy metering within homes and businesses. Not only does each unit of electricity or gas saved become more valuable with higher rates but metering as part of demand side response allows consumers to side-step some of the core variables contributing to these increases. Here’s how:

As stated previously, oil and gas prices are fluctuant, subject to global issues including everything from public health emergencies to war and environmental changes to political unrest. If the past couple of years have taught us anything, surely it’s that social, economic, cultural and environmental change can occur rapidly. COVID-19 caused business closures and national lockdowns around the world, alongside the worst global recession since World War II. Throughout 2020 and 2021, cyclones, extreme rainfall; wildfires and hurricanes have caused climate-induced migration, with thousands of people losing their homes and in some cases, their lives. Given all of this, who knows what changes we will see within the next five or ten years?

Shifting your energy usage away from fossil fuels through smart metering and demand side response allows you to safeguard your energy bills from future price fluctuations. Using a digital energy metering system, you can compare your own energy usage against changes in the grid and switch energy-intensive appliances on during lower-demand hours. By doing so, you will be helping to reduce national demand for fossil fuels -and future fuel prices- as well as cutting your own expenditure through time-of-use (Economy 7 and 9) tariffs or demand side response schemes.

Although the most recent price increases affect variable tariffs (tariffs in which monthly rates change based on wholesale gas and oil prices), fixed tariff customers also stand to gain from metering. 

Taking Control of Your Spending

As a fixed tariff consumer, your energy prices may be secure for an agreed one or two year period but they will be subject to change afterwards. Fixed tariffs mean the price per unit of electricity remains the same but your monthly bill still depends on how much electricity you use. As such, intelligent metering is a valuable way to cut costs for all types of commercial and domestic energy customers.

Furthermore, metering simply provides you with more options as a consumer because several tariffs are only available to buildings with smart meters. Examples include tariffs wherein your energy consumption reading (taken every thirty minutes using a standard, domestic smart meter) allows you to access discounts for using electricity when wholesale prices are cheaper or on a particularly sunny/windy day (when solar/wind energy are most abundant). Metering also means that you won’t be faced with a nasty surprise when your bill arrives, as you can see when your energy usage is high and make changes to reduce it, thus helping you to maintain control of your spending and budget effectively. 

Through sub-metering, you can gain even greater control by singling out particular appliances, buildings or categories of equipment e.g. all fridges, an option which proves especially useful for commercial buildings with lots of appliances and energy-intensive technologies, for example, manufacturing machines or industrial freezers. In this way, sub-metering can create savings beyond your energy bills, informing the way you run your operations and the technologies in which you invest.

Finally, metering is essential in reducing your reliance upon the grid and integrating low-carbon technologies such as solar panels, heat pumps or solar batteries. Afterall, this is the ultimate solution and an excellent end goal for anyone wishing to escape the rising rates of large energy suppliers. 

As Paradise Energy Solutions explains, any home or business using these technologies rely upon real-time metering to establish “how much electricity [a] system is generating, how much energy you’re using, and how much energy you are still purchasing from the utility”. Metering forms the crux of efficient energy management and whilst we do not know what new opportunities lie ahead with further green innovation, it seems safe to say that metering will provide the basis for many advances in years to come.

If you’re looking to save on your energy within a commercial building, GridDuck can help. We offer a cloud-based energy management system and an all-in-one sub-metering solution, allowing you to automate, control and analyse usage with real-time data of all your appliances. To find out more, please arrange a quick and informal chat with Miles.