3 reasons why businesses should switch to green energy
In this short awareness post, we present five compelling reasons why it’s in the interest of any business to transition into green energy. This transition can take the form of (or a combination of):
- Procuring low-carbon energy from your business energy supplier.
- Installing your own business renewable energy generation on your premises
PS. Be sure to check the bonus comments on each section! 👀
- Buying green energy from the grid is cheaper in the long run
- Generate your own renewable energy is cheaper in the long run
- Indirect revenue through enhanced branding
1. Buying green energy from the grid is cheaper in the long run
For businesses that purchase power and gas from the national grid, there are two main reasons why opting for a green fuel mix is a cost-effective choice:
Carbon emissions have a price
Firstly, there are international climate commitments that the UK has embraced since signing the Paris Agreement in 2015 (as well as others). One of the mechanisms in place to ensure the UK fulfils its commitments is the Emissions Trading Scheme (ETS), which sets emission allowances for different sectors of the economy. If a sector fails to meet its emission reduction targets (and transitioning to green energy is a significant way to reduce emissions), it will incur higher costs over time. This primarily applies to the most polluting sectors, such as power generation and heavy industry. Still, it is almost certain that more sectors will have to join and adhere to the scheme over time. Therefore, the sooner your business adopts green energy, the fewer premiums it will face for emitting carbon in the future due to the ETS.
Wholesale electricity pricing is rigged
Secondly, the UK’s outdated electricity pricing system is persistently volatile because it is linked to the most expensive energy sources, often natural gas, rather than more cost-effective renewable energy contracts. This pricing mechanism benefits traditional energy (fossil fuel) companies, which can charge higher rates for their in-demand fossil fuels during times of crisis. Unfortunately, these higher electricity and gas bills fall on energy consumers (i.e., businesses and homes). Moreover, government schemes designed to alleviate energy poverty typically involve government borrowing, often contributing to higher inflation. This, in turn, affects individuals earning wages in British Pounds (most of us) as salaries are often unadjusted for inflation. By purchasing low-carbon energy from business energy suppliers instead of the standard fuel mix, businesses can incentivise suppliers and the industry to shift towards greener energy sources. This grassroots pressure to reform the pricing system will ultimately benefit everyone by lowering energy bills.
💡 Bonus: Businesses can choose between a variable or a fixed clean commercial energy tariff. If your business cannot install its own power generation, it can still opt for fixed electricity bills when market prices are favourable, providing cost protection.
- The Emissions Trading Scheme (ETS) explained!
- What are the UK’s climate commitments, and how can your business help?
- Why is business gas so expensive?
2. Generate your own renewable energy is cheaper in the long run
This reason is even more compelling than the first because the savings and return on investment (ROI) can be directly measured monthly with little room for speculation.
While a substantial initial capital cost is associated with acquiring renewable power generators, the long-term financial, branding, and resilience benefits make it too attractive to overlook. At present, a business can install these types of renewable energy generation:
Firstly, your business will become resilient to external factors influencing business electricity rates. When you invest in your own renewable generators, you clearly understand the costs involved in repaying any financing for the purchase or lease. By incorporating solar PV batteries into your setup, you may even achieve complete energy independence, relying on the national grid only as a backup option. Or even going entirely off-grid. As previously explained, the UK’s wholesale electricity pricing system is unfair and antiquated, and it will remain volatile as long as it’s tied to the most expensive kilowatt-hour. Gaining even a degree of independence from this system safeguards your business against price fluctuations over which you have no control.
Income through electricity arbitrage
Secondly, the system becomes even more cost-effective when you consider that you can sell any surplus renewable power back to the national grid. If your solar panels or other renewable power generators are MSC-certified, your business can sell its excess power back to the grid through the Smart Export Guarantee, allowing you to recoup your initial capital investment faster –similar to how renting a room in your property helps pay off your mortgage faster!–. And if someone at your business possesses the technical expertise to fine-tune your system, especially if it’s accompanied by a battery system, you may even begin generating profits through various electricity arbitrage strategies. It’s worth noting that you can leverage government grid support schemes to optimise these profits, amongst other things. Even at present, the possibilities are vast!
💡 Bonus: Businesses covering their power needs through self-generation are becoming future-proof. As you delve into the rabbit holes of what technology will enable for energy-independent businesses, investment in self-generation becomes an instant no-brainer. See the extended reading list below of some of these emerging energy trends!
- A guide to off-grid business energy
- B2b energy trading through blockchain-based systems
- Wireless EV charging and renting your staff’s EV to boost your business’s profitability.
3. Indirect revenue through enhanced branding
Regardless of your business’s business, environmental credentials are a seller. Marketing and PR teams know this, so nearly all businesses prominently feature a website section highlighting their social and environmental responsibilities.
But there’s a significant caveat: many businesses engage in blatant greenwashing, the practice of exaggerating inconsequential contributions to issues like water conservation, biodiversity, and carbon reduction to create the illusion of addressing the real problems.
For businesses, substantiating their commitment to the environment by procuring green energy from the grid or generating their own clean electricity is a powerful way to flex genuine environmental responsibility. While people may question claims such as using recyclable cups but then disposing of them in a regular bin, they will find it difficult to dispute the use of truly clean electricity when you have the fuel-mix disclosure and hardware to back it up.
💡 Bonus: Taking additional steps like voluntarily achieving carbon neutrality for your entire business through purchasing high-quality carbon credits, replacing gas central heating with heat pumps and installing EV chargers for your staff can provide future-proof marketing for your business. Whether you run a carwash, a marketing agency, or a large tech enterprise, everyone can benefit from the acclaim of using 100% renewable energy.
- What is ESG (Environmental, Social & Governance)?
- Is Direct-Air Capture (DAC) blatant greenwashing?
- Can Crypto help reduce emissions?