The recent UK Government Energy Bill Relief Scheme (EBRS) guidance for non-domestic customers, details how businesses will receive short-term support on their energy costs this winter.
For all non-domestic energy users in Great Britain, the government support price is set at £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas. A comparable rate will be set for Northern Ireland.
The EBRS guidance provides a working example of a large energy user:
A hospital uses around 2,000 MWh of electricity and 7,900 MWh of gas each month. They are on a fixed contract that they signed in June 2022, giving them a current monthly energy bill of about £1.7 million. At the time they signed their contract, wholesale prices for the next 6 months were expected to be higher than the government supported price of £211/MWh for electricity, and £75/MWh for gas, meaning they can receive support under this scheme.
The difference between expected wholesale prices when they signed their contract and the government supported price is worth £76/MWh for electricity and £27/MWh for gas, meaning they receive a discount of £370,000 per month, reducing their original bill by over 20%.
Interpreting the Government example above shows the hospital was paying approximately 37.6p/kWh for power and 11.2p/kWh for gas. With the capped price savings this would reduce to 30p/kWh for power and 8.5p/kWh for gas.
Taking an industrial user and assuming the capped prices above, the potential of installing a Combined Heat and Power (CHP) unit can be shown. Our analysis indicates a 1.2MWe CHP plant producing 7000MWh per year, utilising 60% of the heat load (~4,400MWh) will offer annual savings of approx. £800,000 and a return on investment of just over 1 year.
The 6-month relief will end 31st March 2023 and a 3-month review of the scheme is expected to be published before the calendar year. The review will focus on and identify the most vulnerable non-domestic customers and how the government will continue assisting them with energy costs. These are likely to be those who are least able to adjust, for example by reducing energy usage or increasing energy efficiency. It looks likely for the next year at least the actual gas and power prices will not drop below the price cap.
In the short term, the EBRS will provide some protection to businesses from the unprecedented energy price rises and we advise businesses to use this period of relief to investigate the suitability of on-site generation such as Combined Heat and Power (CHP) to secure costs are managed in the long-term and businesses remain financially sustainable.
If you would like to discuss CHP for your business, please get in touch.
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