Energy market dysfunction stopping UK businesses going green

New research conducted by energy transactions company tem. has revealed vast shortcomings in the energy market, which are feeding distrust and misconceptions among UK businesses and preventing them from switching to green power.

The findings, published in a report titled ‘A New Energy Blueprint’, suggest a widespread belief that the transition to renewable energy is financially unviable. More than half (52%) of UK business leaders incorrectly expect clean energy to increase their business’ energy costs and 35% cite upfront costs as the main barrier preventing them from making the switch. This is despite United Nations findings that renewables are the cheapest form of energy.

A system marred by misunderstanding and mistrust

Outside of higher upfront costs, business leaders also cite a lack of information (29%), insufficient government incentives (19%) and a complicated switching process (18%) as the key reasons their business isn’t powered by renewable energy.

In reality, a major factor keeping energy expensive is the volume of middlemen in the market driving up costs. Meanwhile 97% of business leaders are unaware just how many parties are involved in getting energy from its source to their business, and more than a quarter (27%) of business leaders reported knowing nothing about the transaction fees they take during that process. A further 37% don’t actually know where their energy comes from.

Previous analysis from tem. has found that the involvement of these intermediary parties results in businesses paying an unnecessary 25% premium for their energy. 

A new, transparent solution

The report comes as part of the launch of tem.’s Renewable Energy Direct (RED) offering, which uses AI to match any business with multiple renewable energy generators at any time.s. This bypasses the intermediaries who account for a huge proportion of the average energy bill, thus reducing businesses’ outgoings and giving them transparency on the source of their energy.

With 95% of British business leaders reporting that energy costs impact how competitive their business is, the idea of paying a green premium is a large concern. Any increase in energy costs would force 39% of business leaders to increase prices for their customers, with 58% worrying it would reduce their profit margins, and a further two thirds (61%) saying another energy crisis would be unsurvivable for their business.

Commenting on the findings Joe McDonald, CEO and Co-Founder of tem., says: “The status quo in the energy sector has always been in favour of the big energy providers, who profiteer off a system that hasn’t evolved since it was designed to sell oil and gas 40 years ago. And all this at the expense of the end user, whether they are struggling households, or businesses who – having borne the brunt of the Autumn budget’s £40bn tax hike – are fighting for their bottom line.

“In a world where we are all acutely aware of the need to decarbonise, it is grossly irresponsible that the wholesale market ends up charging people a premium for green energy, while they – through no fault of their own – remain completely unaware of it.

“Our report has laid out in no uncertain terms the gravity of the problem. There's been a huge erosion of trust and optimism around energy, renewable or otherwise, and it urgently needs restoring – which is why we built RED. If businesses are going to transition to clean and affordable energy, it’s time we rethink how energy is bought and sold – and, crucially, bring meaningful transparency to the energy mix.”

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