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Top 10 Factors Affecting the Cost of Energy at Your Business

As a small business owner, you’re an expert in everything that impacts the day to day operation of your business. Be it employing technology, scoping competition, managing data or logistics, there’s no shortage of challenges. Staying on top of your energy expenses is just one more item on that list. But as one of your numerous business expenses, energy costs and usage at your business have to be a key part of your strategy. Some questions to start asking are:

  • What affects the price of my business’s energy?
  • How can my business save money on energy bills?
  • How is my business’s energy bill calculated?

 

When you look at your organization’s monthly energy bill, do you know about the factors that may have affected the numbers you see? If not, that’s okay. Most people don’t, and that’s because it’s actually a pretty complex answer. It’s worthwhile to stay informed about your energy cost and the variables that affect it, so if you want to make an impact on future bills, you know what to do.

We’re here to help — read on to become the energy expert your company needs!

 

External factors that affect the cost of energy

1. Weathering the changing seasons

The cost to supply electricity is always changing throughout the year, and the rates many business owners pay is based on the seasonal cost. Summer heat waves, frigid sub-zero days in the winter, drought or low winds — all these can throw off the generation capacity with high demand.

Since cooling season is in full swing, read our tips (link) for businesses on staying energyconscious during the summer months.

 

2. Location, location, location!

Electricity generation in Alberta might come from coal, hydroelectricity, solar power, wind energy, natural gas or other alternative sources. Then, to carry over the power to your business, there are systems of overhead/underground transmission lines in place. In kind, a complex system of gas processing plants, high pressure pipelines and distribution lines are used to bring natural gas to heat your business and potentially fuel some of your appliances. What you pay for your energy bill has the cost of building, operating and maintaining these distribution systems factored in. Some of the things that cause business energy costs to vary due to location are:

  • Power plant and fuel availability near you
  • Your local regulations and fuel costs
  • Customer density and how many customers share the cost
  • Size of your utility service area and whether it’s urban or rural
  • Your geographic location and terrain

 

So, whether your organization is in downtown Calgary or just outside of Grande Prairie, your energy cost can vary greatly because of how much it costs to get the energy from its source to your business.

 

3. Supply and demand

Here in Alberta, it may generally be less costly to use the abundant coal to generate electricity than the pricier fuel types, but whenever there’s a high demand for electricity, it may become necessary to use the less abundant and more expensive sources to meet demand.

Besides the seasonal surges, unprecedented levels of energy demand can also occur during times of unrest or in the event of unanticipated and severe global events. On the supply side, disruptions in global supply chains directly affect raw material prices, putting pressure on energy production costs. If these high prices are sustained, it projects capital costs and levelized costs of electricity (LCOE) on to customers.

Fuel prices spike too during periods of high electricity demand, or if there are supply constraints due to disruptions in transport, the weather or infrastructure. Higher fuel prices result in higher costs to generate electricity. Similarly, increased costs in the drilling and production process will result in higher natural gas prices.

 

4. The Alberta energy transition

Alberta isn’t exempt from the energy transition from fossil fuels to renewable sources that’s unfolding. As part of the 2030 Coal Phase-Out program, coal-fired electricity generation in the province is expected to be replaced by renewables and natural gas. Like with any other tradeoff, such a shift is also likely to affect electricity and natural gas prices in the process.

 

5. Economy and geopolitics

Powering businesses and residences means the costs for access to electricity and natural gas are tied to commodity prices. Electrification needs copper, power plants and pipelines need steel, buildings need lumber, batteries and motors need metals and minerals, heavy construction equipment needs diesel. If these commodities set out on an inflationary trend, the price trickles down to everything, including energy.

Prices are also tied to supply. Unrest in other parts of the world and political sanctions tend to limit the supply of energy commodities and threaten supply disruption. This leads to higher power prices globally. During such scenarios, commercial and residential consumers alike can anticipate higher numbers on their energy bill.

 

6. Type of energy market

According to Natural Resources Canada (NRCan), one of the most significant factors affecting electricity prices is the market structure. Here in Alberta, we avail a deregulated electricity market, as well as means of generation, which allows for competition between energy retailers.

This keeps the prices lower, compared to regulated markets where a lack of competition results in higher prices. Comparatively, costs tend to be higher in provinces where production is low and that rely more heavily on imported electricity and natural gas.

 

Internal factors that affect the cost of energy

How much energy your business consumes depends on variables like the industry you operate in (for example, a restaurant versus an office building) or where you’re located, but generally speaking, some of the most common “big” energy expenses for small businesses include the following end uses, and there are steps you can take to manage them:

 

7. Shining bright

As one of the major energy expenses for businesses, lighting consumes an average of 7 kWh/square foot. This is also impacted by the types of light bulbs and your business hours. Energy-efficient lighting, LEDs, using natural light and motion activated lighting are some measures that help conserve energy and save more.

 

8. Keeping the temperature in check

Temperature regulation at your business depends on your local climate and the size of the business, but generally, heating and cooling consume an average of 5-7 kWh/sqft or 0.025 GJ/sqft in commercial businesses. The costs are further tied to the condition, age and maintenance of your equipment, insulation, ventilation, etc.

 

9. Office equipment energy guzzlers

  • Computers, laptops and accessories can draw a lot of your business’s energy; especially if they're not energy-efficient and are left plugged in at all times and on non-operating days.
  • Many businesses rely on printers and other office machines to operate. But they don’t have to. These machines draw out energy while functioning and on standby mode. It may make sense for your business to go paperless or to discourage unnecessary, single-side printing among the staff.
  • Refrigerators, freezers, ovens and other similar equipment are central to some businesses and their operations. These types of appliances can also consume significant amounts of energy. It becomes even pricier if they’re not energy-efficient or are outdated models.

 

10. Peak time demand

Depending on the energy plan you’ve selected for your business, peak demand hours refer to the hours of the day when energy usage is at its highest, typically 9 am to 5 pm. Reducing your peak time demand is one of the best ways to save electricity, by taking steps like staggering work hours / start times, running heavy equipment and factory equipment during the evening and early morning hours, and conserving energy throughout the day.

 

At ATCOenergy, we pride ourselves on standing behind Alberta businesses. We’re always here to share up-to-date expertise on how you can manage and reduce your energy bills. Get in touch with one of our Energy Marketers or one of our Happiness Advisors at 1-844-697-2826 and review your electricity prices and contracts as a complimentary/no-obligation service. Just grab a recent bill and we’ll walk you through the charges. If you’re not an existing customer, we can still help you make sense of your energy bills.

Stay informed and do your due diligence in researching energy-saving measures and current affairs. Our blog is a great resource to look at some of the strategies that can be implemented at little or no cost, while effectively improving your bottom line.

 

Sources:

https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/provincial-territorialenergy-profiles/provincial-territorial-energy-profiles-alberta.html

https://www.ictsd.org/how-much-electricity-does-a-business-incanada/#:~:text=An%20average%20commercial%20building%20produces,about%208%20kWh%2Fsquare%20foot.