Energy Savings: Will It Pay for Itself?

Energy-saving products are often sold on their savings: new lighting, heating controls, insulation, solar panels, a more efficient compressor. The question for a small business is simple: at what I actually pay for energy, how long will it take to get my money back?

Use your own figures

Prices paid by businesses vary widely with the size of the business, the contract and when it was signed. The Department for Energy Security and Net Zero publishes average non-domestic prices, which are useful for context, but your own bill is the figure to use. You need:

• Yearly usage in kWh, from your last 12 months of bills.
• Your unit rate in pence per kWh.
• The expected reduction, ideally in writing from the supplier, with the basis for it.

Leave the standing charge out: it is paid whatever you use.

Worked example

A small food producer uses 60,000 kWh of electricity a year at 25p per kWh, so £15,000 a year before standing charges. A supplier quotes £4,500 to fit new controls on its refrigeration, saying they will cut usage by 15%.

• Saving: 60,000 × 15% × £0.25 = £2,250 a year.
• Payback: £4,500 ÷ £2,250 = 2 years.
• Over a 10-year life: £22,500 saved for £4,500 spent, a net £18,000 at today's unit rate.

If unit rates rise, the saving rises with them. If the real reduction is 10% rather than 15%, payback stretches to three years.

Check your own measure

Start with low-cost measures

Some of the best paybacks need little or no spending:

• Controls and timers. Heating, lighting and equipment left on when nobody is there.
• Compressed-air leaks. In workshops, leaks can waste a large share of compressor energy and are cheap to fix.
• Settings. Heating set points, fridge and freezer temperatures, and equipment left on standby.
• Your contract. Check when it ends and compare tariffs before it rolls over. A better rate saves on every kWh.

Then measure. Read the meter weekly for a month before and after any change, so you know what the change achieved rather than relying on the estimate.

For larger investments, the payback, ROI and NPV calculator adds running costs and the cost of money.