Nearly three years after the start of the pandemic, a new challenge is facing commercial real estate. Rising wholesale energy prices—increasing tenfold over the last 18 months—are affecting households and businesses alike. In addition to the general “cost of living” crisis, experts are now talking of a “cost of doing business” crisis too.
Back in August, Cornwall Insight forecast that, without government intervention, businesses would have to pay as much as £634 per megawatt hour (MWh) of electricity this autumn, four times what they paid in 2020 and double what they paid in 2021.
Since February 2021, a typical company in London could expect to pay five times more for gas over the same period.
There is some support available for businesses. At the end of September, the new UK government unveiled the Energy Bill Relief Scheme, to support businesses, charities, and public-sector organisations in paying their bills.
This will fix wholesale electricity prices at £211 per MWh and wholesale gas prices at £75 per MWh for six months.
Yet there’s a limit to the support the government will provide—currently set at £345 per MWh for electricity and £91 per MWh for gas.
That means energy bills are still set to be very high for many organisations, even with government support.
Experts estimate that the support should amount to roughly a 45% discount on expected energy costs over the winter, however even with that discount the amount to pay will be higher than in previous years.
For businesses serious about long-term growth, there’s a more substantial challenge:
The energy crisis is forecast to last into 2023 and beyond. for commercial landlords and building managers, long-term solutions will be crucial.