Economic uncertainty continues to govern the UK‘s unpredictable business landscape. Underlying pressures such as rising raw material and labour costs and escalating energy prices, plus the potential of tariffs for businesses that export to the USA, such as those in manufacturing, can be some of the biggest threats to profitability and even survival. Streamlining operations and improving efficiencies whilst cutting costs can help build financial security and the ability to weather unforeseen disruptions.
For businesses, especially in rural areas and sectors with energy-intensive processes, for instance, those in industrial processing such as steel production, cement, ceramics, glass, and paper industries, where energy consumption is core to their operations, choosing an energy-efficient fuel source is critical. Reliability is also essential in industry and in other energy sectors such as care homes, which operate around the clock and have sky-high energy demands for heating and lighting.
In this blog, we’re going to take a close look at LPG as an energy source for businesses, what savings can be made when switching from other fuel sources such as electricity or oil, and the other benefits this versatile fuel source offers off-grid businesses throughout the UK.
Firstly, let’s look at what savings can be made:
LPG – your efficient energy source
For any business wishing to switch to LPG from an alternative energy source, there will, of course, be initial conversion costs, for instance when switching from oil to LPG. These costs can include tank installation, although this is often provided by your contracted LPG supplier at a reduced or no cost, and boiler replacement. Offsetting these costs long-term with ongoing fuel savings will mean you’ll get more energy for your money.
The advantage of replacing oil with LPG is that LPG has a calorific value of approximately 14 kWh/kg compared to heating oil at 12 kWh, meaning less fuel is needed to generate the same amount of energy. Whilst every business is unique, the economic savings can typically range from 15 to 20%, depending on consumption, with a return on investment of between 2 to 4 years.
In addition, as LPG burns cleaner than oil, it produces fewer deposits and carbon build-up in boilers and burners. This means reduced wear and tear and maintenance costs, reduced risk of breakdowns, critical in industries such as the care home sector and hospitality where continuous heating and hot water are essential, and longer boiler life.
Then there’s electricity. For the many off-grid businesses using electricity, unit prices have been particularly volatile over recent years due to geopolitical events such as Russia’s invasion of Ukraine in February 2022. In addition to the cost per unit used, there is the burden of high daily standing charges, which have to be paid no matter how much electricity is used.
Unlike the domestic market, there is no electricity price cap in place for businesses, and whilst the government introduced the Energy Bill Relief Scheme and the Energy Bills Discount Scheme to help businesses with high energy costs, these have now been scrapped, and there is currently no government support available.
LPG can provide lower, stable, and more predictable fuel prices under long-term supply contracts, providing a compelling, cost-effective alternative to electricity. Meaning fewer surprises when compared to fluctuating grid electricity prices, crucial for budgeting in energy-intensive environments.
Plus, there’s the added benefit of a reliable and consistent supply as bulk LPG tanks can store significant amounts of fuel on-site. Regular and timely deliveries and telemetry-based monitoring keep energy flowing, whereas the regional electricity network and local infrastructure can be vulnerable to power outages caused by extreme weather or technical failures.
Renewable energy solutions such as solar, wind and heat pumps are another consideration for businesses off the grid. Solar power, for instance, produces zero-emission and eliminates ongoing fuel expenses, although the initial capital investment can be substantial with high up-front installation costs. Solar panels have no moving parts and generally require little maintenance, but output does depend on the amount of daylight available, so production fluctuates seasonally and daily. However, solar power is a good solution when backed up by another fuel source, such as LPG.
As Graham Biss, Chief Executive, Rural Services Network, said ‘The electricity supply network in many rural areas has less capacity and is more fragile to disruptions such as tree fall. Until the rural distribution network is comprehensively upgraded, it will not be possible to rely on heat-pump or electrical heating.’
Environmental benefits too
The UK has a legally binding target to achieve net zero emissions by 2050 and businesses of all sizes are facing an increasingly ambitious set of environmental targets, dependent on the size of the business and the sector within which it operates, driven by government regulations. In addition, market expectations also influence as customers increasingly consider sustainability in their purchasing decision-making and favour low-carbon options. By embracing renewable energy systems, businesses can demonstrate their commitment to sustainability and enhance brand reputation but they're often not suitable for off-grid businesses.
However, LPG doesn’t just provide a reliable and cost-effective solution, with lower fuel costs than alternative fuel sources such as oil or electricity, it also comes with reduced environmental impact. LPG produces less carbon dioxide than oil and coal, offers a major reduction in emissions such as NOx, SOx and particulate matter and is non-toxic so has no impact on water or soil should there be an LPG leak.
The good news is that, in the Autumn 2024 Budget, the government announced the Climate Change Levy (CCL) for LPG is to be frozen, whereas the levy for mains gas, electricity, and fossil fuel fuels such as oil and coal will be uprated in line with Retail Price Index (RPI) in 2026 to 2027. Another good reason to choose LPG to keep the wheels of your business turning.
Confidence in the future
There has been strategic investment of more than £600 million in the LPG industry over the last 5 years and significant growth in various sectors, including leisure and recreation, non-food manufacturing and processing, warehousing and distribution, and hospitality, according to the 2022 Liquid Gas UK census.
In addition, the LPG industry aims to transition fully to renewable liquid gases by 2040. Drop-in renewable liquid gases such as BioLPG and rDME will play a key role in the decarbonisation of heat both commercially and industrially.
LPG is a critical energy in the UK, powering businesses and industries in rural off-grid areas, with hundreds and thousands having chosen LPG as their energy source. This versatile, environmentally friendly, and cost-effective solution has a key role to play in decarbonising rural energy into the future.
According to Liquid Gas UK, almost one-third (31%) of energy usage in the UK is from the industrial, commercial and agricultural sectors - rural businesses contribute significantly to a diverse range of sectors, but cutting costs isn’t just about tightening belts, it can often be the difference between survival or failure.
If you're considering switching to LPG as your business energy source, please give us a call on 01423 772 789 or read our blog which answers common LPG FAQ's for businesses.
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