Business energy for manufacturing
Business energy for manufacturing
Manufacturers spend energy on motors, compressed air, process heating and cooling, and on heating and lighting large buildings. The mix depends heavily on what you make, so understanding your own load profile is the first step. Larger users should look closely at contract type, metering data and whether a Climate Change Agreement could cut the Climate Change Levy.
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How much energy do manufacturing use?
| Benchmark | Value | Source |
|---|---|---|
| Typical electricity use per m², workshop or open working area, building only (CIBSE TM46) | 35 kWh/m²/year | GOV.UK |
| Typical heating fuel use per m², workshop or open working area, building only (CIBSE TM46) | 180 kWh/m²/year | GOV.UK |
Benchmarks describe typical buildings. Your own use depends on floor area, opening hours, equipment and how efficient your building is.
What do manufacturing pay per kWh?
There are no official prices by business type, but the government publishes what businesses pay by size of energy use. In Q2 2026, the smallest UK business electricity users (up to 20,000 kWh a year) paid an average of 38.36p per kWh, and those using 20,000 to 499,999 kWh paid 28.59p. The smallest gas users paid 9.31p per kWh. These government averages include standing charges and the Climate Change Levy, but not VAT. Your bill shows a unit rate plus a daily standing charge, so it won't match these all-in figures directly. See business electricity prices and business gas prices for every size band.
Choosing an energy contract for manufacturing
- If your site has half-hourly metering, use the data to see when demand peaks and whether batch processes or charging could move to cheaper periods before you compare prices.
- Fixed prices give budget certainty. Larger users sometimes choose flexible contracts, where energy is bought in blocks over time, which can suit a business able to manage price risk.
- Check whether your sector or process is covered by a Climate Change Agreement. CCA holders get 92% off the Climate Change Levy on electricity and 89% on gas, which can outweigh small differences in unit rates.
- Tell suppliers about planned changes such as new lines, extra shifts or on-site generation when getting quotes, because prices are based on your expected usage.
- Multi-site manufacturers can group supplies onto common renewal dates, but review each site's consumption and meter type separately.
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VAT and Climate Change Levy for manufacturing
Many manufacturers can reduce the Climate Change Levy through a Climate Change Agreement, a voluntary agreement with the Environment Agency, managed with sector associations, to meet energy efficiency targets. CCA holders get 92% off the main rate on electricity and 89% on gas. The CCL main rate is 0.801p per kWh from 1 April 2026 and is set to rise to 0.827p from 1 April 2027. Energy for manufacturing is otherwise charged at the 20% standard VAT rate.
VAT on business energy · Climate Change Levy explained
How manufacturing use energy
It depends on what you make: the Carbon Trust lists furnaces and kilns as the biggest users in cement, ceramics, glass and foundries, boilers and refrigeration in food and drink, drying in paper making, and building heating and lighting in engineering.
Pumps, fans, conveyors, mixers and compressors all run on motors, and many are oversized or left running when they aren't needed. Carbon Trust
An expensive utility and a major source of waste. The Carbon Trust says industrial sites often have leakage rates of up to 30%, and an idling compressor can still use up to 40% of its full-load power. Carbon Trust
Boilers, steam systems, ovens, dryers, heated tanks, kilns and furnaces. The Carbon Trust says dryers alone can be up to 30% of total energy use in some manufacturing sectors. Carbon Trust
High ceilings, strong ventilation and delivery doors left open for convenience all lead to heat loss. Radiant heaters that warm workstations directly can waste less than blown-air heating. Carbon Trust
The Building Energy Efficiency Survey, which covered building services but not processes, found lighting dominated industrial buildings' electricity use because of long hours, with double or 24-hour shifts common. GOV.UK
The Carbon Trust lists refrigeration among the biggest energy users in food and drink and chemicals manufacturing. Carbon Trust
Shift patterns and process loads dominate. A single-shift engineering workshop and a 24-hour food factory can have similar floor areas but very different bills, so building benchmarks such as TM46 are only a rough guide to the non-process part of your use.
Ways manufacturing can cut energy use
Check compressed air systems regularly by listening, using soapy water or ultrasonic detectors, mark leaks on a plan and fix them quickly. The Carbon Trust says cutting waste can save up to 30% of compressed air costs. Carbon Trust
An idling compressor can still draw up to 40% of its full-load power, so turn it off at the end of shifts and over weekends. Carbon Trust
The Carbon Trust says compressor efficiency improves by 1% for every 4°C drop in intake air temperature, so ducting air in from outside can help. Carbon Trust
Up to 90% of the heat a compressor generates can be recovered to heat water or space, for example a workshop or warehouse. Carbon Trust
Many fans and pumps don't need full speed all the time. The Carbon Trust says reducing a motor's speed by 20% cuts its power requirement by about 50%. Carbon Trust
Fitting a lid to a heated tank and controlling agitation and extraction can cut evaporation heat losses by over 50%. Carbon Trust
FAQs
What uses the most energy in a factory?
It depends on the process. The Carbon Trust estimates motors use about a quarter of the electricity on manufacturing sites, while furnaces, kilns, boilers and dryers dominate in heat-intensive sectors such as ceramics, glass, food and paper.
How much energy do compressed air leaks waste?
The Carbon Trust says industrial sites often have compressed air leakage rates of up to 30%. It recommends a systematic, regular leak-detection programme, with leaks repaired as quickly as possible.
What is a Climate Change Agreement?
A voluntary agreement between industry and the Environment Agency to improve energy efficiency. In return, participating sites get a discount on the Climate Change Levy: 92% off on electricity and 89% on gas.
Is there a benchmark for factory energy use?
Only for the building. The CIBSE TM46 workshop benchmark is 35 kWh of electricity and 180 kWh of heating fuel per square metre a year, but process energy varies so much between industries that the most useful comparison is your own usage per unit of output over time.
Should a manufacturer choose a fixed or flexible contract?
A fixed contract locks in prices for the term. A flexible contract lets you buy energy in blocks over time, which can pay off or cost more depending on the market. The right choice depends on your usage, budget and appetite for risk.
Sources
- Carbon Trust, Manufacturing: energy efficiency guide (CTV059 v2, 2018)
- BEIS (now DESNZ), Building Energy Efficiency Survey 2014-15: Overarching Report
- CIBSE TM46:2008 Energy Benchmarks, Table 1 (reproduced by Vale of Glamorgan Council)
- Environment Agency, Climate Change Agreements
- HMRC, Climate Change Levy rates
Other business types
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