How to reduce business energy costs

Energy is one of the few overheads you can cut without cutting what your business does. Some savings come from the way you buy energy, and some from the way you use it. The first group is mostly paperwork. The second starts with walking round your building at the right times and ends, where it makes sense, with new equipment. This guide works through both in the order that usually pays off fastest.

What is the quickest way to cut business energy costs?

Start by making sure you are paying a contracted price, then find out what your building uses when nobody is there. Neither costs anything, and both can reveal big numbers.

Citizens Advice says rollover and out-of-contract tariffs are usually very expensive, and that deemed tariffs, the ones you are put on without choosing, are usually the most expensive of all. If you have moved premises or let a contract lapse, fixing that comes before anything else. Our guides to out-of-contract rates and deemed contracts explain your options.

After that, the Carbon Trust’s experience is that low and no-cost actions can usually cut energy costs by at least 10%.

How can you pay less for each unit?

Your bill is your usage multiplied by your rates, plus taxes. These checks work on the rates side:

• Know your contract end date. Ofgem says that if you don’t change your contract before it expires, your supplier will roll it over automatically. Microbusinesses can’t be rolled over for more than 12 months. Our contract renewal guide explains when to start.
• Check your VAT rate. Small users pay 5% rather than 20% if they stay under the de minimis limits: electricity up to 33 kWh a day on average (or 1,000 kWh a month) and gas up to 145 kWh a day (or 4,397 kWh a month). Qualifying electricity supplies in Great Britain are also temporarily zero-rated from 1 October 2026 to 31 March 2027. See VAT on business energy.
• Check the Climate Change Levy. The main rate is 0.801p/kWh for electricity and gas from 1 April 2026. Some users are exempt or pay less, as our Climate Change Levy guide explains.
• Match the tariff to your usage. A low user is often better off with a lower standing charge. A business that runs at night may suit a time-of-use tariff. Our unit rate vs standing charge guide shows how to compare.
• Get billed on real readings. The Carbon Trust points out that a smart meter lets you do away with estimated billing and see your use more accurately. See smart meters for business.

To see how your all-in price compares with what other businesses pay, use our business energy cost calculator and the government figures on our business energy prices page.

Where does energy go in a typical business building?

Heating is the biggest single use in most non-domestic buildings, followed by lighting. The government’s Building Energy Efficiency Survey, which covered England and Wales in 2014-15, found:

End use	Energy used a year	Share of total
Space heating	66,940 GWh	About 42%
Internal lighting	21,260 GWh	About 13%
Catering	13,270 GWh	About 8%
Cooled storage (food and drink)	10,790 GWh	About 7%
All end uses	161,060 GWh	100%

Shares are our calculation from the survey’s totals. Your own split will depend on what your business does and the hours it keeps. Our sector pages for offices, shops, restaurants and cafes, warehouses and manufacturing show typical usage for each.

The same survey found the stock could cut its energy use by 39% with efficiency measures, and that 53% of floor area was in premises with no energy management resource at all.

What can you do for free?

Most of the no-cost savings come from equipment running when it doesn’t need to.

Measure your out-of-hours use

The Carbon Trust suggests a simple test. Read your electricity meter at closing time before a weekend, read it again when you open, and multiply the difference by your unit rate.

Worked example (illustrative figures):

• Friday closing reading: 45,210 kWh
• Monday opening reading: 45,330 kWh
• Used while closed: 120 kWh
• Over a year of weekends: 120 x 52 = 6,240 kWh
• At 28.76p/kWh (the DESNZ average for small non-domestic electricity users in Q1 2026, before VAT): 6,240 x £0.2876 = £1,795 a year

That is what it costs to run your building empty at weekends, before counting weeknights. Some of it will be essential, such as fridges, alarms or servers. The rest is waste you can switch off.

Set up switch-off routines

The Carbon Trust recommends writing simple opening and closing procedures, then labelling switches by colour: green for switch off at closing, amber for check first, red for leave on. It found much out-of-hours use can be avoided this way. Brief new staff on the routine and spot-check it.

Get the heating right

• Turn it down. The Carbon Trust says heating costs rise by about 8% for every 1°C of overheating, and suggests thermostats are generally set at 19 to 20°C.
• Match timers to occupancy. Seven-day timers let heating go off or down when the building is empty.
• Stop heating and cooling fighting. Set a dead band of about 5°C between the heating and air conditioning set points.

Our guide to cutting business heating costs goes further.

Involve staff and fix leaks

The Carbon Trust says a well-run behaviour change programme can save around 3 to 5% of energy. If you use compressed air, check for leaks: it says 20 to 50% leakage is not uncommon, and leaks are easiest to hear when the system is quiet.

Which upgrades pay back fastest?

Once the free fixes are done, look at equipment. These are the figures published by the Carbon Trust. Your own results will depend on what you have now and how many hours it runs.

Measure	What the Carbon Trust says
LED lighting	Up to 80% less lighting electricity than halogen, metal halide or old T12 fluorescent. Average simple payback under 2.5 years across over 1,000 projects
Lighting controls	Usually 30 to 50% lower lighting energy in a typical office
Optimum start heating controls	Could save 10% of energy costs compared with fixed timers
Annual boiler service	A regularly serviced boiler can save as much as 10% on heating costs. Poor maintenance can add 30% or more
Insulating pipes, valves and tanks	Payback usually within a few months
Building energy management system	Can reduce total energy costs by 10% or more
Variable speed drives on fans and pumps	Cutting speed by 20% can halve running costs
Efficient refrigeration	Average simple payback of 4.5 years across 50 SMEs, on energy savings alone

The government’s survey backs this up: over a third of the savings potential it found came from measures that paid back in three years or less. For lighting in detail, see our LED lighting guide.

To check what a single piece of kit costs to run before and after, try our equipment running cost calculator.

How should you plan your energy savings?

The Carbon Trust’s advice is not to try to do everything at once. A simple plan works better:

1. Make one person responsible. They read the meters, check the bills and run the walk rounds.
2. Read meters monthly. The Carbon Trust says monthly readings are enough for most SMEs to track use and check bills, and that more frequent or smart meter readings give a better picture.
3. Walk round at different times. Start and end of the day, during opening hours and just before a weekend or holiday. Our business energy audit guide includes a checklist.
4. Write an action plan. List each improvement, who owns it and when it will be done.
5. Prioritise by saving and payback. Do the biggest, least disruptive savings first.
6. Buy on running cost, not just price. The Carbon Trust suggests a purchasing policy that looks at energy costs over an item’s lifetime, so a breakdown doesn’t lead to a rushed, inefficient replacement.
7. Measure the result. Compare with the same period last year, allowing for weather and workload.

Is there funding to help?

Some upgrades qualify for support, but schemes differ by nation and change often. As of September 2026, business premises in England and Wales can get £7,500 off an air-to-water or ground source heat pump through the Boiler Upgrade Scheme (£9,000 for eligible off-gas-grid premises replacing oil or LPG, until 31 March 2027), and Scotland offers interest-free loans with cashback through its SME Loan Scheme. Our energy efficiency grants guide lists what is open in each nation.

Should you switch supplier as well?

Using less energy and paying a fair price work together. When your contract is due, compare quotes on your total annual cost at your real usage, not just the unit rate. If you use a broker or comparison service, ask how it is paid: we are paid commission by suppliers, which is included in the prices we quote and disclosed before you agree a contract. See how we make money and our guide to energy brokers.

Frequently asked questions