Businesses in the UK are facing increased pressure to manage their energy costs, as prices continue to rise and the push for sustainability intensifies. Choosing between gas or electricity is a key decision that can significantly impact a company’s bottom line. Here’s a detailed analysis of factors influencing this choice and which energy source may be more cost-effective for UK businesses in 2024.
1. Current Price Comparison: Gas vs. Electricity
As of 2024, gas is still more affordable than electricity in terms of the price per kilowatt-hour (kWh). Gas costs around 6.04p per kWh, whereas electricity costs approximately 24.5p per kWh. This price disparity is largely because electricity generation involves additional processes and infrastructure costs compared to directly sourcing gas Energy-Review.co.uk. For businesses with high energy demands—like those in manufacturing or warehousing—choosing gas for heating can result in significant cost savings.
However, while gas may be cheaper on a per-unit basis, the installation and maintenance costs associated with gas systems, such as boilers, should also be factored in. Gas boiler installation can range from £3,000 to £15,000, depending on the system type and property size. In contrast, electric heating systems often have a lower initial setup cost, although the higher operational costs can offset this advantage over time House of Commons Library.
2. Government Policies and the Path to Net Zero
The UK government’s commitment to reaching net-zero carbon emissions by 2050 is reshaping the energy landscape. Policies such as the gas boiler ban for new installations from 2025 are pushing businesses to consider cleaner energy sources. These regulations are expected to increase gas costs over time due to carbon taxes and reduced availability of subsidies for fossil fuel energy.
Electricity is becoming greener, thanks to heavy investments in renewable energy over the past decade. Wind, solar, and other renewable sources now contribute a significant portion of the UK’s electricity supply. By 2024, it’s possible to choose electricity tariffs that are entirely renewable, thus reducing a business’s carbon footprint significantly. This makes electricity a potentially more attractive option for companies aiming to meet sustainability targets or improve their corporate social responsibility (CSR) profiles Checkatrade.
3. Maintenance and Lifespan Considerations
Maintenance requirements differ between gas and electric systems. Gas heating systems require regular servicing, at least annually, with an estimated cost of around £100 each time. Failure to maintain gas systems can lead to inefficiency, higher costs, and safety risks. Additionally, gas boilers typically need replacing every 15 years, which can be a significant expense.
In contrast, electric systems are relatively low-maintenance and can have a longer lifespan. Many electric heaters come with lifetime warranties, and maintenance primarily involves occasional checks rather than regular servicing. The lower maintenance demands of electric systems can be an important factor for businesses looking to minimize operational disruptions and ongoing costs.
4. Environmental Impact and Corporate Responsibility
The choice between gas or electricity extends beyond cost; environmental considerations are increasingly influencing business energy decisions. Gas, while cleaner than coal, still contributes significantly to the UK’s greenhouse gas emissions. It is the most used fossil fuel in the country, partly because it is still widely used for electricity generation. Currently, about 40% of the UK’s electricity is generated from gas-fired plants, meaning that electricity derived from non-renewable sources also contributes to carbon emissions Energy-Review.co.uk.
Electricity, however, is on a greener trajectory. With the UK’s renewable energy capacity increasing steadily, more businesses are choosing electricity tariffs that support wind, solar, or hydroelectric power. For companies with strong environmental commitments, choosing electricity over gas may align better with their values, even if it incurs higher upfront costs. Additionally, using electricity from renewable sources can help businesses avoid future regulatory costs associated with carbon emissions, such as carbon pricing and potential penalties Checkatrade.
5. Efficiency and Usage Patterns
When considering the efficiency of gas vs. electricity, the intended use is key. Gas heating tends to be more efficient for larger spaces, as gas boilers can heat water quickly and distribute warmth through radiators more effectively. For activities like commercial cooking or industrial processes requiring consistent heating, gas remains the preferred choice due to its efficiency in delivering high temperatures.
On the other hand, modern electric systems such as heat pumps are becoming more efficient and viable for commercial properties, especially those with excellent insulation. Heat pumps can provide heating and cooling, making them a versatile option for businesses that need temperature control throughout the year. Although electric heating may have higher per-unit energy costs, the increased efficiency of some modern systems can reduce overall energy consumption House of Commons Library.
6. The Future of Energy: Trends and Technological Developments
The landscape of energy for businesses is likely to continue evolving, driven by technological innovations and policy changes. Several trends point towards electricity becoming more favourable in the long term. For instance, heat pumps are expected to become more widespread, and innovations in energy storage, such as advanced batteries, are likely to improve the efficiency of electric heating systems.
In addition, hydrogen-ready boilers and hybrid systems that combine heat pumps with conventional heating methods are being developed. While these technologies are not yet mainstream, they indicate a shift towards reducing reliance on gas. Businesses investing in new heating systems may find it worthwhile to consider these emerging technologies, especially if they plan to expand or upgrade in the future.
7. Alternative Heating Solutions
For companies looking for more sustainable options, alternatives like biomass boilers, solar thermal systems, or geothermal heating can supplement or replace traditional gas or electric systems. While these options may involve high initial installation costs, they can lead to long-term savings and provide significant environmental benefits. Heat pumps, for example, use ambient heat and require minimal electricity to operate, making them a cost-effective choice over time. Moreover, businesses can often access grants and incentives to offset the upfront investment Checkatrade.
How Renewable Energy Solutions Can Help Reduce Business Energy Prices in the UK in 2024
Conclusion: Balancing Costs and Sustainability
When deciding whether gas or electricity is the better choice, UK businesses must weigh upfront costs, operational expenses, maintenance, and environmental considerations. Although gas remains cheaper in the short term, electricity offers a pathway to future-proofing energy strategies through green tariffs and compliance with evolving regulations. Businesses aiming for sustainability will find that investing in electric or hybrid systems aligns better with long-term goals and can enhance their public image.
While gas may still be the cost-effective choice for many in 2024, the market is shifting rapidly. Companies need to stay informed about energy trends, government policies, and technological developments to make the best decision for their operations.
