The Rising Cost of Energy: Why Businesses Should Turn to Solar

Introduction

Energy prices are rising once again, putting further strain on consumers already grappling with high energy bills. Ofgem, the UK’s energy regulator, recently announced a 6.4% increase in the energy price cap for April to June 2025, attributing the spike primarily to wholesale energy prices. This trend highlights the ongoing uncertainty of the energy market and the financial burden it places on consumers.

Whilst the price cap applies to domestic consumers, business energy costs tend to follow wider market trends. For businesses relying on grid energy, rising costs can eat into their bottom line, making long-term sustainability increasingly difficult.” As prices continue to fluctuate, many companies are searching for more reliable and cost-effective energy solutions, and solar energy is the most popular choice for companies. By investing in solar panels, businesses can take control of their energy costs, reduce reliance on the grid, and contribute to a cleaner environment.

Why Are Energy Prices So High?

The latest energy price increase, as outlined by Ofgem, is largely driven by a surge in wholesale prices, which account for approximately 78% of the total rise. Additional inflationary pressures and policy costs make up the remaining 22%.

Supply Volatility

The UK’s reliance on international gas markets is a major factor in this volatility. Global supply chain disruptions, geopolitical tensions, and fluctuating demand have all contributed to the instability of energy prices. Businesses have little control over these external factors, making them vulnerable to market shifts. Furthermore, as energy debts from the previous crisis remain at record levels, further price hikes could be on the horizon, intensifying the financial burden on consumers.

Demand Surge

According to the UK Department for Business, Energy & Industrial Strategy, total annual electricity demand is expected to at least double by 2050 emphasising the urgent need for infrastructure upgrades and smart energy solutions. Peak electricity demand could rise from approximately 58 GW in 2020 to between 130 GW and 190 GW by 2050. Similarly, the National Grid’s Future Energy Scenarios project a need for 123 GW to 147 GW of capacity by 2050 to accommodate this surge in demand. This anticipated increase in demand is largely attributed to:

• The electrification transportation
• Electrification of heating
• Growth in data centres and digital services
• Hydrogen production
• Population growth and urbanisation

How Rising Energy Costs Affect Businesses

For commercial businesses, the continuous rise in energy costs presents significant challenges. Higher energy bills can lead to:

• Reduced Profit Margins – Higher energy bills eat into profits, making it harder for businesses to sustain operations without increasing prices.
• Increased Costs for Consumers – To compensate for rising operational expenses, businesses may pass costs onto consumers, potentially reducing competitiveness.
• Operational Cutbacks – Some businesses may need to scale back operations, reduce staff hours, or delay expansion plans due to unpredictable energy costs.
• Financial Planning Difficulties – Constant price fluctuations make it harder for businesses to budget and plan for the future. The ongoing volatility of wholesale energy prices suggests that additional price hikes could be on the horizon, adding more uncertainty.

The Business Case for Solar Energy

To combat rising costs and gain energy independence, more businesses are turning to renewable energy, specifically solar power. By installing solar panels, companies can significantly reduce their reliance on the grid and shield themselves from future price increases. Here’s why solar energy is a smart investment:

1. Boost Your Profits – Cut energy costs and increase your bottom line with solar power.
2. Reduce Dependence on the Grid – Shield your business from rising and unpredictable electricity prices.
3. Achieve ESG Goals – Lower your carbon footprint and enhance sustainability efforts.
4. Strengthen Your Brand – Build a positive reputation with sustainable business practices.
5. Increase Property Value – Energy-efficient buildings attract higher valuations and demand.
6. Government Incentives – Various grants, tax reliefs, and financing options are available to businesses looking to invest in renewable energy solutions.

Why Now Is the Best Time to Invest in Solar

With energy prices climbing, now is the ideal time for businesses to make the switch to solar. Although costs can still vary, solar panel prices have steadily decreased over the years making installations more affordable and efficient than ever before. According to our previous blog on the cost of solar panels in 2025, the upfront investment in solar is becoming increasingly accessible, and businesses can expect a strong return on investment over the lifespan of the system.

Moreover, businesses that act now can take advantage of existing government incentives before policies change. Locking in energy savings today can help safeguard against future price hikes, providing financial stability in an otherwise unpredictable market.

Conclusion

The rising cost of energy presents a significant challenge for businesses, but it also serves as a wake-up call to accelerate the adoption of clean energy for better business and a better world. Relying on the grid leaves businesses vulnerable to market fluctuations, whereas switching to solar offers long-term stability, financial savings, and environmental benefits. The time to act is now, before the next wave of price increases makes electricity even more expensive.

For those looking to maximise their investment in solar energy and take advantage of government incentives such as grants and tax rebates, making the switch even more cost-effective, check out our detailed analysis in our previous blog on solar tax benefits.

Sources

Ofgem Energy Price Cap Announcement (February 2025): https://www.ofgem.gov.uk

UK Government Energy Policy Updates: https://www.gov.uk/government/organisations/department-for-energy-security-and-net-zero

National Grid Energy Market Reports: https://www.nationalgrid.com

Solar Energy UK: https://www.solarenergyuk.org

Electricity Networks Strategic Framework: https://www.gov.uk/government/publications/electricity-networks-strategic-framework/electricity-networks-strategic-framework-appendix-1-electricity-networks-modelling