The energy crisis continues to have an impact on every sector – but with 24/7 demands and a need to protect the health and wellbeing of vulnerable elderly residents, social care is feeling the strain more than most, with rising costs threatening to put some care services out of business. We spoke with two care sector energy brokers to understand better the current challenges, the support available to care operators and steps care providers can take to manage their energy bills.
Last year, a report from the International Monetary Fund discovered that the UK is suffering the greatest impact in Western Europe when it comes to rising energy prices, partly due to our heavy reliance on gas for heating, but also our energy-inefficient buildings.
This is especially true for the care sector, which typically has greater energy demands to ensure vulnerable residents’ comfort and well-being. Last August, Care England bemoaned a ‘staggering’ 683% energy bill hike for its members in just 12 months, while a month later sector experts warned that the energy crisis could cause many care homes to close.
Whilst the latest Spring Budget announcement from the UK Government promises an Energy Bills Discount Scheme and further support for eligible businesses, it is not yet certain just how much pressure this will take away from social care operators.
This leaves care home investors, providers and owners in a difficult position when it comes to facing rising costs: are there ways to mitigate the full impact of the energy crisis? To answer this question, we reached out to Mike Crawshaw, Spiral Group consultant, and Brett Armstrong, Founder of My Business Saved and National Care Association partner, to find out what solutions are currently available for UK care homes.
The energy crisis in social care
“The main challenge facing care home providers is the cost of electricity and gas following the energy crisis of 2021 and 2022,” says Mike Crawshaw, Spiral Group consultant. “This led to prices reaching record levels by last August, before starting to fall again from September onwards.
“Although prices have dropped notably from the point of the peak, they still remain inflated to any contract agreed prior to June 2021 — a consistent and heavy pressure on care commercials.”
Spiral Group was set up in 2003 to provide businesses from all sectors with professional and practical advice on their purchasing. This includes supporting independent care homes and care home groups with energy procurement and management to make them resilient against rising costs.
Brett Armstrong founded My Business Saved in 2019. An energy procurement business, the company offers tailored, cost-saving solutions to a wide range of industry sectors, including schools, restaurants, hotels, offices and social care services.
“There’s no crystal ball and we can only anticipate the factors that may affect the market and which ultimately decide your final utility costs,” Brett explains. “Energy suppliers are risk averse, so when there is volatility and uncertainty, it is incredibly difficult to predict which way the market may be turning next, outside of general overviews. That makes it incredibly important for care home owners and providers to be ahead of the curve and to make sure their house is in order now — or risk facing even higher prices in future.”
Is support for energy costs available to care providers?
“Sadly, the Energy Bills Discount Scheme is unlikely to provide much support to care homes from April, due to the low discounts available and high thresholds for eligibility,” says Mike. “In general terms, we recommend reviewing the energy efficiency of a care home through an energy audit and written report. Some care homes will be required to complete an Energy Savings Opportunity Scheme (ESOS) assessment in 2023, which will provide details of energy-saving opportunities.”
An ESOS assessment identifies the areas of significant energy consumption in a business, and whether it’s compliant with the UK Environment Agency’s standards for energy efficiency. For older care homes and facilities, this may force their hand to invest in cleaner energy systems now – or face potential penalties in the future.
“Exploring renewable options, such as solar panels, is a good way to mitigate costs. With prices being high, it’s an ideal time to begin looking,” advises Mike.
Can care homes protect their commercials in the energy crisis?
When energy price rates are high, it is not just about finding the lowest costs, but long-term stability that social care operators can rely on. A large part of this rests on being aware how and when to renew energy supplier contracts.
“With gas and electricity, you’re able to renew your contracts 12 months in advance,” advises Brett. “If you’re in a scenario where you believe that the market is going to remain volatile, you’re better off renewing earlier – and creating relationships with these suppliers is key.”
“Having conversations with energy procurement companies at an early stage will provide better visibility about what you’re using and when it’s best to change. In many cases, care homes will still be running on a five-year energy contract at a historic, lower price. As the clock ticks down and that contract comes to an end, the severe change in rates can be a very bitter pill to swallow. However, acknowledging this and acting first can be the make-or-break difference.”
Choosing the right time to renew is central to reducing price pressures on care homes, Mike agrees.
“Care home providers will want to get a competitive price point for electricity and gas at the point of renewal, which can be dependent on knowing the optimum time to renew a contract in the future.
“Working with an experienced energy procurement company can provide access to suppliers that care home providers may not have heard of, which creates new opportunities for lower-priced contracts.”
Brett adds: “Prices will always increase with demand and there are certain periods that will always carry larger energy costs. For example, you will typically pay more in the winter than you would in the summer, as there is a higher expected use for lights, heating and cooking hot meals. That makes it vitally important to renew your contract before demand rises to stand the best chance of saving on those costs.”
What else can care homes do to reduce energy spending?
Organisations, such as the National Care Association, are lobbying local government to support care homes through the cost-of-living crisis, but unless official action is announced, care providers will have to consider different ways to reduce their costs without impacting the quality of care for their residents.
“For some people, dealing with energy crisis costs may involve simple changes such as turning off the heating and putting a jacket and gloves on. For social care, that’s not an option. These are necessary services for vulnerable people, who need around-the-clock care in some cases,” says Brett. “This means it’s vital that care home owners, providers and management teams look to where else they can optimise their utilities to ease the financial pressure.
“The best place to start is to assess any fixed business costs that could create an opportunity to save. One of our clients was able to reduce the cost of waste management services by £10,000. Another example is switching to a VoIP telephone system, instead of paying higher charges for long-running, conventional phone contracts.”
Mike adds: “Outside of conventional, everyday energy-saving techniques, we recommend that you don’t wait too long to engage with the process of signing a new energy contract.
“You can agree contracts out until a start date of 2026, so never leave the renewal to the last moment! We have clients who agreed on long-term contracts in early 2021 and have since been able to avoid all cost increases from the energy crisis, whilst still being fixed for another couple of years. Putting in place a longer-term strategy can protect you from similar events in the future.”
- Build relationships with energy suppliers: Communicating with energy and utility suppliers can help them better understand what services your care home or care home group may need to offer better value that suits your usage.
- Be conscious of when contracts renew: If your care home is on an historic energy contract, it’s crucial to be aware how much time it has remaining.
- Get ahead of the curve: The energy crisis may continue for the foreseeable future. Renewing a contract early may save your care home a substantial amount, compared to what it may cost down the line.
- Explore where other costs could be reduced: Assess other business service costs — there may be efficient ways to save money elsewhere to offset your increased energy bills.
- Approach an energy procurement partner: Working with an independent organisation that evaluates energy and utility costs may give your care home the edge on the energy crisis.
If you’re a care home owner, provider or investor looking for expert advice and recommendations for your care home, we’re here to help. Contact us today for a free consultation.