Cost has always been a deciding factor for businesses as they power their company’s operations. But the decision-making process for energy procurement has become increasingly more complex in recent years.
Organisations are not only grappling with the financial impact of the energy transition, but they’re also navigating a global landscape that remains in flux politically and economically.
At the heart of the challenge is a shift in the way energy is generated and consumed. Meeting the Paris Agreement target – of limiting global warming to 1.5°C by 2050 – requires the UK to transition from fossil fuels to a renewable-driven economy.
While renewables currently account for around 37% of the UK’s energy mix, the infrastructure for the remaining 63% must be rapidly rebuilt – all while ensuring the lights stay on for homes and businesses.
This challenge is particularly acute for businesses, who are collectively responsible for around 19% of the UK’s CO2 emissions. With the key role they play in the economy and their extensive supply chains, businesses are well-placed to contribute to national carbon reductions.
Yet, progress towards the goals set by the EU and UK isn’t happening quickly enough, perhaps in part to a lack of confidence in shifting their energy supply to renewable sources due to worries about technical complexity, volatile costs and changing regulations.
Whether they are multinational enterprises or small businesses, organisations are dealing with complex regulations, the high upfront costs of clean energy technologies and rising expectations to meet net zero targets or Environmental, Social, and Governance (ESG) commitments. So how can they navigate these changes?
The growing influence of geopolitics on energy
While energy geopolitics has traditionally focused on securing affordable oil and gas supplies, the shift to renewable energy is transforming how energy is produced, traded, and used – which is disrupting the political relationships and dependencies tied to energy.
Renewable energy is encouraging the growth of a clean tech industry. As it is prioritised by certain countries and blocs, global politics will heavily influence the speed and effectiveness of the energy transition.
However, current geopolitical tensions and divisions pose serious challenges to energy security and efforts to cut greenhouse gas emissions.
For example, US President Donald Trump’s recent environmental decisions – such as scaling back renewable energy incentives by halting the issuance of new or renewed offshore wind energy leases, and his direction for the US to withdraw from the Paris Agreement a second time – have introduced new uncertainties to the global energy market.
This complicates international climate commitments, potentially slowing global progress of renewable adoption and creating ripple effects in energy markets worldwide.
Closer to home, the UK faces its own set of challenges. The rising cost of energy (driven by factors such as the ongoing war in Ukraine), supply chain disruptions such as those we are seeing in the offshore wind sector, and market volatility have placed significant financial strain on businesses and households alike.
The evolving role of GB Energy – a state-backed energy provider – is also under scrutiny. While its mandate is to ensure energy security and affordability, businesses are eager for clearer strategies that address these dual objectives while supporting renewable adoption.
Meanwhile, regulatory changes and the UK government’s COP29 commitments add layers of complexity. Businesses are looking for more than just policy announcements. They need actionable frameworks and incentives to alleviate cost pressures and drive renewable energy adoption.
By reducing uncertainty and enabling long-term investment in clean energy technologies, the Government can empower businesses to positively shape the energy transition and show progress against net zero targets.
The role of collaboration in driving change
Governments play a critical role by setting clear policies and frameworks – such as renewable energy targets, carbon pricing, and emissions reductions mandates – that create a stable environment for investment.
Then in collaboration with this, energy providers must also step up as trusted partners, offering the expertise and innovation businesses need to overcome challenges. Many businesses lack confidence in their energy strategies – or don’t have a clear strategy at all.
They need tailored guidance to develop plans that suit their unique circumstances and the assurance that renewable energy is reliable, transparent, available and cost-effective. Empowering businesses with this confidence is key to enabling them to adopt and report zero-carbon energy with certainty.
A transformational opportunity
The 25-year journey to net zero will not be without its hurdles. But it is also an opportunity to create a cleaner, smarter and more resilient energy system that benefits everyone. By balancing affordability, security and sustainability, businesses can turn the challenges of the energy transition into drivers for innovation and growth.
