Business Energy Decisions: Electricity or Natural Gas?
Energy expenses are an unavoidable operating expense for businesses of every size and industry. Choosing the right energy source can make a considerable impact on operational efficiency while improving your bottom line. Understanding how electricity or natural gas can meet your business’s unique energy needs is the first step to finding a cost-effective energy plan.
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Key Takeaways
Utilities are unavoidable expenses for business owners. Selecting the right energy source for your company is an important decision that directly affects daily operations and your bottom line. Each business has unique energy needs, so this decision profoundly influences your operational efficiency, cost-effectiveness, and environmental impact. Electricity and natural gas stand out as the two most popular sources powering commercial spaces. By gaining a better understanding of these prominent energy sources, you can find the right plan that best suits your company’s needs.
- Electricity can power nearly all business operations and offers access to renewable and carbon-free sources, but it relies on the regional power grid and can be subject to outages and price fluctuations.
- Natural gas is abundant in the U.S., generally more energy-efficient for specific uses (like cooking and HVAC), and delivered through an extensive underground pipeline network, which makes it less prone to outages.
- Although cleaner-burning than other fossil fuels, natural gas still emits greenhouse gases and isn’t available in all buildings without added infrastructure, which can incur costs.
- Businesses should evaluate their existing infrastructure, energy goals, equipment needs, and budget to determine whether electricity, natural gas, or a combination of both best fits their operational and cost objectives
Does Your Business Have a Choice Between Gas & Electric?
Choosing a business energy source relies on the power transmission equipment available and the type of market you live in. However, the infrastructure available on your property might make the decision for you.
Most businesses are equipped with electric power lines, but not every structure is equipped with gas lines. If your business property has both power lines and gas lines, you can easily choose between electricity or natural gas. Otherwise, you can contact your local utility company to add additional infrastructure. For example, installing new gas lines and meters typically costs between $260-820 depending on the complexity of your project.
What are the Pros & Cons of Business Electricity?
The Benefits of Business Electricity
- Renewable Electricity Sources: Electricity offers the benefit of powering your business while reducing your carbon footprint. Businesses in deregulated markets can choose their supplier, meaning they can opt-in to renewable energy plans sourced from solar or wind.
- Carbon-free Energy Sources: In addition to renewable energy sources, electricity can also be generated from clean nuclear power. Nuclear energy production doesn’t produce any greenhouse gas emissions, making it an additional eco-friendly energy solution.
- Powers All Business Operations: Electricity can power everything from cash registers and cooking appliances to machinery and lighting. There are very few limitations to electricity use and applications.
- Robust Infrastructure: Nearly every commercial building in the U.S. is connected to the electrical grid. It’s very rare that a business owner will need to have transmission lines run to their premises, unless it’s new construction.
The Drawbacks of Business Electricity
- (Mostly) Relies on a Regional Power Grid: Unless you generate your own electricity with solar panels, your business will rely on the regional power grid. This makes your business more susceptible to outages due to inclement weather or faulty transmission equipment.
- Operation Disruptions Due to Outages: An outage is not only an annoying situation, but it can affect your bottom line. If your business doesn’t have a back-up generator, you can lose money due to operational disruptions or equipment damage due to power surges.
- Subject to Price Volatility: Since electricity is derived from diversified resources, it is prone to price volatility. If your supplier uses fossil fuels as a main power source, you can receive unexpected rate hikes – especially if you’re on a variable rate plan.
What Are the Pros & Cons of Commercial Natural Gas?
The Benefits of Commercial Natural Gas
- Abundant Gas Supply: The U.S. is the top producer of natural gas in the world. We have large natural gas reserves throughout the South and Appalachian regions. 32 states have some level of natural gas production that is fed into our interstate pipelines.
- Cleaner-Burning Fossil Fuel: Natural gas produces significantly less greenhouse gas emissions than other fossil fuels, like coal and petroleum. Coal produces double the harmful emissions than natural gas to produce the same amount of energy.
- Reliable Regional Infrastructure: The U.S. has more than 3 million miles of pipeline infrastructure to deliver natural gas to businesses and homes.
- Highly Efficient Fuel Source: Natural gas is generally more efficient than electricity, especially when it comes to cooking appliances. Higher efficiency often leads to lower energy costs since less power needs to be consumed to complete a task.
The Drawbacks of Commercial Natural Gas
- Environmental Impact: While natural gas is a cleaner-burning fuel source, it is still a fossil fuel. Gas still produces harmful C02 emissions and contributes to climate change. As the country pursues a 100% clean electricity sector by 2050, gas will not be sustainable in the long term.
- Buildings Aren’t Always Equipped: While our national pipeline infrastructure reaches every state, not every building is fitted with gas lines and meters. Adding gas lines to a property costs around $540 on average.
- Pricing Affected by Global Market: International trade and conflict have a significant impact on natural gas pricing. For example, 2021 gas prices reached a historic high due to Russia’s invasion of Ukraine. This even severely impacted the global gas supply, leading to exorbitant gas prices.
- More Limited Applications: Natural gas is most commonly used for cooking appliances, heating, and cooling. It’s often used in combination with traditional electricity to reduce energy expenses for HVAC and cooking.
Things to Consider When Making the Choice Between Electric & Gas
No two businesses are alike, and that extends to how you power your operations. It’s important to start with your business and energy goals when determining your energy source. Take time to evaluate the type of equipment and technology your business uses, the infrastructure at your premises, and any budgetary goals. After creating an energy strategy, it’s time to compare energy suppliers, plans, and rates to find your ideal power source. Below are a few factors to consider before making an energy decision:
Infrastructure and Availability
Inspect your building’s property to see what type of energy infrastructure is available. Nearly all existing commercial buildings in the U.S. are fitted with electricity; however, they might not be compatible with natural gas. Perhaps you have a preferred energy source, like nuclear power. Do local energy providers offer your preference?
Energy Costs
Electricity and natural gas have unique pricing structures and rates. If the cost of power is your primary concern, you’ll need to compare energy rates from multiple suppliers to determine the most cost-effective choice. Energy rates fluctuate regularly and unexpectedly due to supply and demand dynamics. If finding the lowest rate on the market is your biggest objective, consider employing the expertise of a commercial energy broker.
Efficiency and Dependability
As a general rule, natural gas appliances and HVAC systems are more energy efficient than their electric energy counterparts. However, electric appliances can easily improve their performance with energy management systems and smart technology. In terms of reliability, electric power lines are much more vulnerable to power outages due to inclement weather or damaged equipment. To improve reliability, many businesses powered by electricity choose to buy a supplemental generator or storage system. The network of natural gas pipelines is fully underground, so it is not as susceptible to outages.
Environmental Impact
Consider your business’s carbon footprint and sustainability goals. With electricity, you have the opportunity to choose an energy plan sourced from sustainable sources. Renewable energy plans contribute to a healthier environment and a more sustainable future. In contrast, natural gas does contribute to climate change through greenhouse gas emissions. Gas is more eco-friendly than coal, however it’s not as sustainable as solar or wind-generated electricity.
Industry Preferences
The final consideration for business energy choices is the industry you operate in. Some industries have specific preferences. For example, many restaurants vastly prefer natural gas because it makes commercial kitchens more efficient. Many industrial practices, like paper bills and other manufacturers, also prefer the reliability and efficiency of natural gas.
Why Are Business Electric & Gas Rates So Complicated?
Each business is as unique as the CEO who founded it, and that individualism extends to how you power your operations. Business energy rates and plans are not one size fits all. Suppliers consider your energy usage patterns, source preferences, and budgetary limitations when determining rates and contract terms. Energy pricing becomes even more complex due to external factors like energy source supply, power demand, and weather patterns. Ultimately, each commercial energy plan gets customized to your specific business.
Are Some Regions Eliminating the Option to Choose Natural Gas?
In some areas of the country, building regulations may affect your ability to choose natural gas. As a sustainability initiative, some cities and states are implementing natural gas appliance bans on new building construction.
In 2019, Berkeley, California became the first city to pass a policy banning natural gas hook-up in new buildings. San Francisco adopted a similar ban in 2020, followed by New York City in 2021. More recently, in 2023, New York state adopted a state-wide ban on natural gas in new construction as well. While there are exceptions for specific use-cases, like hospitals or industrial buildings, these policies will directly impact small and medium-sized businesses.
FAQs About Business Energy Decisions: Electricity or Natural Gas
How Can I Determine if My Business Property Has The Necessary Infrastructure For Electricity Or Natural Gas?
Contact your local utility company or an energy expert to determine if your property has the necessary infrastructure for your preferred energy source. They can assess your property and inform you of the available connections and any needed upgrades.
Can My Business Use Both Electricity And Natural Gas?
Yes, your business can use both electricity and natural gas. Many businesses utilize both to optimize energy efficiency and reduce costs, depending on their specific needs and available infrastructure.
Can I choose a Renewable Energy Plan for My Business?
Yes, in deregulated energy markets, you can choose a renewable energy plan for your business. This allows you to select suppliers offering energy sourced from solar, wind, or other renewable resources.
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Kat Garside
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