Abdullah Shoaib
Managing Director
5 min read
Last Updated August 15, 2025
Are variable energy tariffs worth it?
With fluctuating wholesale energy prices and increasing demand for flexibility, many businesses are reconsidering their energy contracts. Businesses generally prefer fixed energy tariffs where prices remain the same during the length of your contract, as this allows for more stability and simpler budget management.
However, another option is the variable energy tariff, where the price you pay fluctuates depending on the market conditions. But is it worth the risk?
In this guide, we’ll break down how flexible energy tariffs work, their pros and cons, and whether they’re a good fit for your business. We’ll also explore how they compare to fixed tariffs and when it might make sense to switch.
Are flexible energy tariffs good?
Flexible or variable energy tariffs can be a smart option for businesses that are comfortable with market-driven pricing and want the freedom to switch suppliers at short notice. These tariffs rise and fall in line with the wholesale market, which means they could lead to savings during periods of low demand or excess supply.
Unlike fixed tariffs, where you pay a set price for the duration of your contract, variable tariffs change regularly, sometimes monthly or even more frequently. This gives you the opportunity to take advantage of falling prices, but also exposes you to potential cost spikes.
They can be especially beneficial for businesses that use energy intermittently or seasonally. For example, if your business operates more heavily in summer months and less so in winter, a variable tariff could allow you to benefit from lower rates during your peak usage times.
However, if price certainty is important to your organisation, a variable tariff might not offer the predictability you need. Spikes in market prices – caused by geopolitical tension, changes in supply chains or seasonal demand – can make budgeting more difficult. In this case, exploring a fixed energy tariff may be the safer route.
How does a variable energy tariff work?
A variable energy tariff is linked to the wholesale market rate, which can change daily based on global supply and demand, geopolitical factors and weather conditions. This means the amount you pay for gas or electricity could fluctuate each billing cycle.
Your supplier sets a unit rate and standing charge based on the current market price. A unit rate is what you pay for your gas and electricity and is charged as pence per kilowatt hours. A standing charge is a set daily amount for supplying your energy. These rates can increase or decrease depending on market trends or if Ofgem, the UK’s energy regulator, changes the price cap. For businesses, this means your energy bills could vary significantly over time.
As variable tariffs often come with no exit fees, they also give you the flexibility to switch to a fixed plan or another supplier when market conditions shift. This flexibility is a major benefit for businesses that actively monitor prices and want to capitalise on price fluctuations.
For organisations with high or unpredictable energy demands, a variable tariff can be beneficial, but only if you’re able to respond to changes in the market. By tracking wholesale energy prices and adjusting your usage during lower-cost periods, you can make more strategic decisions and potentially reduce your overall costs.
Ultimately, whether variable energy tariffs are worth it depends on your business goals and structure. A fixed tariff offers stability but a variable tariff could offer more energy savings. For help managing your energy costs, explore our services for business electricity and business gas – tailored to help you find the most competitive deals on the market and secure flexible solutions that suit your operations.