What is kWh? Why understanding energy unit rates matters

You can't begin to reduce your business energy costs until you know how it's measured.

Your monthly energy bill is not like a subscription service. You can't just pay a set fee per month - or a little bit extra for a premium service. Business energy doesn't work like that.

Boiled down to the basics, you pay for what you use. Use more, pay more.

Your unit rate is arguably the most important number on your bill. It largely determines how much you'll pay in any given month.

In this simple guide, we will explain the definition of kWh, what it means and why it matters.

In this article:

• Learn the difference between kW, kWh and unit rates.
• Understand how energy usage appears on your business energy bill.
• Discover practical ways to reduce energy consumption and lower costs.

What is a kW?

A kilowatt (kW) is a unit of power. It measures the rate at which energy is used.

• 1000W (watts) = 1kW (kilowatts)
• 1000kW = 1MW (megawatts)
• 1000MW = 1GW (gigawatts)

• 1000GW = 1TW (terawatts)

What is kWh?

kWh stands for kilowatt hours and measures how much energy is used over time.

• kWh = kW x Hours Used

For example, a heater that requires 1kW to operate running for five hours uses 5kWh.
Gas is also billed in kWh so suppliers can measure gas and electricity using the same unit of energy.

Your energy bill is calculated by multiplying the number of kWh you use by your unit rate.

What is a unit rate?

A unit rate is the price of a single unit of energy (1kWh) measured in pence.

Businesses pay for what they use. The amount of kWh you use is multiplied by your unit rate, which is set by your business energy supplier.

Your unit rate includes the cost of wholesale energy prices, plus taxes, levies and network costs.

How much is a kWh of electricity?

Small-medium businesses paid an average unit rate of 28.22p per kWh for electricity in 2025 according to figures from the Department for Energy Security and Net Zero (DESNZ).

A small business using 20,000kWh of electricity per year will spend around £7,221 annually, including various taxes and charges.

How much is a kWh of gas?

Department for Energy Security and Net Zero (DESNZ) data also showed small-medium businesses paid an average unit rate of 4.87p per kWh for gas in 2025.

A small business using 50,000kWh of gas per year will spend around £3,584 annually, including various taxes and charges.

How many kWh does an average business use?

Most offices, shops, cafes and other single-site businesses fall into the "Very Small" category and use less than 20,000 kWh of electricity per year.

The Department for Energy Security and Net Zero (DESNZ) sorts businesses into the following categories:

Each business boasts very different needs. That makes it tricky to develop a benchmark figure.

It’s difficult to compare the usage of a 9-5 office building using predominantly electricity with the needs of a medium-sized supermarket requiring a stable supply of energy for 24-7 refrigeration.

How to reduce kWh usage - and business energy costs

Only you know how your business operates, but we can offer several starter tips to help you begin to reduce your business kWh usage:

1. Know your usage: Smart meters, Half Hourly Metering and sub-metering can help you target peak times, locate energy intensive processes and monitor trends so you can begin to act.

2. Not using it? Turn it off: Sounds simple, but businesses will see the cost of leaving computers on standby and using heating and cooling systems when nobody is on site. Every small efficiency adds up to reduced costs.

3. Consider energy-efficient equipment: We know there are some things your businesses simply can’t cut out. In those cases, consider switching out your current appliances for energy-efficient equivalents. This might be as simple as using LED lightbulbs or it could mean replacing your trusty old boiler with a new model designed to enhance efficiency.

4. Monitor workflows: If your business operates on a production line basis, ensure each part of the process uses equipment in an efficient manner, applying settings that use less energy without compromising quality.

5. Get the team onboard: You are just one person. Your business is only going to feel the benefits of efficiencies if numerous people are onboard. Speak to managers, speak to staff, encourage efficient practices as one team.

How we can help

Business energy is confusing. You know you need to stay on top of such a major cost, but that can be difficult while focusing on running your business and serving your customers.

We get it. We can support you.

Troo exists to help businesses like yours make sense of their energy needs, simplify complex information and make smart decisions that lead to real change and reduced costs.

We are not here to sell you a quick fix. We're here to understand what matters to you, offer clear advice, and take ownership of the hard parts, so energy becomes one less thing to worry about.

Book a free energy health check today for practical guidance on your business electricity, gas or water bills.