Supporting struggling SMEs to save energy

Mike Cherry, national policy chairman of the Federation of Small Business, writes an excellent article in The Guardian about the problems facing small businesses to implement energy efficiency measures in their operations. As Cherry argues, energy companies and the government need to roll out smart meters and provide support to struggling small and medium sized enterprises (SMEs).

Small businesses face too many barriers to increasing energy efficiency

There is a feeling that energy prices have never been so high and there’s little evidence that these prices will come down soon. The cost of energy is a significant concern for many small businesses. Almost one third of Federation of Small Business (FSB) members said it is a barrier to growth. Businesses need help. It is critical that government and energy suppliers do all they can to ensure small businesses take advantage of efficiency measures to cut their energy bills.

Many small businesses do not have the capital to invest up-front in energy efficiency or sustainability measures, such as smart meters or solar panels. Those that do choose to take out a Green Deal loan – a government scheme to help reduce energy use – face long payback times, even though they are guaranteed to be no worse off under the scheme’s “golden rule”.

The Green Deal efficiency scheme brought hope that energy costs for small businesses would be reduced. However, the lack of take-up by small firms has become an increasing concern. It clearly is not working as well as it should.

Small firms do have the appetite to be more energy efficient, namely because of the obvious benefits to keeping the cost of doing business down. However, for firms to take on energy efficient measures in real numbers, they need the payback to be quick and the upfront costs to be small. There has to be a tangible business benefit and a low risk to their investment. And the process has to be simple and clear.

Government and decision makers need to provide a clear, long-term policy agenda that works for small firms. A longer term approach should incentivise energy companies to offer help and support to small businesses, something which is currently lacking. Fewer than a fifth of FSB members say that their current energy supplier has offered help or advice on improving their energy efficiency.

A key way energy providers and government can help small businesses improve their energy efficiency is through the roll out of smart meters. It is vital that this roll out caters to the needs of the smallest firms as well as consumers – often they are no different. Done well, these meters will provide businesses with real-time information about their energy usage, enabling them to see where best to invest in energy efficiency measures and take control of their energy costs.

So far, the smart meter roll-out campaign has targeted domestic consumers, with no plans to focus specifically on small businesses, this is a missed opportunity. Energy companies are committed to installing smart meters in all homes and businesses by 2019. However, this is all they are legally required to do.

To make this new technology worthwhile, energy companies must go further, providing ongoing support and advice to customers on energy use. The information gained from these meters must be clear and simple. The meters and their supporting services must also be interoperable between different energy firms, so switching is quick, easy and low cost for small businesses. The costs associated with smart meters or accessing their data must not be prohibitive for the smallest firms.

There is a clear business case for introducing energy efficiency measures, albeit with a number of practical hurdles to overcome. Most small businesses have introduced cheap and easy measures such as replacing light bulbs, introducing switch off policies and installing energy efficient equipment, but have not taken the additional step of investing in more expensive measures.

When it comes to renewables, the picture is murkier. It is clear that for many small firms, the business case for renewable energy generation is far from made, with only around 1% of the 8,000 FSB members recently surveyed saying they produce their own electricity and gas. And for many, only one question matters – is it cheaper?

If the government wants small businesses to invest in renewable energy it needs to address the question of cost. If it isn’t cheaper at source (yet), then they should consider promoting renewable and low carbon energy installations to small businesses through enhanced capital allowances and incentives. Make them an offer they can’t refuse and our innovative and inventive small businesses will take on and develop renewable energy.

Energy companies, government and businesses all have a role to play. We urgently need the right advice and information reaching business if a real step change is to be seen. Businesses have the confidence, but need to be given the tools and information to secure long-lasting energy benefits.