Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Government consultation on energy efficiency for SMEs

Last month saw the close of the formal ‘Call for Evidence’ on the Government’s Energy Efficiency Scheme for Small and Medium Sized Businesses.

It’s thought the scheme could help create up to £2.5 billion a year in savings for SMEs and support the government’s target to ensure all businesses make energy efficiency savings of at least 20% by 2030. SMEs account for over 99% of businesses in the UK and are responsible for over 50% of energy use.

The Call for Evidence document aims to set out possible delivery options for the scheme. It states: “While high energy bills can be a burden on smaller businesses, a lack of information about how much energy any measures might save, and the upfront capital costs of installing energy efficiency measures can deter investment.”

The International Energy Agency (IEA) has suggested that SMEs are lagging behind larger business on energy efficiency measures because of a lack of information, technical expertise and funding and suggests that successful energy efficiency programmes for SMEs should include:

  • Information

SMEs often focus on the day-to-day tasks of the core business, leaving limited time and resources to investigate and pursue energy efficiency opportunities. Just providing information to SMEs rarely results in the implementation of energy efficiency. To learn about the benefits of energy efficiency SMEs need information tailored to their specific needs and delivered in a convenient form from a trusted source. To be successful, any scheme would have to be easy for SMEs to participate in.

  • Expertise and capacity building

Unlike larger businesses, SMEs can rarely develop in-house expertise on energy efficiency; they are more likely to rely on external advice and support for implementation. Energy efficiency programmes should therefore aim to build the capacity of energy consultants and financial institutions as well as that of SMEs themselves.

  • Financing

SMEs face particular difficulty in accessing the finance required to purchase, install and operate more energy efficient equipment or to implement more efficient operating practices, so access to finance tailored to their needs is important.

The scheme will be aimed at commercial and industrial building energy efficiency improvements. The Call for Evidence document presents three options for delivering the scheme.

  • An energy efficiency auction which allows third parties such as energy efficiency installers or energy service companies, to bid into to deliver energy efficiency measures for smaller businesses.
  • A business energy efficiency obligation (EEO) which would be based on the domestic Energy Company Obligation scheme which requires obligated energy suppliers to deliver energy efficiency and heating measures to homes.
  • Expansion of access to finance options to SMEs which would involve supporting currently available finance products for energy efficiency so that they are more attractive to SMEs.

The document stated that the government is ‘particularly sensitive to adding extra costs to business and will consult businesses fully before taking any option forward’.

You can read the document here.