How to accelerate growth in the energy services market for SMEs and eliminate barriers to tackling energy efficiency

While the global spotlight is on COVID-19 and the devastating effects it has caused and continues to cause, we mustn’t forget the devastating effects being caused by the Earth’s ongoing problem – climate change. Everyone has their part to play in tackling this. Let’s look at the UK: the goal is to achieve net zero carbon emissions by 2050 with many of the large corporations, such as Microsoft, Land Securities and National Trust [1], already placing even more ambitious goals. However, SMEs account for 99% of businesses in the UK and are responsible for over 50% of energy use, yet it may be seen that there isn’t the same level of commitment. This doesn’t mean that SMEs aren’t equally concerned, it’s just that many barriers can get in the way: lack of budget, lack of time or lack of confidence in energy efficiency solutions.

In an aim to tackle this issue, last year arbnco was successfully awarded funding for the Government innovation competition “Boosting Access for SMEs to Energy Efficiency” (BASEE). The project will focus on the development of a Digital Energy Efficiency Platform (DEEP) to improve energy efficiency across the 5.7m SMEs across the UK.

DEEP aims to eliminate the common barriers SMEs face in tackling energy efficiency, such as high upfront and transactional costs, economies of scale and difficulties accessing finance. DEEP will generate a bespoke list of energy efficiency measures for SMEs, including costs and finance options, and a business case for implementing energy efficiency.

The platform will also allow potential aggregators to build portfolios of energy efficiency improvement measures across local regions, sectors or improvement types. It is envisioned that projects could be grouped together to achieve economies of scale and favorable financial terms for SMEs. arbnco will work with manufacturers and specialist financial firms to develop strategies for aggregating energy efficiency projects.

The aim of the Government’s BASEE competition is to accelerate the growth of the energy services market for SMEs by driving down transaction costs and promoting third party investment in small-scale energy efficiency projects. BASEE is making available £6m of funding for innovative, scalable business models or solutions that facilitate investment for small energy efficiency retrofit/refurbishment projects in commercial and industrial buildings in the UK.

SMEs account for over half of the UK’s energy use, but when it comes to energy efficiency projects they are often hampered by a lack of expertise or capital. Finance remains a key stumbling block. Small businesses may have a fear of getting into debt and banks also have a reluctance to lend on small projects.

DEEP aims to increase accessibility and help SMEs identify the quick wins that could reduce energy bills and increase carbon savings. arbnco’s aim is for DEEP to be a one-stop shop for businesses to identify and prioritize energy efficiency projects, and find the appropriate finance and best supplier for the chosen retrofit project.

arbnco has partnered with Energy Systems Catapult on the project. The Catapult is providing expertise to the BASEE project in the form of Business Model Innovation support.

The Catapult is an independent innovation centre set up by government to accelerate the UK’s transformation to a low carbon energy system at lowest cost – while ensuring UK businesses and consumers capture the opportunities of clean growth.

The project is now in phase 2 which brings together expertise from multinational energy and services company Centrica, Energy Systems Catapult, Aston Business School, Durham County Council and sustainable finance company, Cyan Finance.

The first phase of the project focussed on the technical feasibility of the platform as well as, understanding of the obstacles that SMEs face when it comes to energy efficiency. A review of potential business models was conducted by Energy Systems Catapult during the first phase. Bringing Centrica on board for phase two will provide greater insight and access to SMEs as we look to roll the platform out nationwide. By providing SMEs with critical insight into their energy use and tailored retrofit recommendations, based on an assessment of the energy performance of their building and patterns in their energy consumption, arbnco can help thousands of businesses become more energy efficient.

Phase two of the project commenced in February 2020 and runs for 14 months. Following completion in June 2021, the platform will be rolled out nationally.

The growing swell of support and funding for a green and sustainable recovery, particularly during the pandemic, is extremely encouraging and arbnco is ready to play its part in delivering a healthy, low carbon built environment.

References

1. Carbon Intelligence. Companies that have set net zero targets. https://carbon.ci/insights/companies-with-net-zero-targets/ (2020)