DECC identifies energy efficiency barriers for SMEs

deccA new study released by the Department of Energy and Climate Change (DECC) has revealed a number of influencing factors for small and medium-sized companies (SMEs) when considering the installation of energy efficiency measures.

DECC commissioned ENWORKS to undertake a small-scale research programme to improve understanding of SMEs’ experiences of energy efficiency, focusing in particular on the later stage barriers and motivations.

The research, which interviewed a small group of 31 SMEs, found that cost savings was commonly cited as a motivation for implementing energy efficiency improvements. This was supported by a positive correlation between implementation rates and the value of cost savings.

However, these rates were low for opportunities with cost saving benefits. For example, cost savings equaling over œ10,000 per annum had an implementation rate of just 25%. DECC’s report suggests that this indicates that cost saving is not enough to make SMEs act, with other barriers limiting their actions.

Among them were challenges with understanding the financial savings available from energy efficiency improvements.

The study also identified the need for capital investment as the most common barrier, despite only 30% of all identified improvements requiring zero capital expenditure. This suggests that there is a potential misconception amongst SMEs that all energy efficiency improvements require capital.

This is a particularly large issue blocking the take up of energy efficiency measures, as many businesses reported that the implementation of those with a payback period of less than two years made business sense, and would go ahead if finance were available. However, the analysis showed that only 13% did so, suggesting they are influenced by wider business considerations beyond the financial.

Such factors included diverting from accepted practice – both in terms of internal operations and external customer expectations – as well as the risk of disrupting day-to-day activities.

However, supply chain pressure was also reported to act as a driver in some instances, with some businesses reporting that their actions were driven by what others were doing on energy efficiency. DECC therefore suggests that influencing supply chains may therefore have the potential to impact the uptake of energy efficiency among SMEs, as would publicising positive achievements to make the adoption of energy efficient practices more attractive.

The culture towards energy efficiency within a business was also reported to be an influencing factor on its uptake.

DECC concluded in its report that energy efficiency represents a substantial economic opportunity that is not being realised to its full potential by UK SMEs. It estimates that this missed opportunity amounts to between œ1.26bn and œ2.63bn a year. At an individual business level, on average this equates to annual missed savings of between œ5,801 and œ12,109, or between 18% and 24% of their annual energy costs. The capital cost associated with delivering these savings is between œ8,663 and œ18,838, with an average payback period of less than two years.

DECC hopes that this latest report will help to increase the uptake of energy efficiency measures amongst SMEs, and intends to carry out a similar study on larger firms.

To read DECC’s report, Research to Assess the Barriers and Drivers to Energy Efficiency in Small and Medium Sized Enterprises, click here