New scheme could potentially offer up to £2.5 billion a year in energy savings for small businesses

by Ian Sinkamba Business Energy News

New scheme could potentially offer up to £2.5 billion a year in energy savings for small businesses

The launch of the government’s new Business Energy Efficiency Scheme is good news for SMEs hoping to save on energy costs

An announcement by the government has introduced a new energy efficiency scheme which could help to unlock up to £2.5 billion a year in savings for small businesses, as well as improve environmental performance, in what has been described as a “win-win” for SMEs.

During his Spring Statement on Wednesday 13th March, chancellor Phillip Hammond called for evidence from SMEs, energy companies, network operators, financial institutions, Energy Service Companies (ESCOs), Local Enterprise Partnerships and academics to inform a number of proposals for a new Business Energy Efficiency Scheme focused on SMEs. This invitation for evidence for the new scheme will be open until 8th May 2019.

The new scheme has been designed to significantly lower the energy costs faced by small and medium enterprises. This is expected to help the government take a meaningful step forward in their target to ensure that businesses hit energy efficiency targets of at least 20% by 2030.

Currently, small and medium-sized enterprises account for upwards of 99% of all businesses in the UK. However, they are reported to have, on average, a “very low awareness” of the benefits of energy efficiency both in terms of saving costs and lowering their brand’s carbon footprint. It is thought that a lack of readily available information on the subject, as well as limited access to finance is largely responsible for this lack of awareness. The upfront costs involved in installing some energy saving measures is also thought to prevent many small or new business to miss out on long term savings.

Potential strategies for the new government scheme are already being put forward. The Department for Business, Energy and Industrial Strategy (BEIS) has proposed three possible options for the Business Energy Efficiency Scheme. These consist of:

  • The implementation of energy efficiency auctions. This could see the government setting up a voluntary auction which aims to target measures for smaller companies. They would compete on the basis of price with the goal of winning funding to deliver energy savings.

  • The implementation of a Business Energy Efficiency Obligation, or a Business form of the ECO scheme. The domestic ECO scheme requires suppliers to fund the installation of energy saving measures within households. This proposal could see a business equivalent of the scheme being set up. Through this scheme, an obligated party would be required to deliver a set amount of energy savings to a small business through the introduction of measures such as insulation.

  • The expansion of SME access to finance options. This could see the government exploring the possibility of support from outside financial institutions or partner organisations, in order to provide as many options as possible for small businesses looking to improve their energy performance.

Proposals such as these could see SMEs making significant long-term savings on their energy costs. Not only that, but it could help to make the UK’s small business landscape increasingly greener in the coming years.

A spokesperson from the Department for Business, Energy and Industrial Strategy commented on the proposed scheme, saying: _ “Through the modern Industrial Strategy, we’re creating the right conditions for small businesses to thrive and exploiting the global shift to clean growth.

“These proposals could help firms from hairdressers to pubs save up to a total of £2.5 billion a year on their energy bills through energy efficiency measures while reducing emissions — a win-win for the environment and the UK’s dedicated entrepreneurs.”_

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