The cost of energy is only likely to rise in the years ahead. But there are steps small firms can take to reduce bills, cut usage and even generate income on the back of changing their habits. Penelope Rance explains.
Fossil fuel shortages and environmental imperatives will drive massive change in the way energy is generated and distributed in the UK over the coming decades. Both the Government and energy companies will need to invest billions in infrastructure – and everyone’s going to have to pay for it.
Small businesses are no exception. “Energy is expensive now; the likelihood is it will be more expensive in the future,” says Allen Creedy, Energy and Environment Chair at FSB. “It’s going to be critical that small businesses are helped to use less of it, and manage it better. As we move into a smarter energy market, the way businesses are empowered to handle demand, use storage and generate their own energy will be increasingly important.”
The recent FSB Member Energy Survey found that 59 per cent of members now see energy as a significant cost to their business, while the 2017 FSB report The Price of Power revealed that security of supply is the biggest energy concern for most small businesses.
Although the Member Energy Survey found that 52 per cent of members would switch energy provider for a marginal cost saving, and 84 per cent would switch for a significant one, switching is no longer a sure-fire way to save: energy is expensive everywhere. And for small businesses, finding the right deal isn’t easy.
In another report, Open Energy: Using data to create a smarter, cheaper and fairer energy market, FSB outlines a market in which tariffs are standardised and presented in machine readable formats – allowing automated comparisons, so businesses can make informed decisions on the best option.
“When you’re comparing different services, it’s not just about the kilowatt-to-hours,” says Mr Creedy. “It’s the support, technology, advice and access to data that you get, all packaged together to help businesses understand their energy use better.” In the Open Energy model, customers could delegate switching powers to third parties, meaning owner-managers wouldn’t have to spend valuable time tracking the market.
One such third party is troo, which has developed a platform that, in return for a one-off fee, will assess a company’s needs and supply energy prices in an easy-to-digest format. “Dealing with suppliers can be a headache: contracts are complex, billing queries and errors frequently occur, while customer service is often average,” says CEO Andrew Richardson. “We get the same fee from each supplier so we are genuinely out to get the customer the best deal.”
Demand management is a more sophisticated way to cut costs, using data analysis and smart technology to schedule energy use. “Many businesses will be unable to change their operating hours, but smart technology can help,” says Mr Creedy. “If you are a food shop, a smart fridge will know when the energy is cheap and switch off at expensive times. Technology can change the way the shop uses its energy.”
Business-specific data from smart meters with half-hourly data recording means time-of-use tariffs could become the norm – but only 22 per cent of FSB members have a smart meter, just 19 per cent rate time-of-use tariffs, and only 8 per cent think that half-hourly data will benefit their business, according to the FSB Member Energy Survey. “What smart meters give you is granularity,” says Mr Creedy.
“You can see your energy peaks and troughs throughout the day in real time. That data can be used by either yourself or your energy provider to help manage your energy use.”
Dedicated software exists to help businesses better understand their energy data, and where efficiencies can be applied. AND Technology Research, for instance, has developed the AEMS dashboard and mobile app to help organisations monitor energy consumption, visualising usage on a user-friendly display.
“With this information, businesses can gain an understanding of where, when and how they are using energy,” says AND senior executive Gemma Rippengale. “It takes them a step further than their bills, providing visibility of the role energy plays within their business.”
The cheapest energy, of course, is that which isn’t used, and there are things every business can do to cut down. “Energy efficiency is an important way to reduce costs,” says Julia Davenport, founder and CEO of consultancy Good Energy. “Investing in low-cost upgrades such as LED lighting, cavity wall insulation and triple glazing can have a dramatic impact.”
Beyond saving money, energy management can help small firms do their bit to protect the planet. “We asked what would persuade small businesses to be more energy efficient, and apart from cost, the most widespread reason was environmental concern,” says Mr Creedy.
“Many of our members are motivated to invest in energy efficiency and renewables for environmental reasons. They won’t do it if they can’t afford it, but it’s not just down to the bottom line.” The Energy Survey showed that 46 per cent would consider switching provider if they were offered a renewable tariff.
Generating renewable energy is often a viable option for small businesses. According to FSB’s research, 12 per cent of members generate energy, mainly using solar panels, and 43 per cent would consider doing so to avoid excessive energy charges.
For light users, storage is also an attractive option. “Small enterprises are well-placed to take advantage of new technologies such as onsite renewables and electric vehicles,” adds Ms Davenport. “These innovations give businesses greater control over their energy use and switch the relationship away from being a passive consumer.”
FSB’s research shows that 58 per cent of small firms have made changes to improve their energy efficiency, but more needs to be done. “Government, regulators and the energy supplies have been confused about why small businesses can’t be persuaded to invest in energy management,” says Mr Creedy.
“Some of them don’t trust that they’ll get the benefit of that investment. Some don’t use much energy, so they don’t see the point. Some haven’t got the upfront capital, or just don’t have the information.”
Small businesses could be at the forefront of the UK’s energy industry overhaul, but only if they are empowered to take control of their own usage, and encouraged to make choices that will be best for their business, the economy and the environment.
FSB members in Scotland can get help with reducing their energy use at resourceefficientscotland.com
Family-owned hotel and restaurant Battlesteads in Hexham, Northumberland, has achieved significant savings in energy costs and its carbon footprint by implementing a number of energy-efficiency measures.
“Initiatives such as a biomass boiler, producing solar energy on site, being selective with our suppliers, and constantly looking for new ways to save energy are helping us to pave the way for a new generation of environmentally-conscious, sustainable hotels,” says proprietor Richard Slade.
The business has also switched its supply to green energy supplier Ecotricity, and has made use of Considerate Group’s ConServe software, which has allowed it to cut its per-room night emissions by almost 80 per cent since 2012.
“It allows users to easily identify inefficiencies in operations through a correlation of consumption to industry metrics, such as room nights or food covers, or a review of site consumption outside its operating hours,” explains Diana Prince-Parrott, senior sustainability analyst at Considerate Group.
Energy management is not just about savings: the evolving energy market also offers new sources of revenue. Where traditionally the National Grid met times of peak energy demands with reserve fossil-fuel power plants, new emissions goals have led to it procuring small amounts of energy from independent generators, and asking businesses to shift consumption times to better manage peaks and troughs.
Demand side response (DSR) is where the National Grid pays heavy energy users to temporarily consume less. This is suited to companies using power-sapping machinery or heating/cooling equipment, such as factories or business parks. Depowering the machinery for a fractional period of time allows the grid to balance, without firing up an extra power plant.
For a small business, access to DSR services can be challenging. One solution is to partner with a company with market access, such as grid flexibility firm LimeJump. These companies can provide a bespoke DSR solution, allowing smarter asset and energy management decisions.