Detail of outcome
While no decision on the final delivery model has been taken, we have commissioned research into auction design in order to further inform the policy-making process.
Although the Department for Business, Energy and Industrial Strategy (BEIS) has extensive experience of running an energy efficiency obligation through the domestic Energy Company Obligation (ECO), we have less experience of energy efficiency auctions, which is why we are commissioning further research. This research will form part of the evidence base that enables BEIS to decide which model should be taken forward to full public consultation.
Detail of feedback received
We received 50 responses from various stakeholders including:
- trade associations
- energy companies
- businesses in the supply chain
- local authorities
The call for evidence posed broad questions around 3 illustrative delivery options to promote take up of energy saving measures in SMEs, as well as asking if there was anything else we should consider. The 3 options were:
- a new supplier obligation
- an energy efficiency auction
- expanding access to finance
Key themes that came up in responses, regardless of the delivery model for the scheme, included:
- the scheme must be simple otherwise SMEs won’t participate
- non-domestic buildings are very varied, and a one size fits all approach won’t work. A bespoke package would be needed for the diverse types of building occupied by small businesses
The key points that came out on the options were:
- there is no clear favourite: respondents provided views on the pros and cons of each
- a number of respondents warned against putting an additional levy on business energy bills to pay for the scheme
- suppliers were unanimous in opposing a new supplier obligation. Their view was that it would distort the energy market and have implications for competitiveness since not all SMEs would benefit from it. Many trade associations were also against placing an obligation on suppliers. However, a few academics provided evidence of supplier obligations having a strong and successful record across a number of countries. Some smaller consultancies and installers were also supportive of the obligation option
- energy suppliers and most trade bodies were supportive of auctions as this would encourage innovation and introduce new players into the market. Some current market players including smaller consultancies were worried about being crowded out of any auction by larger businesses. Questions were also raised about whether the private energy efficiency market in the UK is sufficiently developed to respond to an auction
- respondents acknowledged that lenders and energy service companies see additional risks when operating in the SME market due to a range of factors. Some respondents stated that SMEs tend not to proactively seek finance although others suggested that finance products including interest free loans, revolving green funds, and the use of EPC / business rates might incentivise investment
This call for evidence seeks views on various proposals for a new Business Energy Efficiency Scheme focused on SMEs.
We are keen to hear from anyone with an interest in how a new scheme for SMEs could be designed, including:
- energy companies
- network operators
- financial institutions
- Energy Service Companies (ESCOs)
SMEs account for 99% of UK business and have a very low awareness of the benefits of energy efficiency. The additional documents here provide summaries of findings from 2 projects which explored how to engage SMEs in energy efficiency:
- Digital Discovery: funded by BEIS and delivered through external contractors (completed November 2017) considers the demand for a website targeting SMEs with information about energy efficiency
- Digital Alpha: a 12-week project (completed July 2018) to build 3 prototypes with the aim of motivating SMEs to make a significant contribution to the 20% ambition
We have issued the government response to our previous call for evidence, Helping businesses to improve the way they use energy, in parallel with this call for evidence.