Call for evidence outcome

Energy efficiency scheme for small and medium sized businesses: call for evidence

From:: Department for Business, Energy & Industrial Strategy and HM Treasury
Published: 13 March 2019
Last updated: 23 June 2020 — See all updates

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Energy efficiency scheme for small and medium sized businesses: summary of responses

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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.

We received 50 responses from various stakeholders including:

trade associations
energy companies
businesses in the supply chain
consultancies
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

Original call for evidence

Call for evidence description

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
SMEs
financial institutions
Energy Service Companies (ESCOs)
academics

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.

Documents