As explained by The Rt Hon. Chris Huhne MP, Secretary of State for Energy and Climate Change: “Energy efficiency is an untapped opportunity for all UK businesses, whatever their size. By saving energy, businesses can slash overheads and boost the bottom line.”

Waste Not Want Not
Using energy wastefully currently costs UK businesses more than £6 billion a year. This figure is only set to rise as Ofgem estimates that energy prices could climb by over 40% in real terms over the coming decade. But despite the significant cash and carbon savings available, the private sector is yet to fully realise the benefits of adopting energy efficiency measures.

For the 4.8 million small businesses currently operating in the UK, which account for approximately 45% of total business energy consumption, tackling inefficiency could reap particularly substantial savings in financially challenging times.

As demonstrated by case studies within the report, rewards are on offer for those small businesses able to make the change. For example, Premier Decorations decided to start using a specialist lighting scheme in their warehouse in Wrexham. As a result, they were able to save £67,000 on their annual energy spend and reduce CO2 emissions by 271 tonnes - all with a payback period of less than one and a half years.

But large businesses could benefit too. “The business case for energy efficiency is clear and compelling. Few other investments get anywhere near that rate of return,’ said Hugh Jones, managing director of Carbon Trust Advisory Services. “Yet our data suggests big businesses are leaving around half the investment opportunities on the table and continuing to waste billions of pounds on unnecessary energy use every year.”

But while the arguments for energy efficiency are easy, implementing such change can be difficult. So business needs government to lead the way.


Government support
Through providing suitable incentives and support frameworks, government can ensure that businesses of all shapes and sizes are able to use less energy and save money.

For example, the report proposes the introduction of an Energy Management Hierarchy, which would provide a pathway for business to tackle carbon and GHG emissions through four steps: avoidance, reduction, substitution and compensation. By adopting strategies to ‘avoid’ and ‘reduce’ emissions, businesses can start to save money in under a year. According to the Carbon Trust, a typical large organisation can cut at least 15% of its annual energy bill through the use of simple energy efficiency solutions. In the case of Premier Decorations, this was much more - 74%.

For small businesses, the report outlines how the Carbon Trust 0% business loan scheme has helped many small businesses to invest in energy efficiency improvements. This is well illustrated by the case of The Cavan Bakery in Hampton Hill, Middlesex, which used the loan to buy new and more efficient ovens. The new ovens cut gas consumption by 75%, and so countered rising energy costs and the financial strains of the recession.
The report therefore recommends that the stimulus to The Carbon Trust scheme is expanded through the introduction of private sector capital, to ensure that small businesses continue to cut both costs and carbon.

The forthcoming Green Deal is also a significant opportunity for government to help business. The Coalition Government’s new initiative supports the implementation of energy efficiency packages in households and small businesses. If government could develop a robust system for targeting SMEs under the scheme, energy efficiency would be that much easier for the struggling private sector.  Such targeting could be achieved by government working with trade associations, banks and the Office of Government Commerce. For example, Lloyds Banking Group has recently announced its intention to work with its one million SME customers, many of whom are keen to take out loans to invest in energy efficient products and services. These new partnerships are essential in developing a comprehensive framework for tackling the energy efficiency of small businesses.

Moreover, government could offer a tax break on business rates to organisations that successfully improve their energy efficiency. This could be linked to a building performance certificate such as a Display Energy Certificate (DEC) or accreditation under a recognised Energy Management System. For many organisations, business rates represent a significant proportion of overhead costs and therefore a discount should prove significantly attractive to promote investment in energy efficiency.

A More Secure Future
Energy efficiency in business also has wider consequences, apart from the cash and carbon benefits to the UK plc. With many existing fossil-fuel power stations shortly due to close and the national grid in need of a drastic overhaul, an energy crisis is looming on the UK horizon. Until now, the recession’s impact on our energy consumption has largely masked the inefficiencies of this ageing system. However, if the situation does not improve, future power cuts and rising energy bills will be the inevitable result.

But if businesses change the way they operate, the UK’s overall energy demand will be cut, thereby contributing to a more energy secure future. So the private interest is for the public good.

Lord Teverson, Liberal Democrat peer and co-chair of the inquiry summarises:
“With government leadership, businesses across the UK can thrive, while securing a low-carbon and fuel-secure future for the nation. Now, more than ever before, we must reduce the amount of carbon we emit as a country - reducing energy consumption across the private sector is in both the private and public interest.”

Tommy Moody, Manager, Carbon Connect