Innovation in Small Business Energy Efficiency

Published: 24 April 2020

By Rebecca Lane, Business Modelling Consultant, Energy Systems Catapult

Selling small businesses energy efficiency is notoriously hard – customer feedback from the UK and internationally cites a lack of time, budget, interest or confidence in the solutions available to help Small and Medium-sized Enterprises (SMEs) reduce their energy consumption.

Recent international trends also demonstrate a decline in the uptake of energy efficiency products, which is likely to decrease further in the current global climate.

Yet 99% of businesses in the UK are SMEs and they account for 47% of commercial energy use. There is potential for up to 40% energy reduction with SMEs according to the Building Energy Efficiency Survey which has a huge potential to contribute to the UK’s Net Zero goals.

The Department for Business, Energy and Industrial Strategy recently launched Phase 2 of the Boosting Access for SMEs to Energy Efficiency programme (BASEE) to encourage the development of products and services to help this sector meet the UK’s Net Zero target. Following the successful delivery of Phase 1, Energy Systems Catapult will be supporting Phase 2 pilots for Arbnco, Qbots and Energy Pro.

For new energy efficiency solutions to be a success, they will need to overcome these barriers by delivering more accessible and tailored energy efficiency recommendations for each SME customer.

New Business Models and Value Propositions for SMEs

During Phase 1 of the BASEE programme, Energy Systems Catapult is supporting Arbnco and Qbots Energy to design and assess new business models that combine data analytics, energy services and innovative financing;  to not only deliver improvements in energy efficiency for their SME customers but provide an appealing value proposition that overcomes barriers to uptake by delivering more accessible and tailored solutions that help businesses lower energy costs and save money.

Energy efficiency is usually a low priority for SMEs and makes up a relatively small part of their overheads in many cases, so efficiency improvements only have a marginal improvement on their profitability. If a business did want to take any action to reduce their energy consumption, it may involve pulling together multiple threads from their energy supplier, an installer and a finance provider. Not to mention the huge disruption including calls, site visits and training requirements.

In addition, there is often a missing link between their energy supply and the energy efficiency measures – meaning SMEs never know if the actions they’ve taken have delivered the improvements expected.

Digital energy services are a way of pulling all these threads together under a single service, helping SMEs take control of their energy consumption and understand how they can improve their energy saving in a cost-effective way.

Arbnco logo

Arbnco’s Digital Energy Efficiency Platform is exploring how energy efficiency recommendations, installers and finance providers can be brought together through a single platform to improve accessibility to energy efficiency measures.

Delivering energy efficiency measures to businesses also often requires a significant upfront investment in time and cost to the SME for data collection about the building and its users before any recommendations can be made. Using existing energy data is a key opportunity to reduce the cost and time required by SMEs to reduce the amount of energy they consume.

Q Energy logo

Qbots Energy are exploring how smart metering data and artificial intelligence can be used to deliver energy insights and energy efficiency recommendations through their digital platform.

Non-domestic energy Consumer Insights

To help further develop their propositions, our Consumer Insight team utilised a new non-domestic segmentation method which explores the complexity of energy use and energy outcomes SMEs are trying to achieve. This allows a deeper understanding of customer need when added to more traditional segmentation methods like profile class, sector type or size of the business.

There is a gap in the offering to SMEs today with a need to encourage those with lower energy use and outcome complexity to engage with energy efficiency, particularly when payback periods are long and businesses cases are relatively weak. The segmentation work has been used to tailor the offer to key market sectors for Qbots and Arbnco.

Trialling energy efficiency solutions with real customers

For Phase 2, we will be looking to test the business model and value proposition concepts developed in Phase 1 with real customers. Both the Business Model Innovation and Consumer Insight teams will be supporting the design and analysis of the trials, applying our experience in running trials of new energy products and services with domestic customers to SME customers.

  • Arbnco will be running their trial in three locations, including Bridgend, West Midlands and the Central Belt of Scotland in collaboration with Bridgend County Borough Council, Aston Business School and Centrica.
  • Qbots Energy will be testing their proposition across 40 sites in the Manchester area, working in partnership with Bryt Energy, Leapfrog Finance and AskIf.

The Business Model Innovation team will be gathering insight and evidence post trial with a Go-to-Market strategy to be developed with the lead organisation and partners to inform their product launch in March 2021.

In addition, the Business Model Innovation team will also be supporting EnergyPro to evaluate their existing franchising business model concept to deliver energy efficiency measures to SMEs and refine through stakeholder interviews. The aim is to deliver a validated business model for a range of potential customer types to help establish the franchise model in other areas outside of Oxford

Simon Briggs headshot, Business model innovation team

Our Business Model Innovation team sits within our Systems Integration capability. Contact Simon Briggs, Practice Manager, Business Model Innovation.