Global climate change has meant that ‘once in a lifetime’ weather events are becoming regular occurrences. It is why more UK and international companies are committing to carbon-neutral goals and zero carbon emissions across their entire value chain. For UK government emissions policy to work depends on SMEs making energy savings. Cutting global emissions is a strategy supported by Governments across the world. Strengthened social and environmental legislation will support these goals, as will the purchasing decisions ethical customers make.
Becoming carbon neutral is not only for multinational corporations. Significant energy savings are available to most UK SMEs, provided they can access some help for identification and implementation programmes. Excessive use may even lead to greater financial penalties than those of the Climate Change Levy (CCL). It is also reasonable to expect that energy costs will continue to rise in the future.
According to the Department for Business, Energy and Industrial Strategy, SMEs represent a significant proportion of UK business activity. There are over 5.7 million businesses in the UK and over 99% are SMEs. They are critical to the economy, making up 60% of private-sector employment, and almost half the financial turnover.
SMEs making energy savings
Moreover, SMEs account for over 50% of business energy use, making then suitable candidates for improving business energy efficiency. With appropriate investments in energy efficiency improvements, government estimates are for savings of £3bn pa available
The Federation of Small Business highlights energy efficiency as the single best way for smaller businesses to reduce energy bills. But they also acknowledge the difficulty of persuading small businesses to invest in significant energy performance improvements. Their biggest problem in making these savings is a lack of practical constraints, a lack of information and available cash for suitable motivation.
According to the Carbon Trust, not all programmes for making energy savings have a cost associated with them. The Department of Energy and Climate Change produces a helpful, easy to follow 82-page SME energy efficiency guide full of free and low costs ideas. Many are obvious, such as converting to LED lighting in cooled or refrigerated areas as they produce almost no heat. Moving to LED lighting generally is also cost-effective with good investment return times.
Local organisations also have a role in supplying expertise in helping small businesses making energy savings and make necessary changes. With energy, the more you look, the more savings you find, and it helps to have someone who has done it before. Experience counts
Saving energy across the value chain
An industry value-chain is a representation of the activities involved in producing goods and services. It starts with raw materials and ends with the delivered product or service. Finding energy efficiencies improves productivity by making more for less input, making businesses more competitive and thus more profitable. Most modern equipment is energy efficient, but running costs are becoming more important than the initial buying price.
For example, the purchasing cost of an electric motor represents only 2-3% of its lifetime cost. This means that by reducing a motor’s running cost, there are significant savings available throughout its life. A typical mid-sized motor of 22 kW running eight hours a day for its 20-year life will consume £148,000 in energy costs. But how can you save on a motor’s running cost? For an SME without access to an engineer, this is a difficult problem to solve.
In most cases, the simple answer is to install a variable speed inverter drive (VSD). This is because most motor installations do not need the motor running at full speed all the time. By automatically reducing the motor speed when it is not needed VSDS reduce its power consumption of the motor. Moreover, because of the way motors work, the power consumption falls at the cube of the speed reduction. This means that our 22 kW motor running at 90% speed needs 0.9 x 0.9x 0.9 = 72.9% or 27% less energy to run. This is equal to a saving of £40,000 over the motor life. Larger motors will save more.
Supporting SMEs making energy savings goals
With energy, the more you look, the more savings you will find. Specialist local electrical companies like BPX Electro-Mechanical have a key role in supplying expertise in helping smaller businesses. They can help identify energy savings, provide advice, supply the hardware and oversee the necessary installation changes. The energy hotspots are heating, lighting and factory equipment, and the Carbon Trust recommends taking an energy walk around, and it helps to have a partner who has done it before.
The recently closed Green Business Fund produced a wealth of information to help SMEs improve energy efficiency and reduce energy costs. The guides, resources and seminars were all produced in the last 2-3 years and continue to be available. There is also an online four-stage tool to help businesses measure their carbon footprint; benchmark their energy use and gives an example for building a business case for lighting upgrades.
The current enhanced capital allowance (ECA) scheme closes in April 2020. Replacing it in the summer of 2020 will be the Industrial Energy Transformation Fund (IETF). The ECA was a first-year allowance scheme allowing 100% write off of the cost of an investment in qualifying plant and machinery against the taxable income of the period when investing, thus improving cash flow for businesses. The government increased the Annual Investment Allowance (AIA) to £1M pa and it replaces the ECA until end 2020.
The government also launched a £315m hunt for new technologies to shrink the carbon footprint of the most polluting factories to help meet the UK’s climate targets. Over the next five years, it offers funds to energy-intensive firms to invest in new technology for reducing energy use. The scheme funds are also accessible by manufacturers and SMEs
They are also finalising the design of the new Industrial Energy Transformation Fund, which opens for bids in the summer. The fund will bolster investment in clean growth as it works towards its UK climate targets. Ministers expect the scheme to save £1bn a year on industrial energy bills and cut carbon emissions by 2m tonnes. That is the like taking almost 200,000 cars off the road each year.
Finally, it is important to understand that the government will not meet its emissions goals without the commitment of SMEs making energy savings.