A recent poll of small and medium sized enterprises conducted by Abbey and Alliance & Leicester Business Banking revealed that more than a quarter questioned plan to give environmental considerations a higher priority in 2010. The average SME now claims to spend around £1000 each year reducing its carbon footprint. It’s a figure that is likely to increase in the coming years. Ahead of the UK General Election later this year, there appears to be a consensus across all political parties that this issue needs to be tackled and addressed with further legislative powers.
For the smaller company boss scratching his head wondering how to reduce his firm’s carbon footprint, smart metering is an increasingly attractive option. Smart meters enable suppliers to remotely record a customer’s gas and electricity usage.
“Smart metering isn’t a new phenomenon,” says David Lonsdale, investment manager at August Equity. “Recent technological developments coupled with sustained higher energy prices mean that the economics are now increasingly appealing for a broader range of customers.”
How smart metering works
According to a recently published consultation paper on ‘smart metering and the SME sector’ by the Department of Energy and Climate Change, the cost of buying and installing an electric and a gas smart meter is less than £200. A customer’s property is fitted with a smart box that typically monitors a firm’s gas or electricity usage on a half hourly basis.
“A company owner is then armed with 48 reference points, real-time information that allows him to look at ways to manage his energy use and ultimately cut costs out of the business,” says Lonsdale. “As the old saying goes, you can’t manage what you don’t measure.”
Estimates from the Carbon Trust, the body created by the government to help companies cut their carbon emissions, suggest that more than 2.7 million SMEs across the UK already have their meters read.
Making savings
However, by going further and installing smart meters SMEs could on average scoop savings of £1,000, according to the Carbon Trust’s survey, while collectively cutting carbon dioxide emissions by 2.5 billion tonnes – roughly the size of Bristol’s entire annual carbon footprint
Matt Goodman, policy representative at the Forum of Private Business, which represents small businesses in the UK, says that his members are already seeing bottom line savings because of smart meter installation.
“Smart meters can help small business owners by allowing them to monitor and control their energy use more effectively, rather than relying on the often unreliable billing processes many now face at the hands of the big energy companies.”
He adds: “Of course there is a concern that the savings made by installing a smart meter could be outweighed by the initial cost, but any move that makes energy consumption more transparent, allows for greater control and clarifies the dispute resolution process is to be welcomed.”
Getting ahead
According to Costi Karayannis, director at environmental consultants PMSI, concerns about costs are common but largely unfounded. “There are lots of suppliers that will fund the initial costs these days,” says Karayannis. “Some will even write in guaranteed cost savings and carbon reduction into their initial contracts with firms. There is no shortage of confidence from the suppliers that firms will make decent savings.”
According to Karayannis smart metering is a good entry point into carbon reduction for SMEs and suppliers. “For the average SME smart metering is a quick win,” he says. “For the suppliers of smart meters the costs involved are not prohibitive and their installation can be a way to sell in new products and consulting services to companies.”
One of the key ways that firms can make savings using smart metering is through process optimisation – an assessment of how energy is being consumed across the business. Machines can be timed to come on and off at the most cost efficient time, while businesses can chart peaks in their overall energy consumption and make changes accordingly.
Cutting the environmental footprint
Julia Barnett who runs a pasty-making company, Barnett Fare, in Cornwall is one example of a small business looking to use smart metering to reduce her firm’s environmental footprint whilst also cutting costs. “Lots of smaller firms are looking at this kind of technology because the cost savings are significant,” says Barnett. “We are looking at installing a meter that is projected to save us as much as 15 per cent of energy costs at the moment.”
With the average SME spending more than £2,500 a year on electricity and a further £3,200 on gas, the saving opportunities are there for all to see.
In the medium to long term energy prices are likely to increase which means it will inevitably weigh heavier on SMEs. The fundamentals of supply and demand in the energy market mean that costs will increase and it will become an increasingly important profit and loss item for small and medium sized businesses.
This year some larger British firms will also have to grapple with the implications of the Carbon Reduction Commitment Energy Efficiency Scheme (CRC EES), which will see the government cap carbon emissions for non energy-intensive organisations in the public and private sector. “Legislation is going to have a big impact on how companies operate in Britain,” says Karayannis. “Under the CRC EES affected firms will be given league table positions with the worst performers being hit with fines of as much as 10 per cent of their energy cost. In contrast, the best performers could benefit by as much as 10 per cent.”
Benefits for all
It’s not just SMEs that will benefit from an increased adoption of smart metering. Energy consultancies offering advice on procurement, risk management and compliance are set for an increased workload as companies increasingly focus on these issues. In addition, Building Controls companies, which can install the technology and monitor its long term effectiveness, will receive a fillip.
New buildings are now subject to much stricter regulations than before regarding their environmental impact whilst the retrofit market is also forecast to increase significantly. “Building control companies have a real opportunity with smart metering, not just for the initial installation work, but for the value added services that can be offered to their customers on a contracted managed service basis, says August Equity’s Lonsdale.”
Smart metering would also open up the largely ignored rural market too, addressing the problem of difficult to read meters. Smart metering would enable business owners and suppliers in such areas to receive and provide more targeted and tailored energy efficiency advice. And, of course, lower costs.
A smart future
Looking ahead, it is also possible to see a situation where smart metering technology has wider applications, such as in social and elderly care providers where energy usage could be monitored and used to alert authorities of unusual patterns. The Government is currently working with the Ministry of Justice and the Information Commissioner to iron out any possible issues linked to privacy and smart metering.
It’s clear that smart metering represents a real opportunity for UK businesses. Those who harness the technology will not only see the benefits in terms of reducing annual energy costs, but will also be well placed to comply with the raft of legislation that is likely to be introduced in the coming years.