Challenges of designing and delivering effective SME energy policy

Panel: 1. Foundations of future energy policy

This is a peer-reviewed paper.

Authors:
Samuel Hampton, ECI - Energy Group. Environmental Change Institute, University of Oxford, United Kingdom
Tina Fawcett, Environmental Change Institute, University of Oxford, United Kingdom

Abstract

SMEs (small and medium enterprises) are widely acknowledged as a difficult target for energy policy. This is in part due to their diversity: they operate in every sector, in all property types and vary from one person operations with no business premises, to manufacturers with up to 250 employees. Their energy use is poorly understood: evidence on where, why and how much energy they use is incomplete. This paper uses theory, literature review and examples from the UK and France to investigate where the major difficulties arise in designing effective, economic and equitable policy for SMEs, and suggests how this might be improved. Firstly, the policy context is described with reference to the scale and characteristics of SMEs. Available data on their energy use and potential for savings are presented from literature, followed by a discussion of different models of understanding SME decision-making. Three categories of options available to policy makers are described: (1) designing ‘universal’ policy (2) developing organisational policy designed with minimum obligation thresholds, and (3) deploying measures specifically targeted at SMEs. We argue that the focal unit of policy design is the crucial factor influencing whether SMEs are likely to be included in scope. Where the organisation is the primary focus, SMEs are more likely to be exempted, whereas universal policy such as those focused on products, buildings or technologies may hold potential for extending the benefits of energy efficiency to SMEs. Targeted SME policies largely consist of incentives and information provision, and are typically delivered by business support organisations with primary aims to support economic growth. We argue that while there are benefits from utilising existing support networks for delivering energy efficiency programmes, SMEs with stable business plans are deprioritised, and contradictory effects may arise.