At this point you may be asking why, as an SME, you should care? After all, for most SMEs energy is a relatively minor cost. The average bill is around £500 to £600 a year, similar to that of a domestic consumer.
The answer is yes, you should care. For those businesses operating tight margins then the business motive for reducing your energy bills is clear. But even for those businesses where this isn’t currently a major cost, this is an issue you need to take control off. Simply put, in the coming years energy bills will rise for everyone, whether you’re a large corporate, consumer or SME.
Electricity prices alone are predicted to double by 2020 as 25% of the UK’s generating capacity closes down. With older coal fired power stations coming off line and new sources not available soon enough, all businesses will be hit by higher prices.
At the same time the risk of blackouts – or restrictions at least – is very real, and carbon targets are becoming mandatory. This makes energy a key issue for all businesses – not just the big retailers and manufacturers which have traditionally invested the greatest resource into establishing the most economically optimal long term approach.
In short, all SMEs, particularly larger ones with greater numbers of employees and facilities, will be hit by rising energy prices in the future. Despite this, there are proactive measures you can adopt to mitigate this cost.
Unfortunately, SMEs are not well served by the market. Large corporates can go to big energy buyers who can negotiate long term purchasing agreements on their behalf that hedge against risk and capitalise on opportunities to save money.
At the opposite end of the spectrum, ordinary consumers can take advantage of price comparison websites such as uSwitch. Staggeringly, there are very few such sites available to SMEs, which means finding the best deal is a lot harder.
As a result SMEs often have two options. They can either approach an intermediary to buy on their behalf or shop around themselves. Unfortunately, many intermediaries do not serve SMEs well, adding on fees that mitigate any potential savings or behaving in an unethical way by overcharging.
This means the best option in most cases is to shop around and find the most suitable tariff yourself. In addition, it is important you keep an eye for new tariff deals as your existing one comes to a close after 6 to 12 months. This prevents you from rolling onto the standard tariff, which is often more expensive.
SMEs can also implement basic behavioural changes to reduce their consumption, such as turning off lights and computers when not needed. This can make a big difference, particularly with businesses which have never considered this. Investing in energy saving technologies, on the other hand, is quite tricky for an SME as they are often in premises on short leases and the landlord is not typically keen to make a big upfront investment in new technologies.
Whilst this may seem like a very straightforward approach, it really is the best way SMEs can tackle their energy usage. SMEs are in a tight spot, but the reality is that energy will become a bigger cost to them in the coming years. Ultimately, by planning, shopping around and thinking long term SMEs can save money – and ensure they don’t become the victim of a rising cost over which they have no control.
Giuseppe Di Vita is a Director at Utilyx, an integrated energy consultancy.
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