For most gas and utility companies, small businesses make up the vast majority of accounts within the commercial and industrial customer base. It makes sense, then, to target energy efficiency programs to your retail, grocery, restaurant, office and other smaller, nonresidential customers.
But as the new ACEEE report “Big Opportunities for Small Business: Successful Practices of Utility Small Commercial Energy Efficiency Programs” points out, that can be easier said than done.
“These customers do not have the time to devote to energy efficiency, they are too small to employ staff for it, and they lack capital to make investments. Since many rent their facilities, they do not have decision-making control over building energy systems,” writes report author Seth Nowack. “They also lack awareness and knowledge of energy-efficiency benefits and how to make use of the utility programs.”
Spending and Program Types Vary Widely
Nowack notes that a typical small business energy-efficiency program offers rebates to customers with electric demands below 100 kilowatts. According to data the ACEEE reviewed from 15 gas and electric programs geared toward small businesses, the average yearly expenditure is $7 million—or 12 percent of a utility’s entire electricity portfolio spending. However, the programs only resulted in an average yearly gross kilowatt savings of 9 percent.
So how can a utility establish successful, cost-effective energy-efficiency programs for its small-business customers? The ACEEE report offers the following tips, based on published research, program reports and interviews with experts.
Seven Ways to Erase Participation Barriers for Small Business
- Start with lighting. Lighting offers the most bang for your energy-efficiency buck. Concentrate your efforts on programs like direct-install energy assessments and LED light insertions that make it easy and convenient for your small-business customers to participate. An emerging option is a pay-for-performance model in which the utility works with a contractor that offers energy-efficiency services in return for a negotiated price for energy savings, which reduces risk for the utility.
- Don’t forget gas usage. For some small businesses, lighting is only a small part of energy expenditure. Target these customers with direct-install thermostats, refrigeration or other gas-saving measures.
- Segment the market. Use customer and market data analytics to divide your small-business customers into segments that have common energy needs. Then offer programs tailored to that group, which takes less time, effort and expense than targeting each customer individually.
- Target marketing and communications. You can create messages for segments of customers, but make sure you address them to each customer individually, with some personal details. A generic message may just get tossed in the trash. Nowack also advises targeting customers who have the potential for high energy savings, which can increase participation and thus reduce the overall marketing cost per business.
- Consider going high tech. Nowack says some utilities are offering energy assessment tools on their websites, or even integrating them with their customer marketing and billing data.
- Offer loans. “We found a high correlation between the largest, best-performing small business programs and those that offer financing, especially on-bill financing and on-bill repayment,” Nowack wrote. However, he noted that unless loans are interest-free, participation drops dramatically. And those loans are even more successful when offered together with rebates—especially for businesses with low profit margins and high energy use.
- Establish partnerships. Chambers of commerce, small business advocacy organizations and community groups can act as liaisons between a utility and its customers. Local organizations can also help with technical assistance, energy assessments and support for energy efficiency.
Vice President of Small and Mid-Sized Business Strategy
Fred Dreher knows how to make a big impact in small businesses. He draws upon his vast industry experience to identify ways to improve Franklin Energy’s approach to the small and mid-sized business sector. This includes developing new products that achieve more effective approaches to program implementation. In addition to his role at Franklin Energy, Fred is a former chair and a founding member of the advisory board for the development of UW-Platteville’s Sustainability and Renewable Energy Systems (SRES) degree, a founder of Wisconsin’s SE2 Award (now USGBC Wisconsin’s Building Performance Award), and a former chair of the Association of Energy Services Professionals’ (AESP) Innovations in Tools and Technology Topic Committee. He holds a bachelor's degree in mechanical engineering from UW-Platteville.