Why & how energy efficiency policy should address SMEs

Tina Fawcett and Sam Hampton

Highlights

• Small and medium enterprises (SMEs) use around half of business energy.
• SMEs are largely overlooked by energy efficiency policy in the UK and EU.
• SME capacity to respond to policy and decision-making differs from larger firms.
• Effective policy will require strategic segmentation and targeted interventions.
• We set out a research agenda to fill data gaps and inform policy design.

Small and medium enterprises (SMEs) are collectively significant users of energy, largely overlooked by current energy efficiency policy in the UK and EU. In this ‘perspective’ article, we use theory, empirical evidence and policy analysis, to make the case for increased policy focus on SMEs.

SMEs account for more than half of industrial and commercial energy use, however, the details of their energy use and the potential for savings is poorly understood. While energy end-uses are similar to those in larger enterprises, SMEs’ capacity for paying attention to energy and responding to policy are different, as are their decision-making processes. Designing and delivering effective policy for this heterogenous group will require strategic segmentation and targeted interventions, in turn demanding improved data. We set out a research agenda to address deficiencies in data and evidence, and propose a series of options for policy makers.

Note: This research was co-funded by UKERC and CREDS

Banner photo credit: Alireza Attari on Unsplash