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Coping with the crisis

Increasing resilience in SMEs through energy efficiency

Small and medium-sized enterprises (SMEs) are the backbone of Europe's economy and add value in every sector. They represent 99% of all businesses in the EU, employ over 80 million people and account for more than half of Europe’s gross domestic product. With many small businesses already reeling from the impact of the coronavirus pandemic, the current high energy prices and supply uncertainty are creating further pressure on their survival.

How the EU supports SMEs

Since the start of the energy crisis, the European Commission has come forward with several initiatives that aim at supporting not only households but also small businesses. Already in October 2021, the Commission published a toolbox of measures that EU countries can use to help businesses, such as income support, energy vouchers, rebates on bills or financial support for energy efficiency and renewable energy measures. More recently, an emergency tool was agreed stipulating that EU countries may temporarily set a price for the supply of electricity to SMEs to further support those struggling with high energy prices.

Besides helping them to reduce their energy consumption, which is one of the most effective ways to support SMEs in mitigating energy costs and supply risks, the EU operates several support schemes focused on SMEs that include financing, innovation and advice services. Increasingly, these schemes address the clean energy transition as a priority.

COSME, the programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises, funds many initiatives that help small businesses access finance and improve their business conditions. Programmes such as the Innovation Fund, InvestEU Fund – SME window and Cohesion funds also support SMEs with tailored solutions and contribute to enhancing their sustainable growth and competitiveness, while fostering job creation within them.

Market transformation and innovation programmes such as LIFE Clean Energy Transition and Horizon Europe contribute to supporting the transition towards an energy-efficient, renewable energy-based and climate neutral EU economy, while making companies more climate and environmentally friendly, resilient, competitive and smarter.

Support networks also play a key role to help businesses innovate and grow on an international scale. Through targeted advice services, the Enterprise Europe Network, which is the world’s largest support network for small and medium-sized enterprises, helps companies increase their resilience and support SMEs in their transition to more sustainable and digital business models. The Covenant of Companies, a Commission’s pilot initiative, also encourages SMEs to step up their contribution to a clean energy transition by providing assistance related to energy audits, the implementation of targets for the reduction of emissions, and the identification of technologies, methods and financing mechanisms that companies can use to implement their energy targets.

The role of governments

National and local governments are best placed to assist small businesses on their territory. Many support programmes and structures are already in place, including through financial support (via grants, loans, subsidies, tax relief or a combination of measures), information/advice services (via awareness raising, guidance, training, networks), regulation (e.g., supplier obligations and standards) and national plans or strategies. National or regional energy agencies also play a key role in supporting EU small businesses, as they are often the first point of contact for companies looking for advice to reduce their energy consumption and switch to renewable energy.

Despite the structures already in place, governments can take the following measures to further support SMEs

  • extend existing subsidy schemes for small businesses
  • support energy audits and advice services
  • mandate the implementation of audit recommendations
  • support the implementation of an energy management system
  • strengthen the energy services market
  • provide financial guarantees
  • communicate the multiple benefits of energy transition measures
  • support the process to switch away from fossil fuels
  • support employee-led initiatives and behavioural campaigns
  • facilitate networking
  • ensure easy access to relevant information

What small businesses can do

Given their key role for the EU economy, small businesses need to be further empowered and supported throughout the current energy crisis. On 21 October, the International Energy Agency (IEA) and the European Commission organised an online event aimed at increasing awareness amongst governments, businesses and energy stakeholders about measures they can take to protect small businesses and help them to better cope with the current crisis.

The list of actionable steps to help small businesses reduce their energy consumption and improve their energy efficiency below was presented and discussed during the event by Commissioner for Energy, Kadri Simson, and IEA’s Executive Director, Fatih Birol, as well as other panellists that draw on good practice examples to illustrate the necessary support for small businesses at national, regional and local level.

Understand your energy use

A better understanding of where, how and why energy is used can help businesses unlock opportunities for immediate energy savings and longer-term energy efficiency improvements. Increasing monitoring of management systems, integrating smart meters and controls and carrying out energy audits are some actions that can contribute to significantly reduce the energy use of businesses.

  • Smart meters and controls, when used to identify and manage energy use, can lead to a reduction in energy use of up to 40%.
  • Energy audits have been proven to provide potential average savings of 18% of total energy use.
  • Energy Management Systems can lead to an average 10-17% reduction in annual energy use.

Involve the workforce

Employees are uniquely placed to understand the organisation’s energy use, identify energy efficiency opportunities and undertake energy saving actions. Employee energy training and awareness campaigns have been shown to deliver almost 6% annual energy savings. When combined with technological support and expertise, these can increase up to 21%.

Introduce energy efficient technologies

Replacing inefficient equipment with energy efficient options can lead to immediate energy savings, typically with short payback times. Particularly in the areas of lighting, motor systems, boilers and heaters and compressors, energy efficient options contribute to reducing costs and the business’ reliance on fossil fuel sources.

  • LED lights last up to 5 times longer than other types of lamps, and use up to 90% less energy.
  • For every euro invested in improving the energy efficiency of motor-driven systems, at least 7 will be saved in energy use over the equipment’s lifetime.
  • For most (space) heating processes in small enterprises, energy efficient heat pumps can replace traditional fossil fuel boilers, which can increase energy efficiency over 4 times.
  • The energy consumption of compressed air systems can be reduced by over 1/3 with the correct sizing of the compressor load and model selection.

EU businesses, citizens and public authorities can consult the European Product Registry for Energy Labelling (EPREL) to obtain information and compare the energy efficiency and other details about a wide range of products.

Good housekeeping and maintenance

An average small business could reduce its energy bill by up to 30% by implementing good housekeeping and maintenance measures, particularly regarding heating and cooling, refrigeration, lighting and insulation, among others.

  • Heating costs increase by around 8% for every 1oC increase. Smart programmable thermostats can save between 5% and 15% on heating costs.
  • Refrigeration can represent up to 50% of electricity costs for some businesses. Maintenance alone can decrease energy use by up to 10%.
  • Compressed air can be responsible for 10% of an enterprise’s energy bill. Repairing leaks and reducing air pressure can lead to significant energy savings.
  • Increased control over motor operating parameters can reduce their energy use by 15-40%. Replacing a conventional motor-driven pumping system with an energy efficient system can result in a 57% reduction in energy use.
  • Lighting can be responsible for up to 40% of a building’s electricity use. Using lighting controls reduces its energy use by over 1/3.
  • Insulating pipework has been found to reduce energy losses by over 75%.