Article 4:
Energy efficiency and conservation are a big deal for big businesses. IBM, for instance, implemented more than 3,000 energy conservation and efficiency projects in 2015 and saved nearly $30 million. In 2016, Microsoft spent $2.5 million on efficiency measures plus green power and saved more than $3 million that year.
But, what about the little guys, the small businesses that are defined by the U.S. Small Business Administration as companies with fewer than 500 employees? Such organizations make up 99 percent of the businesses in the U.S., employ some 48 percent of the workers, consume an estimated 20 percent of U.S. energy but attract less than 4 percent of the dollars utilities spend to support efficiency programs.
To see why, the American Council for an Energy-Efficient Economy researched barriers to efficiency initiatives among small businesses as well as what utilities can do about those impediments. Among the more successful utilities, one best practice is this: They segment the small business market and provide customized offerings for each sub-segment.
For utilities that want to target small- to medium-sized businesses in their territories, the Smart Energy Consumer Collaborative (SECC) has a great start. This non-profit agency recently queried more than 1,000 small- and medium-sized business (SMBs) and now has insights on how to target this sector.
Your best bets
SECC segments SMBs into five categories. Patty Durand, president and CEO of the organization, explains that the first group is called the “ESTABLISHED AND ENGAGED” folks and they make up 15 percent of the SMB market. In the SECC study, 23 percent of this group came from the services sector, 17 percent were manufacturers and 10 percent were in construction trades.
SMBs in this segment have a median energy bill of $900 monthly and consume some 54 percent of the SMB energy-use pie. They’ll be open to your energy efficiency messages and outreach, Durand says. “Businesses in this group have already done a lot of energy efficiency work investment and are always looking for ways to save money,” she adds.
“They’re looking for grid-edge services or maybe renewables, electric vehicles and EV charging,” Durand continues. “They’re also looking for environmental messaging because some of these businesses have corporate sustainability programs or carbon-emissions goals to meet.”
And, of course, they’re looking to reduce costs. SECC research indicates that the top areas of interest for these businesses are tools for forecasting energy expenses, green power and assistance calculating return on investment.
The next segment that will welcome your energy-saving offerings are those businesses SECC calls the “MOTIVATED YET INACTIVE.” Again, services companies make up the lion’s share of this sub-set, accounting for 29 percent of the survey sample. Retailers were the next largest category, coming in at 18 percent.
Motivated Yet Inactive businesses represent 17 percent of the survey participants, carry a median power bill of $248 monthly and make up 4 percent of the SMB market’s energy use. Unlike the Established and Engaged, where nearly 70 percent own their own business facilities, about half of the Motivated Yet Inactive are renters, so they have fewer options with efficiency programs even thought they’re open to suggestions if properly incented. This group also is unlikely to have any one person overseeing the energy spend. Ninety-two percent of these businesses have fewer than 10 employees.
When trying to engage this group in energy efficiency, Durand says lighting is a good starting point because they don’t have a lot of agency — or control — over their work sites. “They would also be interested in community solar,” she says. Other potential offerings include relevant usage rates, bill credits for cutting energy use during peaks and walk-through audits to find potential savings.
The “maybe” SMBs
Two groups of businesses surface as those you might be able to engage, but you’ll need plenty of incentives to do so. The first in this group is those SECC calls “INTERESTED IF INCENTED.”
“Energy is not top of mind for this group,” she says. Getting them to opt for “new programs and services will require really compelling incentives.”
That’s surprising, as this cadre, which makes up 27 percent of the SMB market, pays a median monthly bill of $600 and has around 60 employees. The group contains a lot of services businesses (21 percent) and construction firms (13 percent).
Revenues for this group run relatively high. More than half gross between $1 million and $5 million annually, while 30 percent gross more than $5 million per year. Still, only 9 percent report having spoken to their power provider about energy efficiency, and only 20 percent cite energy among their top three operating expenses. “Things like labor and construction materials come in higher than electricity does,” Durand says. “That is one reason that they are challenging to engage.”
She adds that this group would be open to engagement provided you can find a way to deliver savings in the range of 30 percent or higher. “If you can’t produce a number like that, they’re not going to engage,” she says.
The last group Durand identifies as likely candidates for your EE programs are SMBs she calls “SAVING AND SATISFIED.” With an average employee count of 74 and a monthly energy bill in the $300 range, this group has already taken many steps to become more energy efficient. “They feel like they’ve already invested a lot and they’ve gotten a good return on their investment,” Durand says. “This is a very happy group,” a group generally satisfied with their utility”.
Largely made up of services-sector firms and retailers, Durand says the Saving and Satisfied businesses you serve, “probably would be receptive to outreach.” Their interests include forecasting future costs, bill credits for reducing peak usage and assistance calculating ROI of energy efficiency investments.
Durand also warns that if you’re going to try to engage this group, your efforts need to be highly targeted and personalized. “A bill stuffer or email is probably not going to work for them. You may want to connect with a direct phone call,” she says.
As a case in point, Durand points to a successful campaign run by Pacific Gas and Electric, where utility managers identified approximately 12,000 SMB customers who could slash their electric bills simply by making a switch to a different rate plan. The utility used email to contact the customers and added a personal phone call to nearly 1,000 customers who could save at least $5,000 annually with a rate-plan switch. More than 5 percent of customers targeted responded affirmatively to the campaign. As a result of the 600 or so rate changes, PG&E delivered more than $1 million in annual savings on SMB customer bills.
Oh, never mind
One group SECC doesn’t think will be easy to engage is the SMB segment researchers call the DECIDEDLY DISENGAGED. Made up of services (21 percent), retailers (17 percent) and financial, insurance or real estate organizations (19 percent), this group equals 28 percent of the SMB market. Its median monthly energy spend is $158, and these businesses consume approximately 5 percent of the SMB energy- use total.
These people don’t think they can save money, Durand says. She recommends pursuing each of the other segments and leaving this one alone … or at least last on your target marketing list.
As for the others, Durand thinks utilities should strive to become the SMBs’ energy expert.
“Customers are looking at their utilities in the way they look at their other service providers and finding those utilities wanting in outreach,” she says. “Engaging SMBs and keeping them satisfied will help prevent them from turning away if they have the choice.”
