Staff Sgt. Siuta B. Ika / U.S. Air Force
A pair of recent reports look at how utilities can reach small and medium businesses with efficiency programs.
When it comes to the challenge of connecting small and medium businesses with energy efficiency programs, a pair of recent reports confirm what many utilities already know: There are no shortcuts or one-size-fits-all solutions.
Small and medium businesses consume about 20 percent of the country’s energy, but they account for less than 4 percent of utility energy efficiency spending, according to EnergySavvy. It is “one of the most challenging sectors that we see utility programs going after,” said Neal Elliott, senior research director at the American Council for an Energy-Efficient Economy.
Experts usually consider a utility program successful when 5 to 15 percent of eligible customers participate in it, he said. But many small and medium business programs are barely at 1 percent.
Why? Small businesses often don’t have staff dedicated to energy management, Elliott said. On top of that, without smart planning by utilities, the cost of interacting with them can outweigh the revenue for the utility and savings for the customer.
The Smart Energy Consumer Collaborative included small and medium businesses for the first time this year in its annual State of the Consumer report. Accenture also recently released its own report showing the value of small and medium business engagement.
Getting the most work done in as few consultations as possible is key, Elliott said. Some of the most successful programs he’s seen are direct-install programs, in which utility representatives come to the business site, assess it and offer the customer the optimal measure, such as a lighting upgrade. If the customer agrees, the utility often has contractors on hand that can do the upgrade right then. And when many businesses are situated close to each other — for example, if a city has a main street — the utility assessors can make the most of their own time by going up the street and covering as many businesses as possible.
Several utilities, including ComEd in the Midwest, have been successful in implementing these and similar “one-stop shop” installation programs, Elliott said. He added that a company like ComEd, which serves higher density areas in northern Illinois, is likely to have an easier time engaging more customers than one like Ameren, which operates in lower density areas in the central and southern regions of the state.
Slightly larger businesses may be able to benefit from more upgrades, Elliott said — opportunities like air conditioning or water heating system changes. In this case, given limited access to funds, the utility often has to offer a financing option to help the business pay for the upgrade.
A common option is on-bill financing, in which the utility pays for the equipment up front and the customer then pays for it on their monthly bills. “If you can set up a process where they get the cash up front, then you can move forward and get the contractor in there, and get the savings opportunities cemented,” Elliott said.
But however the customer pays, and whatever the upgrade, Elliott emphasized that in the most successful programs, “the only thing a customer has to do is say ‘yes.’” Follow-up work like calling installers or getting quotes can take time and money these customers don’t have. So if a utility can assess the property, inform the customer about upgrade opportunities and costs, and facilitate installation, that customer will be more likely to follow through, he said.
Utility representatives can also use their initial assessments with the customer to determine if there might be room for more work in the future, Elliott said. For example, a food processor might start with a lighting upgrade, which could lead to a refrigeration upgrade next time.
Given the wide variety of business sizes and specialties — from offices to retail establishments to manufacturing facilities — customers have different energy needs and varying levels of interest in efficiency. This is where Elliott and others see opportunity for utilities to segment their customers.
The case for segmentation
The Smart Energy Consumer Collaborative breaks down customer segments based on customers’ current levels of engagement with their utilities and how actively they seek energy efficiency options.
Importantly, SECC’s survey research showed that managers of larger businesses in the small and medium business sector are more likely to seek out energy efficiency options than managers of smaller establishments. This is in part because operations with hundreds of employees tend to use more energy than operations with only a few.
It also correlates with the time and resources business administrators have available. Managers of smaller businesses often have multiple responsibilities, so finding the right person to begin with can be difficult. “I think that is the biggest challenge that we face as a research organization, and also the biggest challenge that utilities and industry professionals face, is reaching that decision maker,” said Patty Durand, SECC’s president and CEO.
Elliott agreed, adding that when it comes to communication, in-person interaction is often more effective than email offers, phone calls or mailings. “Telling someone, ‘Hi, we’ll be in your neighborhood; can we stop by?’ — that’s how a lot of these programs are successful,” he said.
Business specialty is also important. Manufacturing companies tend to be especially engaged in energy efficiency, SECC’s data shows. These businesses are often open for more hours than other businesses and have the highest energy bills, so efficiency upgrades can be especially useful.
Utilities need to look at who their customers are to determine how best to serve them, Elliott said. California-based Pacific Gas and Electric, for example, serves agricultural customers who use irrigation pumps, so the utility offers services to manage those pumps.
But utilities also need to be realistic in how well they’re suited to engage with customers in different specialties. Elliott used Oregon-based Portland General Electric as an example: One of the company’s largest customers is a steel mill. Knowing they didn’t have the capacity to develop the technical expertise necessary to meet that one steel mill’s energy needs, PGE’s administrators contracted an engineering firm to serve as an informational resource for the mill.
“Having that segmented approach and building those customer portfolio offerings that are tailored specifically to customers that are high energy users or economically important to the community — that’s how you really have good success,” Elliott said.
Smart meters, with the huge data sets they offer, can help utilities serve small and medium businesses. Detailed energy usage information can show irregular patterns and indicate failing equipment, Elliott said. It could also help utilities compare usage among organizations, potentially opening the door to offer savings opportunities to businesses.
Public utilities commissions can help by implementing regulations that minimize work for the customer, Elliott said: one-page contracts with little fine print.
Overall, he said, to achieve high levels of participation among small and medium businesses, “minimizing the customer need for action is imperative.”