Is small business left out of the EE boom?

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By Elisa Wood

October 1, 2009

The US has about 29.6 million small businesses and they employ over half of the nation’s private sector. They hire 40% of our high tech workers, make up 97.3% of our exporters, and generate most of our innovations, according to SCORE.

Still, we hear small business often say it gets the shaft when it comes to public policy; it just doesn’t have the political clout of big business.

What’s this got to do with energy efficiency? I’ve been wondering – suspecting actually – that small business is getting left out of the energy efficiency boom sweeping the United States.

I admit that my evidence is purely empirical and cursory. I have been trying to collect case studies from the Eastern states for an energy efficiency guide that I am collaborating on with my colleagues at RealEnergyWriters.com. I’ve put out a request for the case studies from small businesses to my many good sources, as well as through the social media.

I’ve received profiles of schools, colleges, hospitals, and manufacturing facilities – all non-profits or large energy users. Where I wonder is the dry cleaner, the Mom & Pop shop, the car wash?

I don’t mean to imply there are no small business efficiency programs. Several people have directed me to Efficiency Maine’s program, which does not target small businesses per se, but does serve many. I’ve also received some great examples from United Illuminating in Connecticut.

Manufacturers and data centers are low-hanging fruit that energy service companies like to pursue. Homeowners have consumer groups pressing state regulators on their behalf. But who is pushing before state utility commission’s to be sure small business gets its fair share of the vast amount of efficiency funding now being distributed?

Perhaps the fault lies with small business, itself. Overwhelmed by trying to operate in this economy, do small business owners have the time to think about energy efficiency?  It’s likely few even realize funds and financing mechanisms exist in several states to help them with upfront capital costs.

Small business may well fall victim to some of the market failures Environment Northeast points out in its October 1 report, “Energy Efficiency: Engine of Economic Growth.”

These failures are:

* Liquidity Constraints – when a consumer or business has inadequate access to capital to purchase efficient equipment or improve building energy performance

* Split Incentives – when the owner of a piece of equipment or building (the landlord) does not pay the energy bill and is thus unlikely to invest in efficiency improvements that would benefit the resident/renter

* Information Problems – when purchasers do not know the future energy costs of a product or property and are thus unlikely to invest in the more efficient option with a higher upfront cost

* Behavioral Problems, such as bounded rationality – when the complexity of a decision is beyond the ability of a consumer to make an economically optimal choice.

So this blog does not really reach a conclusion, but asks a question: Are small businesses getting left out of the energy efficiency boom?  If so, what’s the problem? If not, please direct me to success stories!

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Elisa Wood About Elisa Wood

Elisa Wood is the chief editor of MicrogridKnowledge.com. She has been writing about energy for more than two decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.

Comments

  1. I agree that small business has tended to be left out of the energy efficiency discussion, but there also many opportunities and new potential for energy efficiency. We recently completed a paper on a contract from the National Small Business Association about on bill finance, greenhouse gas emissions and energy efficiency. One of the things we found in the process of writing this document was that there really is very little data out there on efficiency for small business in particular. We also found, though, that the EPA Energy Star program has a great small business initiative and that a number of states — Pennsylvania and California in particular — have active programs to help small businesses. I have posted a copy of this paper, among others, at http://www.conoverbrown.com/finance

  2. Efficiency Maine’s original charter mandated that a specific percentage of collected efficiency funds be used as incentives or support for small business projects. Our team found that key allies were the associations that represented these business owners. From the Maine Pomological Society (apple growers) to the Maine Innkeepers Association, we worked consistently with over 100 statewide associations in every field. Not only could they educate with EM, but they spread the word and encouraged their members. Even Sysco recognized the leadership potential of educating the restaurants and small stores they served.
    Associations help the small businesses have strength in numbers and also create a strong peer support system.

  3. This is very true. I have found that small and mid-sized manufacturers are just not aware of the energy savings opportunities available in their factories. The state-sponsored energy service providers who offer rebates and audits go after the larger opportunities first, which makes sense, but so many smaller manufacturers get left out. I feel there is an opportunity for private energy service companies to go after this business.

  4. I came across your post and wanted to chime in about small business energy efficiency – I agree with the comments above that the opportunity is out there but is sometimes hard for small businesses to find.

    Like Pennsylvania, Maine, and California, Minnesota is beginning to require a certain percentage of electricity savings. I work for a program called Energy Smart in Minnesota – we are a business assistance program approved by the state Office of Energy Security helping small and medium sized businesses save money through energy efficiency. Minnesota has several fantastic utility programs, including the One-Stop Efficiency Shop lighting program which takes care of lighting rebates for a business and helps coordinate a lighting retrofit project through contractors. The One-Stop “Shared Savings” loan program is designed so that the monthly payment is approximately equal to the amount of energy cost savings each month.

    Energy efficiency definitely can be a tough project to tackle as a small business. As Mike Grande noted, generally a small business isn’t a big enough power consumer to have a dedicated utility account manager to help them, and the savings from retrofitting a couple of lighting fixtures does not look as impressive as, say, retrofitting the entire Department of Defense, or all of 3M. There is rebate paperwork to fill out, there are contractors to call – and meanwhile small business owners are busy trying to run their businesses.

    If the process is easy – that helps. We do our best to get the opportunity in front of a business multiple times and really focus on the cost savings aspect and the increased quality of a more energy efficient retrofit. Consistent reminders and follow ups also help – we contact each small business that has upgraded an average of twelve times, and it takes an average of five months from the first contact to the final upgrade.

    We have helped several small businesses through this process – it can be done, and it can save the businesses money right away while providing better building performance. A seafood distributor, advertising agency, a flooring distributor, and more have all upgraded in the last year – despite the economic downturn.

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