Energy efficiency challenges and opportunities for small businesses
03 December 2014
Since the launch of the PSEE, it has reached close to 1000 small businesses in giving advice, creating awareness and providing training. Based on queries from small businesses received by experts at the PSEE’s call centre and questions raised at its workshops and other national events, it is clear that small businesses have to address various barriers just to stay afloat, with energy listed as one of these.
Many small business owners think of energy efficiency as a complicated matter better suited to larger businesses. However, in the PSEE’s experience small businesses can save up to 20% on their energy costs without any capital investment – savings that could contribute to the sustainability and profitability of the business, while also contributing to job retention and/or creation.
Typical challenges faced by small businesses
At a recent workshop held as part of the Global Entrepreneurship Week and attended by delegates from small black-owned companies, it was clear that energy was but one of a number of challenges that this sector needs to contend with. Yet, with rising energy price increases and supply interruptions, small businesses are particularly vulnerable given various other barriers they encounter, including:
- access into the bigger corporate value chain networks;
- translating innovation into actionable business plans;
- access to finance and markets;
- cash-flow management; and
- inefficient equipment.
Amidst these other challenges, few small business owners realise that energy is the single biggest growing cost in their businesses and can present risks and opportunities for the sustainability of their businesses.
The hikes in energy costs between 1 April 2013 and 31 March 2018 approved by NERSA represent an increase of at least 47% in the electricity costs for businesses over the five-year period. Add to this the recently announced increase of 4.69% due to come into effect in April 2015 on top of the annual 8% hike. In addition, fluctuating fuel prices impact the total energy spend of businesses. These factors have a significant impact on the sustainability and profitability of any small business. “Any opportunity therefore to save energy is an opportunity to save money to plough back into your business and enhance the sustainability of the business,” says Valerie Geen, Head of Energy at the NBI. The mistaken belief that energy efficiency is an expensive exercise requiring big investments and hence the reserve of big business, further serves as a deterrent for small business owners to get involved.
Energy-efficiency opportunities for small businesses
Unlike many other rising costs that businesses have little choice but to simply absorb into their operations, there are a number of things small businesses can do to mitigate the impact of rising energy costs on their profit margin. Energy efficiency is to a large degree about common sense behaviour change. By simply implementing a number of practical hints and tips, typical savings of up to 20% on energy costs can be realised without any capital investment, for example:
- Business owners should take the time to check the accuracy of their electricity bill to guard against municipal billing errors that could lead to a company being overcharged by hundreds if not thousands of rands.
- Compile a spreadsheet of the business’s energy spend over a period of time and take note of any spikes in use – investigate the reason(s) for this and implement remedial action.
- Conduct regular maintenance on equipment to improve efficiency and performance.
- A business can give itself a competitive edge by being able to supply its energy consumption and efficiency measures to companies they are a supplier to and who may be looking for ways to reduce their own carbon footprint.
- By simply switching off lights, air conditioning units, computers and other office machines when not in use, a business could realise a substantial saving on its energy bill within a matter of months.
For a business with an electricity bill of R10 000 a month, a 20% reduction in energy usage already amounts to a saving of R2 000; 12 months down the line it adds up to R24 000 at no or low cost to the business.
Furthermore, the PSEE’s small business workshops provide small businesses with an opportunity to make the connection between how their own and their employees’ behaviour impact the energy efficiency and associated costs of their businesses. In a specific case, for instance, the management and staff of a small company were hosing themselves down with a compressed air unit several times a day, wasting precious units of energy that were costing them five times more than regular electricity.
Only once a small business has exhausted no-cost opportunities to lower energy costs, do they need to move on to consider low-cost measures, such as replacing old light bulbs with energy-efficient ones and considering roof insulation as an alternative to air-conditioning.
It is also recommended that small businesses take a long-term view when purchasing new machinery: instead of considering price only, the energy usage of various models should also be factored in. If a more expensive model uses much less electricity, the long-term gain of an energy-efficient machine may far outweigh the short-term benefit of buying a cheaper machine that is less energy efficient.
On the topic of energy usage, it is important to understand how energy is being utilised in a business. An electricity meter is an excellent tool to help business owners keep an eye on the kilowatt-hours being used. Businesses can also request electricity usage data from their municipalities to help them establish usage trends and to pick up and address unexpected spikes.
How Government, Eskom and big business can help
Based on the PSEE’s interactions with small business owners, the following has emerged as areas where Government, Eskom and big business could possibly assist them in becoming more energy efficient:
- Make electricity meters available to small businesses at no or low cost.
- Waive the fee charged by municipalities for the provision of energy usage data – if this fee could be waived, as is the case for bigger businesses, it would serve as an incentive for small business owners to obtain this information.
- Bigger businesses can play an important role in educating their small business suppliers on the importance of energy efficiency and by setting energy efficiency targets for their suppliers to meet. In this regard, Woolworths is setting a great example by having already engaged more than 100 of its suppliers to participate in energy audits, fully paid for by the PSEE.
PSEE small business workshop fact file
- The four-hour workshops are presented in the major metropolitan areas. Depending on the interest, it will be expanded to other areas to ensure easy access for all businesses.
- Workshops are usually attended by about 20 delegates, allowing for one-on-one interaction between delegates and energy specialists. Delegates who bring along their business’s electricity bill usually get the opportunity to work through it with a specialist.
- Workshop topics range from a basic introduction to energy efficiency and what it means in terms of small businesses, to sessions focused on topics such as plant technology, HVAC (heating, ventilating and air conditioning), lighting and refrigeration. Publications on most of these topics can also be downloaded from www.psee.org.za
- Call 080 111 3943 or visit www.psee.org.za to find a workshop near you. Alternatively, email us at email@example.com with your queries.