In the LAUNCH project, we have been testing and piloting standardised materials that we have developed together with a broad range of stakeholders in the energy efficiency market. Observations from the interactive LAUNCH Education Programme (LEP) we have been running with a small group of energy efficiency project developers have reinforced the need to address the small- and medium-sized commercial and industrial customer segments of the market. The LEP is part of the LAUNCH Pilot Programme that has been running for the past 10 months.
Uninformed customers, frustrated service-providers and missed opportunities
Small and medium-sized commercial and industrial enterprises form a substantial part of total energy demand in most geographical locations. Most people would agree that the opportunity to reduce energy usage costs of these businesses, while improving sustainability for society, would be a win-win. But this is not happening at scale and speed. The market for energy efficiency is characterised by uninformed customers and frustrated service-providers, which leads to missed energy and climate policy targets, and above all missed opportunities for society.
The key market players and their roles in transforming the energy efficiency market
The reasons are complex and many, making it difficult to analyse and figure out a simple silver-bullet solution. Researching different customer and other stakeholder datasets in isolation does not give the whole picture rather, it can distort the picture, resulting in various fragmented, misaligned programmatic approaches by different market actors over the past decade. In our first blog on this topic, we discuss some of the market actors and their respective roles in delivering energy efficiency measures to the small-medium sized enterprise (SME) customer group, and explore why these types of customers are still being left behind, despite the efforts and good intentions of government agencies, energy-service providers (for simplicity termed ‘project developers’ here), and customers alike.
Project developers, investors, utilities all operate in their respective core markets, and as such have adopted individual business practices and processes that are adapted to serve their respective needs. These actors have very different objectives and/or business operating profiles, and as such view the market differently, especially as it relates to customer acquisition and expected outcomes. Here we talk about each participant and explore their experiences in engaging the SME customer group.
Project developers
As part of the phase 1 pilot activities in the LAUNCH project, we have spent many hours with different project developers from different EU member countries developing end-customer contracts and risk management protocols, discussing project and equity finance possibilities, and helping project developers better engage customers to build project pipelines. Emerging themes from our interactions with this group are the lack of available growth equity capital, the lack of available project finance, and the difficulties in managing the cost of acquisition to remain competitive. These are the big challenges to market growth from a contractor’s perspective. This group are the operating at the front-line of the market, and as such require the tools to build the industry on behalf of all other stakeholders.
Providing these actors with standardised contracts, standardised risk assessment protocols, strong sales processes and techniques, and access to affordable, reliable capital is a big step, but more needs to be done, and done fast for the market to be successfully transformed.
Investors
Over the last ten years, not a year has passed without one or more big announcement from investors and investor groups about launching green or environmental Funds to finance energy efficiency and renewable energy. Some would say it’s reasonable to state that the public relations impact has far outweighed the subsequent deployment of capital. This is not entirely the fault of the investment community, but it does highlight a gap in knowledge between project developers and financiers in terms of the nuances of deploying energy efficiency at scale to the SME customer group.
It could highlight a perhaps more cynical trend developing within financial funds of making announcements about deploying capital to energy efficiency yet directing the flow of funds to large scale renewable projects.
Utilities
One could argue that this group is in the enviable position to deliver energy efficiency at scale to SME commercial and industrial customers. In fact, the SME customer is already a customer of the utility, and energy efficiency is viewed as a core competency of a utility by its customers.
Recent deregulation efforts by different EU member states, among other things, has impacted the level of engagement of utilities in developing energy efficiency programs for SMEs. In the past, these utilities could develop and manage innovative programs for this sector and expect to make a return on that investment. Today this is not the case and as such this market is not supported.
Breaking down the barriers to energy efficiency market growth
There is a great deal more to discuss regarding these different groups and their roles in breaking down the barriers that prevent the scaling and acceleration of energy efficiency market growth.
In the next blog articles, we will talk about the main challenges these actors face, and how they can overcome them.
Make sure to keep an eye on our website and other media channels and, meanwhile, sign up to the LAUNCH community to receive updates about the project and its materials. You can contact us directly at pilot@launch2020.eu if you are considering piloting any of the LAUNCH materials. More information can be found on the LAUNCH website.
