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  1. Spotlight
2 December 2021

How smart energy can deliver for smaller businesses

A new report reveals how smart meters could transform the energy market.

By Dr Jeffrey Hardy

Smaller businesses form the backbone of the UK’s economy. They make up around a third of total employment and a fifth of turnover, representing 96 per cent of all businesses in the UK.

From hairdressers to cafés, to bakeries, electricians, plumbers and shops, smaller businesses are at the very centre of our communities. They are core to the identity of people and places up and down the country. And yet they often don’t enjoy the levels of service that they deserve from the UK’s current energy market.

A lot of smaller businesses have a similar relationship with their energy consumption as normal family homes – that is, there’s a comparable level of serious disengagement. People simply don’t have the time or the resources to worry about where their energy is coming from and to shop around for the best supplier. Our report, The Future of Energy for Smaller Businesses, shines a light on how this situation can be resolved.

We’ve tried to look at this huge part of the UK’s economy and some of the challenges it faces in the energy market, especially in the context of the journey the whole country is making towards net zero. The report looks to the future and provides positive proposals for how the energy needs of smaller businesses could be better served, getting customers better deals, better services and, crucially, saving energy.

At the core of our proposals lies the widespread uptake of smart meters. When a lot of people think about smart meters they think they’re simply a device for measuring the energy usage of individuals, as well as letting them know how much their energy is costing in near real time. It’s true – smart meters are an incredibly useful tool that can help homes and businesses budget better, reduce their energy waste, and save time by not having to send meter readings to their suppliers every month.

But they do a lot more than that.

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Data on energy usage isn’t just for the customer – it can also be shared securely with energy suppliers. And that’s where the magic can really happen, because that kind of aggregated information is really useful. Our report gives real-life examples of how the data transmitted from smart meters can bring huge benefits to smaller businesses.

First and foremost, smart meters will mean that customised, bespoke tariffs are available. Smaller business owners will be able to specify their energy preferences – whether that’s having steady bills, maximising savings even if that means bills can be a bit more volatile, or making sure they’re consuming cleaner energy from renewable sources. Those preferences, coupled with the hard data on how these businesses use energy, could be transmitted to an online platform, a kind of one-stop shop for energy. That one-stop shop could bring together data on the energy usage and energy preferences of millions of customers. It could group thousands of businesses with similar use profiles and preferences and sell their collective energy demand to suppliers. We’ve heard a lot about energy companies going bankrupt recently because they’re not hedged against large fluctuations in the market. But by using smart meter data we’ll be able to bring the energy markets into the 21st century. Companies will be able to hedge because they can procure energy with the confidence that their customer base has predictable and steady patterns
of consumption.

This will be a win for the end customer – for the shop, the barbers or the plumbers – because they get a good deal on their energy. But it will also be a win for the supplier because they’ve got certainty over what their customers’ energy demands will be. It’s that kind of simple thing that could make a big difference, just from having a smart meter.

Data from meters could also be shared automatically with energy-efficiency specialists. Those specialists will be able to provide customers with advice on easy ways to reduce their consumption, whether that’s by replacing fluorescent bulbs with LEDs, or providing information or discounts on installing solar panels and batteries, or advice on the savings that could be made by replacing older cars with electric vehicles (EVs).

The UK government has set the ambitious target of ending the sale of new petrol- and diesel-powered cars by 2030. That means EVs are going to become a lot more widespread in the coming years, and for smaller businesses that’s an opportunity. Smart meters will enable smaller business owners and staff to select time-of-use tariffs that allow them to charge their vehicles when demand for electricity, and therefore the price of electricity, is at its lowest. For smaller businesses using EVs for business and personal use and charging at home, it’ll be incredibly easy to automatically separate out the mileage and the cost of each journey made for their clients, making things easier for billing and tax purposes.

Not only will smaller business owners be able to charge their cars from the grid, but, with vehicle-to-grid technology, when their cars are plugged in they’ll have the option of being able to sell spare electricity from their batteries back at times when it’s more expensive, making EVs far cheaper to run.

If smaller businesses were grouped together, say in a shopping centre, smart meters could facilitate an integrated energy service. The particular energy habits and consumption needs of each smaller business in the network could be determined by smart meter data, and on-site batteries coupled with solar panels could optimise how energy is shared and distributed by those different businesses according to their particular needs and times of use. The flexibility afforded by this integrated system would lead to both cheaper bills and a reduced need for smaller businesses to spend time shopping around for different tariffs – everything could be optimised automatically.

And that’s the really essential benefit we’re likely to see from the smart meter roll-out – both domestic and smaller business consumers will be able to massively reduce the amount of time, effort and expertise needed to engage with the modern energy market. Smart management will deliver cost savings, energy reductions, price stability, and the ability to tailor tariffs to the needs of individuals and organisations without adding to their lists of chores.

The smart energy revolution is taking place right now, and smaller businesses are a key part of that journey.

Dr Jeffrey Hardy is a senior research fellow at the Grantham Institute, Imperial College London.

Join the energy revolution and contact your energy supplier to request a smart meter. Visit: smartenergygb.org

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