Overcoming the small business hurdle: Three engagement approaches for utilities
Targeting customers by vertical, leveraging data to identify potential savings and removing financial barriers can help utilities increase participation in demand-side management programs.
The following is a viewpoint from Mike Kaplan, vice president at sustainability and energy management company Ecova.
Over the past decade, utilities have increasingly focused on engaging their small and medium business (SMB) customers with energy efficiency, but this customer segment still remains the largest untapped source of energy savings.
In the U.S., small businesses represent 97 percent of all commercial energy customers and consume 20 percent of the nation’s energy. Yet, less than 2 percent of small businesses participate in their utility’s demand side management program each year.
Fortunately, 70 percent of small businesses want to go green, and emerging utility programs and technologies will enable them to do so more easily.
There are three key approaches that utilities should consider today as they support SMBs on their journey toward energy efficiency and sustainability.
The SMB market is extraordinarily diverse, particularly in regard to business size, ownership structure, number of sites and energy management maturity. Utilities can drive personalized customer engagement efforts around these characteristics by segmenting their customers by vertical and use type.
Grocery stores, for example, are primarily concerned with foot traffic, food safety and product loss prevention. Utilities can illustrate the direct benefits of energy efficiency for this vertical by connecting energy improvements to an enhanced in-store experience and environment. They can educate the regional manager at a grocery chain on how to upgrade the refrigeration systems and install sensors to monitor this new equipment. Such minor improvements can drive more business value for the grocery customer, enabling the company to more effectively compete with big-box and online retailers that have now entered the market.
Utilities should also consider that verticals can be segmented even further — and that no customer is exactly alike. National Grid, which provides natural gas and electricity to New York, Rhode Island and Massachusetts, has launched a new program for restaurants that aims to increase comprehensive savings across restaurant businesses based on their specific use types. The operations of quick-service restaurants are significantly different from high-end restaurants, and as such they have markedly different energy needs. Analytics, on-site audits and specialized energy solutions are particularly important for this sector. By scoping out projects for each customer by equipment type, plug load and HVAC requirements, among other criteria, National Grid will engage a wider variety of restaurant businesses and help them meet their individual energy goals.
Put data to work
With more technology and equipment coming online in recent years, data and digital connectivity have become increasingly critical for energy efficiency programs. Through an analytics-driven approach, utilities can identify high-potential customers for energy savings by examining their meter consumption data at scale. These customers include those that can save 10-20 percent or more on their energy bill with equipment adjustments and upgrades.
When SMBs have energy insights that illustrate exactly where and how they overspend, they are more willing to engage with their utility in energy efficiency measures. Toronto Hydro achieved this by leveraging virtual energy assessments in its conservation and demand management programs, enabling the utility to prioritize and engage hundreds of midsize office buildings with high savings potential. The program experienced a 7.5-fold spike in customer engagement and 12-fold increase in project commitments compared to prior baseline metrics, and it drove 3.2 measures per committed project, which resulted in higher customer participation and satisfaction with Toronto Hydro’s services.
Meeting economic and business priorities
Reaching SMBs is important, but closing projects may require additional strategies and tools.
Many SMBs are hesitant to invest capital in energy-efficient equipment when the inefficient versions are working properly, such as a new fryer in a restaurant kitchen or office equipment. By removing barriers to financing and eliminating the upfront capital for equipment and installation, utilities can make it easier for SMBs to participate in and navigate demand side management programs. Once customers experience the initial savings from more energy efficient equipment and lower utility bills, energy management programs become a no-brainer for them going forward.
Finally, utilities must also understand new motivations that drive energy efficiency program adoption among business customers. According to the Shelton Group’s 2016 Energy Pulse Survey, energy and cost savings were the primary driver for energy improvements in 2013, but concerns about climate change and employee retention increased as reasons for adoption in 2016. By extending the conversation to focus more on non-energy benefits, utilities can connect on a deeper level with their customers’ strongest pain points.
While there are various obstacles to greater energy efficiency adoption in the SMB market, overcoming these challenges has never been more achievable. By targeting customers by vertical, leveraging data to identify savings potential and removing financial barriers, utilities can increase participation in their programs and better manage demand — ultimately creating deeper relationships with more satisfied customers. As energy efficient technology improves, sales channels expand and incentives broaden, utilities can more effectively engage their SMB customers for a new era of energy efficiency and energy management.
Mike Kaplan is vice president at sustainability and energy management company Ecova.