ManagEnergy is a technical support initiative of the Intelligent Energy - Europe (IEE) programme of the European Commission which aims to assist actors from the public sector and their advisers working on energy efficiency and renewable energy at the local and regional level.

SMEs and the transition to a low carbon society

Economists increasingly predict that SMEs will be the force behind the economic restructuring and energy transition that the future stability of Europe depends on. Moreover, SMEs are the backbone of the European economy. They make up more than 99 per cent of all European businesses, provide two out of three private sector jobs and contribute to more than half of the total added value created by businesses in the EU.

Low carbon opportunities for SMEs

Low carbon technologies cover a very broad range and translate into an equally diverse range of opportunities for SMEs. Equally, there are many challenges in winning work, financing investment, developing administrative systems and delivering successful projects as individual businesses work to gain experience in the sector. SMEs may be involved as the primary delivery organisation or support larger organisations in a subcontracting role.

Although there are many niche opportunities, the three main areas for low carbon technologies are:

· installations based on existing housing and other building stock (building retrofit)

· housing developments/infrastructure (new build)

· stand-alone installations based on “greenfield” sites and not associated directly with buildings (greenfield renewables developments).

The first two areas commonly use “micro-renewable” technology (solar, heat pumps, biomass and – less often – wind) and are appropriate areas for SMEs to lead in – especially for smaller scale projects. The third area covers larger scale developments (solar farms, wind clusters or farms, and biomass combined heat and power) where SMEs are more likely to be second or third-tier suppliers. There are some larger scale retrofits where again SMEs may act as subcontractors or suppliers, such as biomass district heating schemes.

Small hydro schemes also offer niche opportunities for specialist SMEs. Opportunities for independent SMEs clearly lie largely in the smaller systems as larger scale installations are increasingly dominated by big energy and contracting companies. While the small systems and projects sector is seemingly ideal for SMEs and sole traders, it is also noticeable that larger organisations are actively acquiring small specialist and innovative businesses, and making it harder for independent SMEs to win projects despite the increase in renewable energy projects.

The time is right for independent SMEs to seize opportunities, partner up with other complementary firms where appropriate and build a track record, or they will have to be content to operate only through large corporate supply chains.

At the most fundamental skills level, harnessing renewable energy is all about producing and using electricity and heat in a sustainable and environmentally responsible way, and understanding how to make best use of naturally occurring energy flows. It also requires a well-trained and coordinated workforce, and a well organised and integrated supply chain for larger scale projects. For biomass specifically, there is also a need for a fully functioning and robust fuel supply chain (mostly for wood fuel).

Given these requirements, SMEs in the professions or consultancy and specialist trades that understand electricity provision and heating (or cooling) should benefit most from the opportunities emerging as renewables technology is mainstreamed. Equipment needs to be planned for and specified, so architects and designers, planners, and mechanical and electrical and other consultants of various types will be needed. Electricians and plumbers together with general builders will be ideally suited for installation and maintenance requirements, and various specialists will also be needed.

For larger projects, particularly where public consultation is needed, SMEs can offer a wide range of services including community consultation, planning, legal and other professional services. SMEs active in the renewable energy field can also expand into providing due diligence services as consumers are presented with more and more options and products. For special-purpose renewables finance and delivery models, including projects involving energy service companies, a full range of administrative services including legal and financial will be needed.

While most of the major onshore renewables technologies are well developed (solar, wind, biomass, heat pumps and small hydro), further technology and process innovation is still required to increase the efficiency and range of solutions (for example, “hybrid” solutions – combining two or more individual technologies) and broaden deployment opportunities. In many areas small and flexible research and development organisations can prosper by creating holistic and bespoke solutions with multiple technology applications.

For all renewables technologies except solar, there is a need for some or considerable specialist knowledge and SMEs that have this within their own organisation or through partnerships can prosper. For example, with small-scale hydro, an understanding of water flows and connected environmental matters will be essential to lead a project. For biomass wood fuel, understanding fuel specifications, fuel handling and logistics is needed. Such projects will then draw on the skills of foresters, land and estate agents, farmers and growers, hauliers and bulk handling specialists. District energy schemes will need pipe laying and specialist engineering skills. Heat pumps and borehole drilling require specialist geological expertise, although most applications will call on traditional trenching, and pipe or cable laying skills. Wind energy requires expertise in assessing air flows and effective siting as well as development planning for larger projects.

Solar energy (thermal or photovoltaic) is the exception to this rule as the technology has advanced to the point where simple installation is possible given a modest amount of training.

In summary, the diverse nature of the low carbon sector means that the skills and expertise of many different types of SME can be utilised – architects, surveyors, engineers, planners and other consultants; small builders and developers; plumbers, electricians, roofers, scaffolders and other specialist trades; financiers, lawyers and researchers; energy controls and management, and remote monitoring specialists; and environmentalists, arboriculturalists, foresters, farmers and landowners. All can be involved at various stages of a range of sustainable energy projects – whether during design, development, consultation, installation, monitoring, maintenance or fuel supply.

Challenges to growth

While the potential opportunities for SMEs in the low carbon sectors are growing and significant, there are also challenges and potential barriers to be negotiated, including:

· continuing concerns about the consistency of low carbon policy and incentives towards the low carbon sectors; and whether these might impact strongly on momentum in the market again

· acquiring the necessary knowledge, skills and accreditations needed to service this new, and still evolving, market

· securing appropriate funding and the additional resources needed to exploit the new market effectively

· selecting and targeting the most suitable renewables technologies and applications capabilities

· competing against larger contractors which have integrated capabilities to win work and access government schemes

· the danger that new schemes will impact on some existing areas of business that have long been the traditional preserve of local SMEs. As large organisations such as energy utilities, major retailers and refurbishment main contractors seek to roll out large-scale energy efficiency and renewable energy programmes, some may also aim to capture more small-scale home or building improvement work on the back of this

· navigating and adhering to the complex, stringent procurement requirements of large public and private buyers, coupled with a lack of capacity and experience within SMEs to address this

· understanding the financial mechanisms and incentives associated with sustainable energy installations and communicating the options to potential customers

· a lack of knowledge and confidence among some public and private buyers about whether proposed technologies and design solutions actually provide good value, and which provide best value, which may in turn delay commitment

· creating a marketing strategy and messages that will appeal to potential customers/ investors and give them the information and confidence to proceed


Fortunately, at EU level the importance of SMEs in the energy transition is well recognised and significant supports are available. Much of this support can come from structural funds, and is one of the four priority objectives of the 2014-2020 programme.

However, wider measures are available to support, for example, research and innovation, business planning for innovative SMEs and export and tech-transfer.

Around 20 per cent of Horizon 2020's total combined budget for all societal challenges, as well as the specific Leadership in Enabling and Industrial Technologies ’ (LEITs) objective, is likely to go to SMEs. This means that at least €8.33 billion in EU support for research and innovation activities will go directly to small businesses.

Another new funding opportunity is the Fast Track to Innovation pilot initiative, which also requires a smaller consortium, and aims to speed up the commercialisation of research. The Commission notes that, 'first-time applicants and SMEs are particularly welcome' to participate in the new programme.

Under Horizon 2020, about one third of the access to risk finance budget - over €900m - will go to SMEs and small midcaps, through a debt facility providing loans, guarantees and other forms of debt finance to entities. This also includes an equity facility, providing finance for mainly early-stage investments, with particular focus on early-stage SMEs.

While support under Horizon 2020 requires transnational collaboration, the SME instrument is exclusively dedicated to small businesses, targeting those that are highly innovative and demonstrate strong ambition to develop, grow and internationalise, regardless of the sector. With a budget of more than €3 billion for 2014-2020, the SME instrument grants tailored support to businesses that have ground-breaking ideas with high market potential but lack certain resources, or a real strategy, to deliver.

Support for export and partnership development is also important for SMEs. The Enterprise Europe Network (EEN) is a key instrument, bringing together around 600 business support organisations from over 50 countries, and helping small companies seize business opportunities in the single market. Increasing the internationalisation of SMEs is important, and the EEN provides a business database containing thousands of company profiles. It also organises regular matchmaking events.