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The green future is small (and medium)
In the first Industrial Revolution, steam engines were critical to providing energy, and each one relied on having an engineer on hand. Today, SMEs play a similarly vital role in the Green Revolution.
Small and medium-sized enterprises(SMEs) are the lifeblood of the UK economy. There are six million SMEs in the UK – that’s more than 99% of all companies. They employ 61% of the workforce and generate £2.2 trillion of revenues. The OECD declares SMEs to be key drivers of green and inclusive growth, while a recent survey by Opinium found that 6 in 10 UK SMEs believe net-zero and the green recovery is good for business. The Green Edge has been sampling the SME world.
Image, BMI using data from HM Government, Contribution of different sized businesses to total population, employment and turnover, start of 2021.
The Solar Shed Ltd is a well-run and successful SME geared up for the green revolution. Led by ex-London policeman Kevin Holland, The Solar Shed manages retrofit projects delivering domestic net zero energy solutions. Many projects involve putting solar panels or tiles onto roofs, but the bigger picture revolves around the total energy demands of properties and the lifestyles of their owners. Consequently, The Solar Shed looks at the insulation, storage, generation and uses of energy of each property, and tailors solutions to meet needs, aspirations and funds available.
Interestingly, the Solar Shed steers clear of selling energy generation based on feed tariffs and other Government grants and schemes, something Kevin calls the ‘solar-coaster’. Instead, he prefers to help his clients make investment decisions by considering costs and returns - which is quite easy to do right now, particularly with current energy cost spikes projected to last through to 2024. Of course, there’s also the environmental value for those who pay attention to Greta Thunberg and David Attenborough. Rarely calculated into the equation, though, is the enhanced value of a property and its speed of sale when a property has a top-rated Energy Performance Certificate.
The market for businesses like The Solar Shed is huge. Only 1.3 million domestic properties have solar panels, leaving another 31.7 million to tackle. Over the years, the efficiency of solar has greatly improved and the power generated from a single standard panel these days has doubled from 200 to 400 kWh (typically, a domestic property might need something like 10 panels). With incoming technologies like virtually unbreakable panels and thin solar films starting to make their mark, The Solar Shed is always looking for new developments, even exploring things like tidal energy.
In our view, The Solar Shed nicely illustrates some of the key values of an SME to the green revolution: restlessness; agility; pragmatism; constantly looking to improve and to find better solutions. The energy of SMEs will carry the day in many cases with the domestic property shift to net zero. And if Kevin Holland has his way, a solar army will take the UK to a solar future.
Hear more from our interview with Kevin Holland in last week’s Green Edge podcast.
The SME Champion
The Electrical Contractors’ Association has been at the forefront of electricity in the UK for over 100 years, calming concerns around safety, regulations, and standards from the start. Today, the ECA champions the role of its 2,700 member organisations, in being at the vanguard of the green transformation and the further use of electricity across all aspects of life. In a greening world ECA member businesses increasingly fit electric vehicle (EV) charging points, install photovoltaic (PV) and solar panels, and work with smart building systems, controls, low energy lighting, heat pumps, cooling systems and other key green technologies.
Electricians – 230,000 across the electrical industry plus others employed in other sectors (there are probably around another 100,000 or so in construction alone) - work across the UK as direct employees, though self-employment or via agencies. And this dispersed and fragmented workforce is both a major strength and, potentially, a critical weakness when called to deliver low carbon technologies across many locations over the next, say, 10 years. The retrofitting in London alone with 3.7 million domestic properties will require a workforce of 33,000 up to 2030 – and that excludes the retrofitting of all the public and commercial buildings. This rate of growth comes at a time when London has the greatest shortage of electricians and the largest dependence on agency and self-employed electricians. It is also a labour market which was hit by the exodus of skilled tradespeople due to Brexit and the pandemic. At the moment it simply isn’t clear how the UK Government - with its much-vaunted Green Jobs Delivery Group - is monitoring the health, resilience and vitality of SMEs who provide the critical electrical skills in London and across the UK.
We’ll be talking more about the ECA and the points raised here in next week’s Green Edge post.
The SME Network
In their own words, British Chambers of Commerce sit at the heart of a unique network of businesses across the UK. Chambers provide platforms for the commercial development of SMEs and act as co-ordinators and change agents to encourage SMEs to consider how they will progress their own green transition plans.
A major challenge is getting SMEs to consider their green strategic options and how to progress them in a practical and achievable way. The Green Edge recently talked on this subject with Ross McNally, Executive Chair of Hampshire Chamber of Commerce, who told us, ‘most businesses are not placing sustainability at the heart of their strategy. But if they are, then there's a skills issue around who takes that forward?’.
The Hampshire Chamber is seeking to help here by building a ‘community of practice’, where businesses are helping each other and the Chamber acts as a network facilitator for the development of appropriate green skills on both the supply and demand sides.
How did the Chamber come to this approach? First, central government tends to focus on the large corporations and views skills issues and policies through the eyes of these corporations. Second, the Chamber knows that the changes being required of its members are beyond the scale of simply running another education and training programme. Instead, becoming sustainable and net zero requires a complete recast of everything a business does: its products, its supply chain and processes, and how best to wrap employee skills and capabilities around the changes. The Chamber therefore concluded that it needed to get businesses to engage and to deeply (re)think what they offer, how they trade, and how they operate. A real hearts and minds type of challenge.
Hampshire Chamber of Commerce in association with the University of Winchester is running a launch event, ‘Build your purpose, build your business’ for SMEs and micro businesses on 5 October.
The Green Edge opinion: Government needs to think small (and medium)
SMEs are key to the UK’s green revolution. But what do we think are the real challenges facing Government and its Green Jobs Delivery Group?
First, to properly recognise the strategic importance of SMEs and not be dazzled by the headlights of big business. Singly or - more often - as a group, SMEs contain highly skilled people that can drive a technology forward. A key example: given the widely dispersed nature of the UK housing stock, SMEs appear to be the only real solution to the retrofit challenge.
Second, to assess and measure the health of SME capacities and capabilities to extend their roles, both in retrofitting and in wider decarbonisation. Here, the networks of Chambers of Commerce and other representative bodies have a key role to play.
Third, to devise a means for adding capacity to SMEs through green apprenticeships, possibly funded by the unspent apprenticeship levy, and to find ways of tapping into the education and training opportunities being created through the work of SMEs.
Fourth, to encourage banks and building societies to create green mortgage products to fund domestic retrofits by owner-occupiers, and social and private landlords. Good policy here could well help to shape and harness the momentum that exists in the SME community.
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Definitions of SMEs vary. The UK Government uses the EU definition: an SME is any organisation that has fewer than 250 employees and a turnover of less than €50 million or a balance sheet total less than €43 million.
In fact, according to Kevin, the Government policy inconsistencies has meant the solar panel installation industry’s skilled workforce dropped from 22,000 down to 5,000 when the scheme changed in 2010-11.