SMEs are increasingly lowering their energy costs

• Small and medium-sized enterprises have stepped up energy efficiency investments
• Price decline of intensely used sources of energy in the past years has taken pressure off businesses
• Share of enterprises with low energy costs is growing while increasingly fewer businesses have high energy costs
• Chief Economist of KfW Group, Dr Jörg Zeuner: “We are seeing a clear change in awareness among SMEs”

In the past years, small and medium-sized companies in Germany have worked harder to make their operations more energy-efficient. Small enterprises have been particularly active. During the same period, the prices of energy sources heavily consumed in the business sector such as petroleum products and natural gas have fallen. This has reduced energy costs considerably for businesses overall. According to an analysis conducted by KfW Research on the basis of the representative KfW SME Panel, enterprises are today much less vulnerable to any future energy price increases than just a few years ago.

The research has revealed that between 2014 and 2016, some 1.4 million SMEs adopted measures aimed at improving their energy efficiency and saving energy costs, which represented a share of 37% and an increase of 4% on the comparison period of 2011 to 2013. In particular, small businesses with not more than ten employees stepped up their activities noticeably. Among them, the share of firms that adopted energy-efficiency measures was 36%, which is 5% higher than in the previous report. Enterprises in the segment of other services also increased their activities considerably – their share grew by 12 percentage points.

Enterprises are shifting their focus: While in the period from 2011 to 2013 they prioritised measures that were easier to implement and less capital-intensive, such as changing their energy utility, between 2014 and 2016 SMEs shifted their activities much more strongly towards investing, for example in energy-efficient production facilities and equipment.

The Chief Economist of KfW, Dr Jörg Zeuner, commented on the findings of the analysis as follows: “The result of our monitoring shows that efficient energy management is becoming increasingly important for small and medium-sized enterprises. We see this as evidence of changing awareness among SMEs. Indeed, there is urgency in accelerating the pace in improving energy efficiency in the business sector, not just with a view to achieving the federal government's energy targets, but also to secure the competitiveness of the enterprises themselves.”

The stronger commitment to energy efficiency – combined with lower prices of important sources of energy – is increasingly yielding results for businesses: While 56% of small and medium-sized enterprises now spend not more than EUR 5,000 per year on energy costs, that share was only around 40% in the years 2011 to 2013. At the same time, the share of enterprises paying more than EUR 50,000 for energy each year has dropped from 20% to 13%.

The current analysis is available (in German only) at: www.kfw.de/fokus