Businesses face ‘far-reaching’ challenges to help achieve clean power target, new Co-op and Green Alliance report shows

• New report from Co-op and the Green Alliance finds businesses of all sizes could play a much bigger role in supporting Government’s clean energy mission
• Co-op CEO and Chair of the Net Zero Council Shirine Khoury-Haq is calling on the Government to provide SMEs with advice and low-cost loans to unlock their participation in renewable energy generation
• In a letter to the Energy Secretary, Khoury-Haq highlighted the critical role energy consuming businesses should play for the UK’s clean power targets

A new report published uncovers the critical role small businesses must play in delivering the Government’s clean energy targets, as millions continue to face significant challenges shifting to renewable electricity.

The research from Green Alliance, commissioned by Co-op, uncovered that electricity usage  by small and medium-sized enterprises (SME) was equivalent to 85% of all renewable electricity generated in 2024. This demonstrates the size of potential demand for renewable electricity from these organisations and the critical role that these businesses will play in the Government’s clean energy mission. 

Speaking to a wide range of businesses, energy suppliers and industry experts, Green Alliance found it is SMEs that often lack the capital required to invest in onsite renewables and energy efficiency measures and face high barriers to entry to secure Power Purchasing Agreements (PPAs).

According to the report, a lack of transparency risks locking small businesses out of long-term, and often cheaper, clean energy contracts. As a result, Green Alliance together with Co-op has set out a series of recommendations for the Government and industry including creating a credit guarantee scheme for SMEs to increase the accessibility of PPAs, making permanent the VAT holiday on energy savings materials and providing every small business with a smart meter to improve energy efficiency. As of 2023, over three million small businesses (42%) did not have a smart meter installed.

In a letter to Energy Secretary Ed Miliband, Co-op CEO and industry co-chair of the Net Zero Council Shirine Khoury-Haq, warns that businesses face ‘far-reaching’ challenges when trying to decarbonise. The letter notes that the UK is at a ‘crucial juncture’ on the path to net zero and that ‘a supportive policy environment can help the government to realise its clean power and economic growth missions.’

Khoury-Haq is calling for a package of support for small businesses, including launching an equivalent to Business Energy Scotland which offers free energy auditing and low-cost loans to install renewables on site.

Shirine Khoury-Haq, CEO of Co-op, said: “The UK has made huge strides in the transition to clean energy and we need to continue work on delivering a cleaner, greener and fairer future. The opportunity ahead of us is significant and failure to act now will be irreversible in the future. 

“As this important report shows, the role of businesses as energy consumers is a crucial part of the equation in delivering our climate and green growth targets. To deliver a better environment, create new jobs, and support our local community businesses, we must address barriers SMEs face in the clean energy transition.  

“At Co-op, on the basis of scientific evidence, we believe that reducing our impact on the planet has never been more urgent. That is why we will continue investing in energy efficiency, unlocking embedded generation across our estate and maintaining our longstanding commitment to PPAs. I remain committed to working with all members of the Net Zero Council to ensure that every business – small and large – is supported to play their part in this critical mission.” 

Roz Bulleid, Research and Policy Director at Green Alliance, said: “How we power the UK’s small businesses could make a significant difference to how easy it is to have a clean power system by 2030. Our research shows these firms used the equivalent of 85% of the UK’s renewable energy last year, but they often lack the capacity to build their own renewables or make significant energy efficiency investments and are too small to secure long term deals for cheaper clean power. Policymakers can help by improving businesses’ insights into their power use and addressing the cost barriers to them going green, including through free energy audits, low cost loans and making permanent the VAT holiday on energy saving materials.”

The report outlines a series of recommendations to Government, including:

• Make permanent the VAT holiday on energy savings materials
• Zero rate VAT on building retrofits which improve energy efficiency
• Provide low-cost loans for SMEs to build onsite renewables
• Expand the remit of the Business Climate Hub in England to match Business Energy Scotland, and offer free energy auditing
• Increase the minimum energy efficiency for leased commercial properties to EPC B for new tenancies
• Increase the accessibility of PPAs for businesses by creating a credit guarantee scheme, contract template and pooling possibilities
• Reform Renewable Energy Guarantee of Origin (REGOs), which, unless reformed urgently, will become ‘increasingly irrelevant’ for reaching Clean Power 2030.

Green Alliance’s research also sets out practical measures for businesses to consider in their transition to net zero, including increasing energy efficiency by installing a smart meter, as well as investing in onsite renewables which can be paid back in as little as four years.

Co-op has committed to reaching net zero across its operations by 2035 and entire business by 2040. In March 2024, Co-op became the first convenience retailer to have its net zero targets validated by the globally-recognised Science Based Targets initiative (SBTi). In its updated Climate Action Plan, Co-op further committed to sourcing renewable energy via corporate PPAs and investing in supporting suppliers and producers to reduce absolute carbon emissions.