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Determinants of energy-efficiency Investments

 

Investments in energy efficiency often remain undecided because companies do not perceive its strategic characteristics. The aim of the project was to test the hypothesis that energy management significantly enhances companies’ perception of the strategic character of energy-efficiency investments.

Background (completed research project)

In many companies there is still considerable potential for reducing energy consumption. Yet, energy efficiency investments – even when highly profitable – often remain undecided. An important reason is the perceived non-strategic character of such investments. Beginning with this observation, the study addressed large energy consuming firms in the industrial and services sectors in Switzerland. The main research hypothesis is that energy management significantly raises companies’ perceived “strategicity” of energy efficiency investments. Thus, energy management is expected to induce positive decisions regarding energy efficiency investments and ultimately to increase the energy performance of a firm.

Aim (completed research project)

The three main objectives of the project are the following:

  • to analyse the role, importance and drivers of energy management in large energy consuming companies;
  • to study decision-making processes leading to energy efficiency investments;
  • to analyse the impact of energy management on energy efficiency investment decisions.

Results

Energy management plays an important role in companies’ energy efficiency investment decision-making process. However, the hypothesised positive influence of the (level of) energy management on the perceived strategic character of energy efficiency investments could not be confirmed by the empirical analyses of this project. Instead, the observed impact is often the reverse: if energy efficiency is perceived as strategic, then companies tend to have a high or higher level of energy management.

Furthermore, the fact emerged that energy management is often unable to play its important role of data and project idea-provider for two main reasons: first, few companies monitor and verify whether effective savings comply with the planned and expected savings. Second, as shown by the survey findings, less than one-third of the 305 responding companies allocated technical resources, such as meters or sub-meters to support the energy management system, and only 30% have defined a baseline (i.e. a reference situation to which they can compare the progress made regarding energy performance).

Laws and regulations seem to be particularly effective for companies where the top-level management is not interested in energy efficiency. The management usually wants to fulfil all regulations to avoid compliance issues. The chances of energy management (EM) to realise energy efficiency (EE) projects can be increased by the importance given to the project via an effective external driver, e.g. adequate regulations.

Relevance

Relevance for research

This research project provides three key insights that are useful for energy efficiency investment research in large-scale consumer companies:

  • The combination of three empirical approaches (standardised survey, qualitative interviews of a subsample and complementary case studies) makes it possible to analyse decision-making behaviour in companies step-by-step and in more detail.
  • The decision model based on the previous research was reviewed, further developed and empirically tested.
  • The research approach facilitates the development of application-oriented proposals to improve decision-making regarding energy efficiency measures in large-scale consumer companies.

Relevance for practice

The project has implications for companies (large-scale energy consumers) and for the government:

  • Companies can increase the value of energy management and develop their design further, in particular by developing monitoring and control tools. Multiple benefits of energy efficiency should be included in project evaluation, in order to link energy-efficiency projects to core business, increase their strategic character and therefore their chances of being realised.
  • The results of the three sub-studies confirm that the regulator can contribute to the promotion of energy efficiency measures in firms. The research team concludes by recommending a mix of measures. This includes the amplification of information, education and trainings. Another recommendation is to increase technical support for companies and to expand and intensify national as well as cantonal strategies and regulations.

Original title

M_KEY – Management as a Key Driver of Energy Performance

Project leaders

  • Dr. Rolf Iten, INFRAS, Zürich
  • Dr. Catherine Cooremans, Institut de recherches économiques, Université de Neuchâtel
  • Prof. Milad Zarin-Nejadan, Institut de recherches économiques, Université de Neuchâtel