Barriers to Energy Efficiency: Evidence from Selected Sectors

September 19, 2003

News

19/09/2003

 

Barriers to Energy Efficiency: Evidence from Selected Sectors

By Eoin O’Malley (ESRI), Sue Scott (ESRI) and Steve Sorrell (University of Sussex)

Embargo: Friday 19 September 2003, 00:01 am.



To combat climate change, it is essential to reduce the use of fossil fuels and minimise greenhouse gas emissions. To help to achieve that objective, energy must be used efficiently. However, many international studies claim that companies and other organisations are “leaving money on the floor” by neglecting highly cost-effective opportunities to invest in measures that would improve their energy efficiency.



A new ESRI report, “Barriers to Energy Efficiency: Evidence from Selected Sectors”, examines these claims in the context of the Irish economy, and asks why organisations apparently ignore financially rewarding opportunities to improve their energy efficiency. The report is based on detailed case studies of organisations in the mechanical engineering, brewing and higher education sectors.



Key Findings:

 

 

  • The report finds that companies and colleges in Ireland do not take advantage of a wide range of opportunities to improve their energy efficiency that appear to be cost-effective. “Cost-effective” here means that such investments in energy efficiency would have a significantly better rate of return than the cost of capital.
  • Companies that are relatively heavy consumers of energy – such as those in the brewing industry – are the least likely to ignore such opportunities.
  • There are several reasons why organisations do not act on these opportunities, but two appear particularly important. The first is that companies demand a very high rate of return from such investments, a rate of return that would be much higher than the cost of capital. They may do this to cover business, financial and technical risks, but such rationales are rarely explicit and not always justified.
  • The second important reason is staff costs and time constraints. Managers frequently do not have the time to identify and implement energy efficiency projects. Particularly in sectors that are relatively light consumers of energy, managers often cannot afford the time to be experts on energy matters.
  • In addition to these two major reasons for overlooking energy efficiency opportunities, a wide range of other barriers to energy efficiency were also found to some extent in different sectors. These include: inadequate information on energy efficiency opportunities, inadequate incentives to improve energy efficiency, low status of energy management, and unhelpful organisational culture and values.
  • The report concludes that if the government aims to improve energy efficiency and to cut greenhouse gas emissions, it should implement a carbon tax and the EU’s Integrated Pollution Prevention and Control (IPPC) Directive. The carbon tax would raise awareness of efficiency opportunities across all sectors.
  • In addition, however, other more specific measures are needed at the sector or company level to address the variety of barriers to energy efficiency that occur in different circumstances. These more specific measures should include energy audits, demonstration case studies, industry-specific or technology-specific guidelines, and informative energy labelling, meters and bills.