From demand side management (DSM) to energy efficiency services: A Finnish case study

Abstract

Energy conservation is expected to contribute significantly to climate change mitigation and energy security. Traditionally, energy companies have had strong role in providing Demand Side Management (DSM) measures. However, after energy market liberalization in Europe, energy companies' DSM activities declined. In response, the EU issued Directive (2006/32/EC) on energy end-use efficiency and energy services (ESD) to motivate energy companies to promote energy efficiency and conservation, closely followed by Directive (2012/27/EU) on energy efficiency (EED), requiring the setting up energy efficiency obligation schemes. Despite strong political and economic motivation, energy companies struggle to develop energy efficiency services in liberalised energy markets due to conflicting institutional demands, which arise from contradicting policy requirements and customer relations. The main challenges in developing new innovative energy efficiency services, evidenced by an in-depth case study, were (1) the unbundling of energy company operations, which makes it difficult to develop services when the contribution of several business units is required and (2) the distrust among energy end-users, which renders the business logic of energy saving contract models self-contradictory. On the basis of the research, avenues out of these dilemmas are suggested.