Energy Efficiency Investments Research Articles

EIB Working Paper 2021/07 - Can European businesses achieve productivity gains from investments in energy efficiency?

Energy efficiency investments are essential for transitioning to a carbon-neutral economy. Nevertheless, despite being financially viable, many energy efficiency investment opportunities do not materialise. The existing literature attributes this situation to financial and non-financial factors. Research suggests that many firms focus only on direct energy savings and neglect non-energy benefits that include increased labour productivity. Up to date, due to lack of high-quality data, few studies attempted to quantify the effects of the energy efficiency investments on firm-level outcomes other than the reductions in energy consumption. This paper overcomes this barrier by using novel data from a firm-level survey conducted by the European Investment Bank that covers more than 15,000 firms in 27 European Union member states and the UK during 2018-2019. It studies the relationship between the energy efficiency investment and the labour productivity of the European firms, utilising instrumental variables methodology to account for potential endogeneity. The results show a positive and causal relationship between energy efficiency investment and labour productivity. The findings of the paper suggest that firms can benefit much more from the energy efficiency investment than what is often assumed, and highlight a need for government policies that would increase firms' awareness of the non-energy benefits.

Сучасний стан і проблеми світового енергетичного ринку

The article is aimed at carrying out a comprehensive analysis of the current state of the world energy market, identifying the main problems of its functioning, and substantiating possible ways to solve them. The research considered the structure of the world energy market, provided a description of its main components. The essence of the energy problem is analyzed, the main causes of its occurrence are defined. It is found that the energy problem occupies a significant place among such global problems of humanity as the threat of nuclear war, epidemic, ecological crisis, demographic problems, international terrorism, etc. A dynamic analysis of the use of traditional energy in the world is carried out. It is determined that due to the limited global reserves of natural gas and oil, in the near future it will be impossible to meet the growing demand of humanity for energy resources. The rating of countries that are trying to actively develop green energy at the State level is presented. The main methods of energy saving of leading countries of the world are highlighted. An analysis of the scale of investment in energy efficiency and energy saving of the leading world countries is carried out. It is determined that China is the leader in investments in green energy. During the research, the essence of the concept of «energy security» is disclosed and its main priorities in the application by different countries are specified. The most important aspects of international energy security are defined. The tendencies of further development of the world energy market are highlighted and the main ways of solving energy problems are proposed.

Financing the future infrastructure of sustainable energy systems

The development of suitable financing models plays an important role for long-term investments in green energy infrastructures necessary to achieve energy and climate targets. In this context, it is important to state that people do not demand energy per se, but energy services such as mobility, heating, cooking and lighting. These services are provided by a combination of different energy carriers and technologies. In this paper, the focus lies on the optimal financing of innovative technologies from the society's point-of-view. Therefore, long-term financing models of new energy solutions play a key role in three core areas: (ⅰ) investments in renewable energy technologies, e.g., large solar thermal, PV, wind power systems, (ⅱ) investments in new network infrastructure for electricity, district heating, hydrogen, charging stations for battery electric vehicles, etc.; (ⅲ) investments in energy efficiency. In this paper we observe that there is practically no degree of freedom in the market regarding choice of financing parameters such as interest rate and depreciation time. In real life, all long-term investments, e.g., in the area of electricity or district heating networks, are located in a strictly regulated environment.

Factorial model of the strategy of increasing the level of energy security of enterprises in terms of resource-saving

The strategy of increasing the energy security of enterprises, and also the factors of influence on their production relations, socio-economic development and functioning in a crisis are studied. It is proved that the scarcity of energy resources requires an assessment of the factors influencing energy security and taking them into account in the formation of business strategies. The concept of energy security was further developed through the prism of a factor model of strategy implementation taking into account energy saving policy. In the course of the research the methods of critical analysis, structuralization, factorial, generalization, scenario, matrix, impulse process was used. The scientific result concerns a substantiated strategy to increase the level of energy security of enterprises based on the structuring of the factor environment and the built factor model that takes into account formal and informal aspects. The practical value of the study consists in substantiated strategic measures, the implementation of which ensures the maximum possible growth of energy security of enterprises, in particular: investment in energy efficiency, energy efficiency of enterprises, development of eco-consciousness of staff, which allows to justify a stable and prone system of energy security of the state to growth.

Analysis of Bioeconomy Affecting Factors – Climate Change and Production

Abstract Implementation of bioeconomy has become an important topic on the national and global scale. Bioeconomy and its development is considered to be affected by many factors, for example, climate change, production, technology, waste and so on. Even more, there are linkages between these factors which, when discovered, could help to achieve one of the bioeconomy’s goals – sustainable use of bioresources. This paper analysis the interlinkage between two bioeconomy affecting factors – climate change and production. It was discovered that between two chosen factors there are seven common indicators: greenhouse gas emissions, investments in energy efficiency, energy consumption, waste generated, resource productivity, created wastewater, and use of freshwater. Regression method was used to conduct the strongest links between these common indicators. Results showed that the strongest links are between the indicators: resource productivity and GHG emissions, energy consumption and waste generated, and resource productivity and waste generated.

Decarbonisation of the economy through the introduction of innovative technologies into the energy sector

The article is devoted to topical issues of decarbonisation of the economy. The main purpose of the article is to study the relationship existing among key indicators of economic development, innovation in the energy sector and the amount of emissions, in particular, GDP per capita, Fossil CO2 per capita, Global Energy Innovation Index as a resulting indicator of the level of innovative technologies development in the energy sector as well as indicators of the development of renewable energy in different countries. The article also aims to identify ways of improving innovative development of the energy sector based on the study of measures taken by leading countries. The negative global trends in the direction of decarbonisation of the economy are found, for example, the growth rate of global investment in energy efficiency in 2019 compared to 2016 decreased by almost 6%, and the growth rate of investment in renewables fell by 0.7%. The main specific results of the analysis serve as a basis for establishing the ways of improving innovative development of the energy sector of the national economy with appropriate recommendations, taking into account successful world experience, which will accelerate the achievement of Sustainable Development Goals 7 and 12.

Politics and Corporate‐Sector Environmentally Significant Actions: The Effects of Political Partisanship on U.S. Utilities Energy Efficiency Policies

AbstractThis study assesses the direct, indirect, and total impacts of political partisanship on state‐level utilities' investment in energy efficiency. This subject is of utmost importance because energy efficiency improvement has become a linchpin in worldwide efforts to combat climate change and other environmental challenges. Analysis of data on 51 electric utilities nested within 31 U.S. states indicates that political partisanship influences utilities' energy efficiency policies. There is strong evidence that electric utilities in states dominated by the Republican Party are less likely to invest in energy efficiency than those in states governed by the Democratic Party. This finding suggests that political partisanship may be shaping the policy and regulatory frameworks put in place by state governments to incentivize or compel the participation of private‐sector entities' in environmental management and/or resource conservation.

Numerical evaluation of the thermal performance of a near-surface earth-to-air heat exchanger with short-grass ground cover: A parametric study

Abstract High energy consumption and increasing energy cost have encouraged investment in energy efficiency. In hot areas, like the Middle East, the share of space cooling accounts for most of the total energy use in buildings. Earth-to-air heat exchangers represent an energy-efficient and environmentally friendly cooling technique. An earth-to-air heat exchanger buried near the ground surface with short-grass cover, which lowers the soil temperature by evapotranspiration, is an alternative to conventional deep buried types. In this study, a steady three-dimensional numerical model of this earth-to-air heat exchanger was developed by considering the conservation of mass, momentum, energy, and species. Soil temperature and moisture content measurements were used as boundary conditions for the model. In addition, the variations of soil temperature and thermal conductivity with depth were considered in the model. Numerical predictions of temperature matched experimental measurements within ±0.5 °C. Using the validated numerical model, the effect of inlet air temperature, airflow rate, tube length, material, wall thickness, and soil thermal conductivity on the earth-to-air heat exchanger thermal performance was investigated. Increasing the airflow rate and tube length resulted in an asymptotic increase and decrease in the earth-to-air heat exchanger outlet temperature, respectively. By increasing the tube wall thickness from 1 to 10 mm, the outlet temperature for an aluminum tube remained unchanged, while for PE and PVC tubes, the outlet temperature increased by about 1.1 and 2.2 °C, respectively. By increasing the soil thermal conductivity from 1 to 5 W m−1 K−1 the outlet temperature decreased by about 4.4 °C.

Towards a More Realistic Cost–Benefit Analysis—Attempting to Integrate Transaction Costs and Energy Efficiency Services

In order to calculate the financial return of energy efficiency measures, a cost–benefit analysis (CBA) is a proven tool for investors. Generally, however, most CBAs for investors have a narrow focus, which is—simply speaking—on investment costs compared with energy cost savings over the life span of the investment. This only provides part of the full picture. Ideally, a comprehensive or extended CBA would take additional benefits as well as additional costs into account. The objective of this paper is to reflect upon integrating into a CBA two important cost components: transaction costs and energy efficiency services—and how they interact. Even though this concept has not been carried out to the knowledge of the authors, we even go a step further to try to apply this idea. In so doing, we carried out a meta-analysis on relevant literature and existing data and interviewed a limited number of energy experts with comprehensive experience in carrying out energy services. Even though data is hardly available, we succeeded in constructing three real-world cases and applied an extended CBA making use of information gathered on transaction costs and energy services costs. We were able to show that, despite these additional cost components, the energy efficiency measures are economically viable. Quantitative data was not available on how energy services reduce transaction costs; more information on this aspect could render our results even more positive. Even though empirical and conceptual research must intensify efforts to design an even more comprehensive CBA, these first-of-its-kind findings can counterargue those that believe energy efficiency is not worth it (in monetary terms) due to transaction costs or energy services costs. In fact, this is good news for energy efficiency and for those that seek to make use of our findings to argue in favor of taking up energy efficiency investments in businesses.

Barriers to the Adoption of Energy Efficiency Measures in Mostaganem, Algeria

The residential sector of Algeria consumes 29% of the total energy consumption. In order to reduce and address this consumption along with the challenges of climate change, the Algerian public policy considers energy efficiency investment measures (EEIMs) in the residential sector as a key factor. However, despite the recommendations and incitement measures from the government, the adoption of EEIMs of Algerian homeowners is too low. In 2018, EEIMs have been implemented in 4,000 houses. This number represents only 4% of the government's target which is the implementation of EEIMs in 100,000 houses per year. The present article, accordingly, attempts to explore the barriers to the adoption of EEIMs. To this effect, a questionnaire survey with 150 randomly selected Algerian single-family homeowners in Mostaganem area was used for the study. It was found that the five greatest barriers to the adoption of EEIMs were: (1) the lack of subsidies and rebates on energy efficient equipment, (2) the high initial prices of energy efficient equipment, (3) the lack of techniques and tools for the estimation of saved energy, (4) the unwillingness to borrow money and (5) the difficulty of identifying, procuring, installing, operating and maintaining energy efficiency measures. The principal component analysis categorised 16 barriers around four components: (1) "Financial" barriers, (2) "Technological" barriers, (3) "Lack of time and knowledge" barriers and (4) "Attitude towards energy efficiency improvements" barriers. Finally, the multivariate analysis of variance (MANOVA) analysis has shown that the perception of barriers to the adoption of EEIMs also differs in accordance with certain personal characteristics of the homeowner.

Análise experimental de indicadores de qualidade de energia de lâmpadas LED E27 residenciais disponíveis no mercado brasileiro

With advances in energy demand, investments in energy efficiency and power quality are increasingly important. One of the extensively adopted measures is the replacement of fluorescent lamps by LED lamps. This measure contributes to the increase of energy efficiency, but produces a high load of current harmonics, which may cause degradation in power quality indicators of the electric distribution networks, due to the presence of rectification electronic circuits present in such lamps. In this work, several models of LED lamps available in the Brazilian market were tested for harmonic and power factor production, taking as reference the standards Inmetro 389/2014, 143/2015 and 144/2015. Applying the Fast Fourier Transform (FFT) the modules and phases of each harmonic component in the currents were measured. Subsequently, the total harmonic distortion (THD) of the current in each lamp was calculated and the estimated total power factor. The results obtained were compared with the nominal values of the lamps and the circuit of four of the lamps was analyzed. It was verified that only six models out of the twenty-three analyzed had THD below 100% and of the analyzed models, 61% did not meet the nominal technical specifications regarding the power factor, and that Power Factor Correction (PFC) techniques present in some of the models were responsible for adjusting the lamps to the regulation parameters.

Energy efficiency, information, and the acceptability of rent increases: A survey experiment with tenants

Abstract This paper studies the role of imperfect information and attentional biases in the context of energy efficiency investments in rented properties and associated split incentives. We design a multiple price list experiment representing owners' decision to replace the central heating appliance, and employ both within-subject information disclosure and between-subject variation in information provision to quantify how tenants trade off energy efficiency and rent increases. Results show that informing tenants of a CHF 1 decrease in energy bills leads to CHF 1.12 in acceptable rent increase on average. Quantile regressions further indicate that the average treatment effect of information reflects heterogeneous changes along the entire distribution of acceptable rent increases. By contrast, information on energy bills variability dampens acceptable rent increase, and information about CO2 tax payments has no incremental impact on choices. Our results highlight the importance of credible ex-ante estimates of financial savings associated with energy efficiency investments.

Energy R&D Investments and Emissions Abatement Policy

The study examines the interactions of the energy R&D investments and the CO2 abatement policy using an endogenous energy R&D climate-economy model. Energy R&D investments affect the carbon emissions directly through efficiency improvements and indirectly by changing the comparative advantages of resources. This study considers the R&D investments in energy efficiency and low-carbon technology and explores how energy R&D investments accelerate the energy transition from fossil fuels to low-carbon technology. Three policies of carbon abatements are considered, namely, the optimal policy, the 2 ଌ policy, and the 1.5 ଌ policy. From the perspectives of benefits and costs, the optimal policy leads to the least abatement costs compared to the other two abatement policies. This study indicates that the more restrictive the abatement policy is, the more severe economic damage is caused in the short run, but more economic welfare is gained in the long run.

Financing the (Environmental) Quality of Cities with Energy Efficiency Investments

The purpose of the paper is to study the financing models in order to drive the large amount of financial resources, already allocated for energy efficiency, to improve the quality of cities. These resources are being deployed worldwide by both public and private financial institutions. Energy efficiency is usually managed at the scale of the buildings, i.e., consumption reduction (heating, lighting, etc.). The study methodology is to review energy-efficiency finance (EEF) models, and assess them using multiple case studies. At the same time, the ownership of cities’ spaces is studied across public-private space management, as an effective methodology to bridge the gap between public and investor finance. The comparative analysis of the case studies suggests a paradigm shift in the definition of energy efficiency, not just in terms of the buildings, but instead also the local urban environment with its feedbacks on the quality of urban living. The practical implications are innovative EEF models, such as those being reviewed, which may be: (1) analytical, to assess the environment at the scale of blocks or neighbourhoods; (2) financial, to fund the specific scale; (3) relating to policy, to support and encourage. In recent years, support for urban regeneration is becoming particularly relevant, given the budget constraints of most public administrations and the conjunctural shortening of private partnerships.

How to finance the transition to low-carbon energy in Europe?

In this paper, we use standard scenarios focussing on renewable energy, energy efficiency and grid investments. We take stock of the literature and quantitative data on available sources of financing for clean energy to qualitatively match supply and demand of specific sources of finance in the European context. Our analysis shows that under the current investment mandates and lending criteria the required funds for a successful energy transition are available. In fact, the current landscape of financing sources can provide between two and six times what is necessary. However, institutional investors and lenders such as pension funds and banks in particular are reluctant to invest in the renewable energy or grid infrastructure because of expected (policy) discontinuities. In addition, more venture capital and household investment are needed to finance low-risk small-ticket projects in the early stages of innovative clean energy technologies, to complement the abundantly available funds for large-scale investments. Based on our analysis, we develop a matrix indicating the role and availability of different sources of finance and new intermediation channels in the energy transition and how these should be deployed.

Heterogeneous preferences and investments in energy saving measures

We investigate whether risk, time, environmental, and social preferences affect single family homeowners’ investments in energy efficient renovations and energy quality of their house using established experimental measures and questionnaires. We find that homeowners who report to be more risk taking are more likely to have renovated their house. Pro-environmental and future-oriented renovators, i.e. renovators with lower discount factors, live in homes with higher energy efficiency. Controlling for the energy efficiency of houses, we further find that energy consumption as measured by heating and energy costs are lower for future-oriented and pro-environmental individuals. Social preferences measured in a dictator and a generosity game play a mixed role for investments in energy efficiency and energy consumption.

The Influence of Economic Barriers and Drivers on Energy Efficiency Investments in Maritime Shipping, from the Perspective of the Principal-Agent Problem

Maritime transport stands out as a strategic sector; the increasing trend in maritime traffic makes it essential to reduce energy consumption and emissions through investment in energy efficiency. However, investments can be hindered by barriers, and drivers are necessary to reduce or overcome them and promote investment. Consequently, the purpose of this study is to analyze what factors influence investment decisions—and how they do so—when there are principal-agent problems in the shipowner–charterer relationship. The methodology is based on the following process: model and hypotheses formulation, variable definition, the creation of a study sample and statistical treatment through a descriptive analysis of variables and a binomial logistic regression model, all based on a state-of-the-art application. The results corroborate the hypotheses and indicate that principal-agent problems and split incentives, especially in time charter contracts, and a lack of verified information make the shipowners less likely to invest. Moreover, energy efficiency measures are less likely to be implemented in older vessels, possibly due to the difficulty associated with recovering the investment; they are more likely in larger and newer vessels, and regulation encourage their adoption. Furthermore, investment is more likely in vessels with verified information and high levels of both activity and harmful emissions. Improved knowledge in this field could help businesses and governments to act in a more sustainable manner, without detriment to an innovative and competitive sector.

The impact of political instruments on building energy retrofits: A risk-integrated thermal Energy Hub approach

Thermal building retrofits are one of the key approaches to mitigate greenhouse gas emissions. Nevertheless, the current rate of retrofits in Germany is around 1%, and the building sector lags behind environmental goals of saving damaging emissions. A potential reason inhibiting investments is the financial risk connected to thermal building retrofits. While recent research focuses on various political instruments to promote environmental investments, their influence on the financial risk of energy efficiency investments has scarcely been considered. In this study, a method to include risk in the financial evaluation of thermal building retrofits is developed. With this method, named as the Risk-Integrated Thermal Energy Hub, the impact of various political instruments such as emission taxes, subsidies, and energy efficiency insurances on investment decisions of homeowners is analyzed. Based on real-world data of 342 one and two-family houses in Germany, this study illustrates how political instruments influence the financial risk and return of example building retrofits. The findings reveal the effectiveness of energy efficiency insurances in mitigating risk, by promoting environmentally friendlier investments relatively cost-efficient compared to subsidies. Further, this case study indicates that emission taxes need to exceed 140€ per CO2 ton to significantly impact investment decisions.

Energy prices and investment in energy efficiency: evidence from Chinese industry 1997–2004

The paper develops and implements a methodology for assessing the role of energy prices and new investment in reducing energy intensity in Chinese industry. Analysing a unique panel data set which reports firm‐level energy consumption and price from 1997 to 2004, the paper finds: the energy prices, not only the current but also the past energy prices, are key factors that driving down firms' energy intensity for all three types of firms: state‐owned enterprises (SOEs), domestic non‐SOEs (NSOEs) and foreign‐funded firms (FFEs); furthermore, SOEs exhibit a robust price‐investment channel: responding to rising energy prices, SOEs tend to invest in new energy‐efficient capital, through which SOEs reduce energy intensity; the same price‐investment channels are less robust for non‐SOEs or foreign‐funded firms.

Development of a Weight Factor Method for Sustainability Decisions in Building Renovation. Case Study Using Renobuild

Energy efficiency investments have become strategically important for the European Union. In particular, energy efficient renovation and investment in the existing building stock have become major challenges. Renovation of a building should involve a holistic and integrated design process, which considers all aspects of sustainability. The aim of this work is to suggest a mathematical model that weighs economic, social and ecological aspects into a measure that supports housing owners/decision makers to find the optimal renovation alternative from their perspective, taking factors such as budget, energy consumption, etc. into consideration. Multi-criteria decision-making (MCDM) concerns structuring and solving multiple-criteria decision problems. MCDM has become popular in energy planning as it enables the decision maker to pay attention to all the criteria available and make the appropriate decision as per the priority of the criteria. In this study, the concept is introduced based on economic, social and ecological aspects assessed during a renovation project. A pedagogical example illustrates the suggested numerical system for comparing different renovation alternatives. The suggested method will facilitate decision-making processes in renovation projects and will allow decision makers to choose the best renovation alternatives that are in line with their business ideas and principles.