Addressing and overcoming barriers
for energy savings in business
– experiences from 7 municipalities facilitation of 100 Danish
companies
By Kasper Dirckinck-Holmfeld
Department of Planning, Aalborg University Copenhagen,
A.C. Mayers vænge 15
DK-2450 København SV
Email: kadir@plan.aau.dk
Præsentation af Aalborg Universitet
Content
• Introduction – Evaluation of Carbon 20 project
• Role and approach of the Local Authorities as
facilitators
• Evaluating the Carbon 20 concept for facilitating CO2
reductions
• Barriers for Energy savings in Industry
• Conclusions
Præsentation af Aalborg Universitet
Introduction – Outset
• Energy savings at end-users are high on the political agenda
internationally and in Denmark.
• Energy savings are considered a cost efficient mean to
achieve GHG emission reduction and industrial sector has a
huge untapped potentials for cost- efficient savings (IPCC
2007).
• Jaffe and Stavins has termed this an “Energy efficiency gab”
(Jaffe and Stavins 1994).
• Calls for political action to address this gab (Jaffe and Stavins 1994
and 2005; Sorrel et al. 2004; Paton 2001; Thollander et al. 2007, Lees 2012, Armstead
2012; Fleiter et al 2012).
Præsentation af Aalborg Universitet
Introduction – Carbon 20
• 7 Danish municipalities (Local Government/Authorities)
• Objective: engage 100 companies to lower GHG emission by 20%
• Means:
• Specific voluntary agreement on each company, including energy screening
by energy consultant/-utilities
• Forming of network
• Foster that 20 companies go beyond optimisation and implementation of
known solutions.
• Internal capacity building among caseworkers in the municipalities
• Organised:
•
•
Environmental Regulation/Compliance monitoring units (6 municipalities)
Special unit for promoting voluntary action beyond compliance (One
municipality)
Præsentation af Aalborg Universitet
Role and approach Local Authorities
Præsentation af Aalborg Universitet
Role and approach Local Authorities
• Knowledge Bank vs. Knowledge Broker
•
Teacher vs. Tutor (Malmborg 2004 and 2007)
• Expert
(Change Agent)
Process Consultant
• Political Reflective Navigator (Broberg and Hermund 2003)
• Ability to support establishment of ‘political programs’ on environment
• Ability to navigate in organizations
• Ability to understand and mediate or translate between different
‘languages’
• Ability to change between different roles and mobilize different types
of knowledge
Præsentation af Aalborg Universitet
Role and approach Local Authorities
• During internal capacity building activities an ongoing discussion about with competences is
needed.
• On one hand: Caseworkers accustomed to
compliance monitoring calls for rather technical
knowledge as a mean to appear as competent partner
• Opposite: the ones from municipality not involved
legal compliance advocate for much broader approach
in respect to the process.
• However agreement seems to arrive at a mix…..
Præsentation af Aalborg Universitet
Role and approach Local Authorities
• Reflective Dialog partner
• Apply a flexible approach in order to address companies at their
premises
• Bring to play diverse competences depending on situation
combining
• basic insight into the technical areas in terms of identifying overall
potentials and focus areas,
• knowing where to direct the companies for more specific guidance.
• be able to show interest in the companies experienced challenges
• be able to align their agendas to offer suitable contributions to
solutions to the companies experienced challenges.
Præsentation af Aalborg Universitet
Carbon 20 concept for facilitating
environmental improvements
Præsentation af Aalborg Universitet
Carbon 20 concepts for facilitating environmental improvements
• Scholars evaluation political programmes
addressing SME advocate for
• a free or subsidized preliminary screenings of
potentials and solutions
• tight facilitation of implementation.
(Thollader and Dotzauer 2010, Bradford and Fraser 2008, Lees 2012)
Præsentation af Aalborg Universitet
Carbon 20 concepts for facilitating environmental improvements
• Implementation of environmental
improvement – EMS
Præsentation af Aalborg Universitet
Carbon 20 concepts for facilitating environmental improvements
Carbon 20 process
Action
plan
Scree
nings
Præsentation af Aalborg Universitet
Carbon 20 concepts for facilitating environmental improvements
1) Involvement process
• The timeframe from first promoted until specific serious engagement
efforts is considered critical for the companies motivation to participate.
• 100 Companies was asked for a preliminary proclamation (no binding) of
participation as part of the preparation for the application for EU
• Application processes long
• Process of reconfiguration of set-up of for implementation and agreeing on a
concept to bring about to the companies
• Several of the preliminary companies had either already began the work
themselves or lost interest judging the project to bureaucratic.
• One of the municipalities had to alter involvement strategy a year into the
project
• Must companies actually less than 2 years for actual implementation
Præsentation af Aalborg Universitet
Carbon 20 concepts for facilitating environmental improvements
2) Technical Screenings
•
Agreements where several consultant utilising Energy Saving Obligation for Energy
utilities
•
•
Caseworkers generally found the screening valuable
•
•
•
As basic outset for the dialogue process with the companies,
As hand-on option to gained knowledge by participating in the screenings,
Some tensions for the setting related to:
•
•
•
•
•
•
•
the consultants agree to offer a screening free of charge for the companies, but with a possible
compensation by the project on specific
Confusion about on the terms for the project compensating for the screening
Lack of precise understandings of the overall mechanism by all actors
Failure in actually establishing a proper business models that accommodates the saving
achieved for the energy utilities involved providing the screening
Experienced lack of commitment due to no up-front payment
Confusions about the responsibilities in the following up process
Lack of actual savings achievable in several of the smallest companies to actually justify the time
spent on a detailed screening
Most of the actors do sees possibilities for continuing and extending the
cooperation.
Præsentation af Aalborg Universitet
Carbon 20 concepts for facilitating environmental improvements
3) Action Plan
•
The “action plan”
•
•
•
has for the vast majorities of the companies not been adopted as a useful internal working
document to structure the companies implementation.
Has instead functioned as an agreement document between the municipality and company
The caseworkers
•
•
point out that used too much time with limited success trying to make the companies adopting
the action plan themselves, whereas
Others had quite good success agreeing on the action plan on location after discussing the
screening and other potentials.
•
The “action plan” as agreement document do cause some companies to be
reluctance to sign and finalise the action plan before assessed the feasibility of all
the options.
•
Several actions plan are still not finalised (under half a year left)
•
The companies has begun implementing solutions anyhow.
Præsentation af Aalborg Universitet
Carbon 20 concepts for facilitating environmental improvements
4) Reporting
•
The majority of the companies is not shoving interest in their carbon footprint,
•
Conceive it a necessity in relation to the project rather than something that could be of value
for them.
•
It has been a challenge for the caseworkers to get the companies to report their
emission
•
Must of the caseworkers have thus began to fill out the data themselves
•
•
but still use a lot of time and efforts to remind the companies to provide the needed data.
They criticise also the tool applied – climatecompass.dk –
•
•
The portal has until recently not been able to provide companies the possibility to follow the
development in the emission year by year – just improved because feedback this project.
The calculation is solely based on national average data without the possibility to adjusting for
local dataset – e.g. different values for local district heating
Præsentation af Aalborg Universitet
Carbon 20 concepts for facilitating environmental improvements
5) Implementation
• It is very important to constantly follow up on the
companies to keep momentum and focus on the task.
• As one of the caseworkers put is:
“Energy savings etc. is not part of their normal focus and
even very committed companies are often down
prioritising even very favourable solutions in a busy
working day, where the servicing of customers has
priority. One need to accept this, but keeps on following
up to keep the topic on the agenda”.
Præsentation af Aalborg Universitet
Barriers for Energy savings in
Industry
Præsentation af Aalborg Universitet
Barriers for Energy savings in Industry
• Sorrell basic taxonomy of 6 barriers:
• Imperfect information including transaction cost,
• Hidden cost,
• cost of disruptions to production and staff
replacement/training, technical and financial risk,
• Access to capital,
• Split incentives where the investors cannot fully
appropriate the benefit, as well as
• Bounded rationality where constraint on time, attention
and the ability to process information prevent the
individuals in charge making otherwise “rational” decisions
Præsentation af Aalborg Universitet
Barriers for Energy savings in Industry
• Specific for SME – Among others: (Thollander, Danestig & Rohdin 2007, ECEEE 2012)
• lack of time or other priorities (including for
capital investment)
• lack of access to capital/funding
• cost of production disruption
• Competences
Præsentation af Aalborg Universitet
Barriers for Energy savings in Industry
• The Danish Society of Engineers (Danish:
Ingeniørforeningen) in a Danish content defined 5
“obstructions” for energy savings
in business:
•
•
•
•
•
Lack of financial capabilities
Lack of knowledge about own energy consumption
The owner has the cost - the tenant has the income
Frames and rules that are in disfavour of energy savings
Inability to follow-up and maintenance - lacking someone
to drive energy saving efforts
Præsentation af Aalborg Universitet
Barriers for Energy savings in Industry
• In the Carbon 20 project these “obstructions”
and barriers is adjusted to 3 barriers:
• Internal capacities to implement the solution (lack of
time and manpower or insight and competences)
• Economic and financial barriers (access to capital,
investment horizons and payback period)
• Structural constrains (tax systems and he ownertenant aspect)
• Different means for how Municipalities can
address those
Præsentation af Aalborg Universitet
Barriers for Energy savings in Industry
1) Internal capabilities
• Energy savings is not the core competences for participating companies
• Companies focused on pleasing their customers and view energy savings
etc. as something on the “nice to do” list.
“The biggest barrier in getting this done is a matter of priorities. And here, the
customers are always the most important! And when you're busy during the working
hour with respect to production etc. then it is difficult to find the energy and
resources to get these things done as well”.
• For some SME and non-industrial/production based, it is however not
“just” a question of internal prioritisation, but also a question of lack of
competences to actually work structured with realising the identified
savings.
Præsentation af Aalborg Universitet
Barriers for Energy savings in Industry
1) Internal capabilities – Addressing such by a reflective dialog partner
•
The constant following up by the caseworkers is considered central for keeping
focus and attention
•
Several of the caseworkers has began cooperate with the internal units in charge of
local job creation to offer the participating companies possibilities for trainee
(subsidised by state)
•
One municipalities have employed a internal trainee/student to facilitate the
implementation process at companies.
•
Considerations of expanding cooperation with the job creation units to make some
tailor made re-educations of the unemployed to actually act as facilitator for
companies lacking the competences
•
Increasingly they work to align their “sales” strategy to what triggers the
companies (or the represent of the companies in question) enthusiasm, whether
•
•
the technicalities or economic reasoning (cost reductions) generally assumed, or
other aspects such as e.g. linking is to the adding value for possible customers, Social
responsibility etc.
Præsentation af Aalborg Universitet
Barriers for Energy savings in Industry
2) Financial constraints
•
Several of the companies is experience severe constrains establishing proper
finance.
•
•
Themselves challenged economically
Getting loans have become significantly more difficult.
•
The typically investment horizons have generally been reduced from between 3-5
years to now under 2
•
However in this project - The companies seems to engage in some bigger projects,
but several do lack finance for the investment and have trouble receiving loans
•
As a producer of world wide known designer furniture express it:
"Focus right now is on the extension of the building. We are using most of our own capital on
this project, and need to raise capital for the investment in respect to climate action. However,
despite a 17% growth last year, the bank will not help us to invest in anything"
Præsentation af Aalborg Universitet
Barriers for Energy savings in Industry
2) Financial constraints – Addressing by a reflective dialog partner
•
The involved energy consultant are starting to try to engage different financial
institutions supplementing the catalogue of improvement with suggestions for how
to finance it through the savings achieved.
•
Also began reconsidering the “product” that they provide - the whole “packet” of
both identification, financing and managing the implementation.
•
If the packet should be feasible for SME – resource spending need to be reduced
significantly
•
•
•
•
•
appoint student employee instead of the most experienced consultants,
make pooling of similar and “neighbouring” companies,
provided standard self-assessment tools as baselines and/or
utilise the established standardised data for calculation of saving of specific solutions often used
in the domestic market rather than the specific calculations used in the business segment.
The municipality is also starting to consider how to expand the packet with both
managements- and financial support elements build into the packet.
Præsentation af Aalborg Universitet
Barriers for Energy savings in Industry
3) Structural – Owner - Tenant
•
For SME there is often a split of incentives between landlords and tenants in terms
of who hold the investments and who actually gains in terms of reduced cost.
•
Several companies are thus restraining from engaging in improving the buildings
envelope as considered responsibility of owner
•
Also companies renting the buildings experiences constrains for their involvement.
"I believe that energy and climate increasingly will become a competitive parameters for office
rental. But it is a challenge, as the energy use is generally included in the rent, whereas the
tenants have no motivation to save. And it is actually difficult to address this, without going to
sound money-grubbing…".
•
One has managed to find an agreement with the landlords about sharing the risk
and gains in respect to a larger retrofitting of the buildings.
Præsentation af Aalborg Universitet
Barriers for Energy savings in Industry
3) Structural - Tax
• While we in Denmark have quite high taxes on the energy, that makes the saving
more profitable, the taxes du also sometimes actually causes some barriers.
•
The utilisations of surplus heating are taxed extra
•
•
using electricity for heating is taxed higher as (until recently with the introducing of heat
pumps etc.), was a rather inefficient utilisation of the electricity.
If companies cannot utilise the surplus heat themselves and would be able to distribute it either
to neighbouring companies or into the district heat system, the companies will be taxed as an
energy supplier.
•
Danish Energy Agency have argued that the utilisation of surplus heat in most cases
will be profitable for the companies anyhow
•
However most companies conceived this as quite complicated and restrain from
assessing the profitability
•
While some companies in this project has considered but abandoning it again,
several companies are still working on regaining heat both internally, but also
providing externally e.g. district heat system.
Præsentation af Aalborg Universitet
Barriers for Energy savings in Industry
3) Structural – Addressing by reflective dialogpartner
•
As a public representative, the caseworkers can act as a carrier to bring the
problems back to the political system and try to get some pressure up the system.
•
Some attempt to make both these a political issue for the Green Cities to bring up
the system has been taken.
•
To make the heat surplus a political issue requires specific calculations showing
haw the taxes makes it unattractive.
•
when ask to provide such, the specific companies in question actually withdraw from getting
involved in that.
•
Recently some attempt to assess it further has been decided nationally
•
The municipalities could also challenge it by promoting the forming of “Heat
communities”
•
Likewise the municipalities did have an active role in mingling the cooperation
between owner and tenant in one case…
Præsentation af Aalborg Universitet
Conclusions I – Role of Authorities
• The local authorities should be a “reflective dialog
partner” that are capable of adjusting strategy and
approach to align the overall targets to fit the interest
and mentality of the company in question.
• This means that the caseworkers
• need to possess some basic insight into available solutions
• be able to judge/spot overall gaps in current situations,
• be able to listening and understand the situation of the
company in question,
• know where to direct the company for further help.
Præsentation af Aalborg Universitet
Conclusions II – Evaluation of applied concept in Carbon 20
• Overall the concept applied is viewed to provide a useful frame for
committing and sustaining the companies focus on the agenda and
forming a valuable baseline for further interactions and cooperation.
• However the concepts is viewed to be to stiff
• Several elements are considered out of scope for some of the
companies
• Has required to much efforts to collect data in respect to reporting
• The value of the “Action Plan” has something companies to adopt as
their own is questionable for most companies
• The concept will thus need some (minor) adjustment for the future
involvement of new companies
Præsentation af Aalborg Universitet
Conclusions III – Barriers
•
The project identifies 3 overall barriers related to:
•
•
•
•
Internal capacities to implement the solution related both to lack of time and insight to actively
prioritise the task as well as lack of precise competences to implement solutions
Economic constrains and lack of access to financial capital for the needed investment,
Structural aspect related to Split-incentives between property-owners and tenants as well as
Energy taxes on the utilisation of surplus heat.
Throughout the project the different caseworkers and other actors have in varying
degree tried different means for helping the companies overcome barriers including:
•
•
•
•
•
A frequent and persistent following up to keep the focus on the agenda,
showing interest in the companies general business situation and interest and trying to align the
energy saving and climate agenda into fitting what triggers their enthusiasm,
trying to find different settings for involving actors, that can see a business case being the ones
facilitating the implementation of solution
Engage financial institutions and considering agreements where loans are paid by savings
feeding back to the political system about conceived barriers that need change in the overall
regulatory frames.
Præsentation af Aalborg Universitet
Messages to bring on in respect to local political facilitation
programmes:
1.
Local authorities “should” take op a role of “Reflective dialog
partner”
2.
It is useful to have some framing and concept to structure the
activities, but need to be flexible to allow adjusting for specific
company in question
3.
The local authorities “should” be capable of addressing various
experienced barriers covering at least internal capabilities,
economic constrains and structural aspect by a verity of actions
including constantly following up, engage several diverse actors
and bring back issues to political system.
Præsentation af Aalborg Universitet