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How do firms consider non-energy benefits? Empirical findings on energy-efficiency investments in Swedish industry
Linköping University, Department of Management and Engineering, Energy Systems. Linköping University, Faculty of Science & Engineering.
Linköping University, Department of Management and Engineering, Business Administration. Linköping University, Faculty of Arts and Sciences.
2016 (English)In: Journal of Cleaner Production, ISSN 0959-6526, E-ISSN 1879-1786, Vol. 113, p. 472-482Article in journal (Refereed) Published
Resource type
Text
Abstract [en]

When industrial firms invest in energy efficiency, the effect may go beyond energy cost savings and produce additional non-energy benefits as well. However, there is a lack of knowledge regarding experiences in non-energy benefits and the extent to which these are acknowledged by industry. This study attempts to explore firms perspectives on non-energy benefits of industrial energy-efficiency investments and if and how non-energy benefits are considered in the investment process. Moreover, this study also explores investment motives and critical aspects of adopting energy-efficiency investments. Based on a questionnaire and interviews with representatives of Swedish industrial firms, the results indicate that energy efficiency seems to be an important issue for the firms, but profitability and payoff appear to be the most important factors for adopting an investment, implying that it is often difficult to meet the payoff requirements with energy cost savings alone. In the meantime, various non-energy benefits are observed, but there seems to be a lack of knowledge of how these should be quantified and monetised. To facilitate such an assessment of non-energy benefits and to include them in the investment analysis, a measurement framework is provided. It is concluded that including non-energy benefits in the investment analysis can contribute to a framing of energy-efficiency investments that can meet the firms requirements for profitability assessment, which can further enhance opportunities for energy-efficiency investments in industry. Thus, the study contributes with new insights into the energy-efficiency investment process and the extent to which non-energy benefits are considered, along with the methods for measuring them.

Place, publisher, year, edition, pages
ELSEVIER SCI LTD , 2016. Vol. 113, p. 472-482
Keywords [en]
Energy efficiency; Investments; Non-energy benefits; Explorative study; Investment decisions
National Category
Mechanical Engineering Economics and Business
Identifiers
URN: urn:nbn:se:liu:diva-126262DOI: 10.1016/j.jclepro.2015.11.070ISI: 000370993200046OAI: oai:DiVA.org:liu-126262DiVA, id: diva2:913431
Note

Funding Agencies|Swedish Energy Agency; Department of Management and Engineering at Linkoping University

Available from: 2016-03-21 Created: 2016-03-21 Last updated: 2019-04-11
In thesis
1. The Investment Process for Capital Investments: The case of industrial energy-efficiency investments and non-energy benefits
Open this publication in new window or tab >>The Investment Process for Capital Investments: The case of industrial energy-efficiency investments and non-energy benefits
2016 (English)Licentiate thesis, comprehensive summary (Other academic)
Abstract [en]

Capital investments play a crucial role for the business of every firm. In an industrial context, energy efficiency is an important means to meet future energy needs and in the same time reduce climate impact. In this thesis, the investment process for capital investments is therefore studied by addressing the case of industrial capital investments improving energy efficiency. The thesis specifically aims to illuminate how additional benefits, i.e. non-energy benefits, are and can be acknowledged in the investment process by applying an ex-ante perspective. The thesis holds the decision-making process as unit of analysis and aims to contribute with insights on firm level. Especially in an energy-efficiency context, such a process perspective has only been scarcely applied.

The thesis is based on a literature review and two empirical studies. The literature review is the starting point of the thesis and reviews the literature on benefit concepts and investment behaviour of energy-efficiency investments. It is then followed by an explorative study in which thirteen industrial Swedish firms are interviewed on how they consider non-energy benefits. Investment motives and critical aspects for adopting energy-efficiency investments are also addressed. It also includes a questionnaire, distributed and collected during a networking event for energy-intensive firms within Swedish manufacturing industry. The second empirical study is a case study conducted at a Swedish pulp and paper firm. It aims to take a comprehensive perspective on the investment process as well as to analyse how and when non-energy benefits are acknowledged in the investment process. This case study approach  enables participants at different levels in the organisation to be engaged in the study and new perspectives to be addressed.

The results indicate a general investment process passing through the phases identification, development and selection. Investment motives, information, internal coordination and external actors appear as key aspects of the investment process. Energy-efficiency investments are primarily initiated due to cost-savings motives. However, the subsequent investment process appears as consistent for all investment categories; the investment process described here is thus not specific for energy-efficiency investments only. The results instead indicate an investment process influenced by investment size; it influences the extent to which information is collected and assessed before making the decision, i.e. level of procedural rationality, as well as how the investment project is coordinated within the firm. Last, suppliers are involved in the investment process to a large extent from an early stage.

Regarding non-energy benefits, the results indicate that various benefits have been observed but far from all are acknowledged in the investment process. They are to a larger extent acknowledged for larger investments when more resources are devoted to the investment process. Quantifiable non-energy benefits improve the business case for energy-efficiency investments and non-energy benefits should thus be quantified to the extent possible. Yet, nonenergy benefits characterised by a lower level of quantifiability could still be important, such as benefits related to work environment, and should therefore be considered. However, the findings indicate a frequent use and reliance upon an investment manual, implicating a need for simplicity when addressing the additional benefits. This indicates that there should be an emphasis on a limited number of main benefits, rather than seeking to acknowledge all possible benefits.

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2016. p. 60
Series
Faculty of Arts and Sciences thesis, ISSN 1401-4637 ; 117
Keywords
Investment process, investment decision making, capital investments, energy efficiency investments, non-energy benefits, industry.
National Category
Business Administration Energy Systems Social Sciences Interdisciplinary
Identifiers
urn:nbn:se:liu:diva-126367 (URN)10.3384/lic.diva-126367 (DOI)978-91-7685-790-8 (ISBN)
Presentation
2016-04-08, ACAS, Hus A, Campus Valla, Linköpings universitet, Linköping, 10:00 (Swedish)
Opponent
Supervisors
Available from: 2016-03-23 Created: 2016-03-23 Last updated: 2019-10-12Bibliographically approved
2. The Non-Energy Benefits of Industrial Energy Efficiency: Investments and Measures
Open this publication in new window or tab >>The Non-Energy Benefits of Industrial Energy Efficiency: Investments and Measures
2016 (English)Licentiate thesis, comprehensive summary (Other academic)
Abstract [en]

Improved industrial energy efficiency is viewed as an important means in the reduction of CO2 emissions and climate change mitigation. Various energy efficiency measures for improving energy efficiency exists, but even evaluated as cost-effective, there seems to be a difference between the energy efficiency measures that theoretically could be undertaken and which measures that actually are realised. On the other hand, industrial energy efficiency measures might yield extra effects, denoted as non-energy benefits, beyond the actual energy savings or energy cost savings.

Based on interviews and a questionnaire, results showed that the Swedish industrial firms studied had observed various non-energy benefits. However, few of the non-energy benefits observed were translated into monetary values and included in investment calculations. Results indicated that this non-inclusion could be explained by lack on information on how to measure and monetise the benefits, but even if not translated into monetary values, some of the non-energy benefits were sometimes used qualitatively in investment decisions. The utilisation of the benefits seemed to depend on the type and the level of quantifiability among the perceived benefits.

This thesis has also explored energy efficiency measures and non-energy benefits for a specific industrial energy-using process – compressed air. A literature review on energy efficiency in relation to compressed air systems revealed a large variation in which measures that could be undertaken to improve energy efficiency. However, few publications applied a comprehensive perspective including the entire compressed air system. Few non-energy benefits of specific energy efficiency measures for compressed air systems were identified, but the study provided insights into how non-energy benefits should be studied. This thesis suggests that energy efficiency and non-energy benefits in compressed air systems should be studied on specific measure level to enable the observation of their effects. However, the studies also addressed the importance of having a systems perspective; the whole system should be regarded to understand the effects of energy efficiency measures and related non-energy benefits.

Place, publisher, year, edition, pages
Linköping: Linköpings universitet, 2016. p. 64
Series
Linköping Studies in Science and Technology. Thesis, ISSN 0280-7971 ; 1760
Keywords
Industrial energy efficiency, energy efficiency measures, energy efficiency investments, non-energy benefits, compressed air
National Category
Energy Systems
Identifiers
urn:nbn:se:liu:diva-131831 (URN)10.3384/lic.diva-131831 (DOI)9789176856727 (ISBN)
Presentation
2016-10-28, ACAS, A-huset, Campus Valla, Linköpings universitet, Linköping, 12:29 (Swedish)
Opponent
Supervisors
Funder
Swedish Energy Agency
Available from: 2016-11-09 Created: 2016-10-10 Last updated: 2019-10-29Bibliographically approved
3. Non-Energy Benefits of Industrial Energy Efficiency: Roles and Potentials
Open this publication in new window or tab >>Non-Energy Benefits of Industrial Energy Efficiency: Roles and Potentials
2019 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Climate and environmental targets place significant requirements on energy efficiency and improved industrial energy efficiency is viewed as one of the most important means of reducing CO2 emissions and mitigating climate change. Even though efforts have been undertaken to improve energy efficiency there is still the potential for further improvements to be made. The potential is a result of that proposed energy efficiency improvement measures are not implemented, even if judged as cost-effective.

Besides improving energy efficiency, the implementation of energy efficiency improvements in industrial firms can generate additional beneficial effects: so-called non-energy benefits. Examples of non-energy benefits are: improved productivity, lower operation and maintenance costs, a better work environment, decreased waste and fewer external effects, such as lower emissions. This thesis has investigated the roles and potential of non-energy benefits in decisions on energy efficiency improvements from three perspectives: energy efficiency measures, energy efficiency investments and energy management activities.

The results of the studies presented in this thesis demonstrated that different types of non-energy benefits were observed in various areas within industrial firms due to the energy efficiency measures, energy efficiency investments and energy management activities they have implemented. Studying energy efficiency measures and investments revealed that implementing one single energy efficiency measure or investment can generate several non-energy benefits. The studies also uncovered a relationship between the non-energy benefits, i.e. chain reactions of primary, secondary and further effects, in which one benefit can generate other types of benefits. Consequently, some non-energy benefits were observed immediately after the implementation of energy efficiency measures, direct effects, while others were perceived later on, indirect effects. Furthermore, extending the perspective by including energy management activities led to the recognition of novel non-energy benefits.

The results of this thesis demonstrated that non-energy benefits were seldom acknowledged in decisions on energy efficiency improvements. However, the non-energy benefits’ character, diversity and relations among them enabled opportunities for the non-energy benefits to be included in decisions on energy efficiency in various ways. For instance, based on the results of these studies, monetised non-energy benefits could be included in investment calculations contributing to cost-effectiveness, while certain effects that are difficult to measure and quantify could be utilised qualitatively in investment evaluations as extra arguments, or, if important to the firm, as objectives for making the investment. Hence, depending on their type, non-energy benefits seemed to have different roles in decisions on industrial energy efficiency improvements.

This thesis contributed with a comprehensive approach by investigating energy efficiency improvements and the related non-energy benefits through three perspectives. By combining the results from each perspective, the view on industrial firms’ decisions on energy efficiency improvements was widened. In this thesis it is concluded that the potential of non-energy benefits in decision-making on industrial energy efficiency improvements lies in the utilisation of all types of non-energy benefits and to consider all the roles that non-energy benefits may have. By utilising knowledge on non-energy benefits along with their roles observed in relation to previous implementations of energy efficiency improvements, non-energy benefits can impact decisions on new implementations.

Abstract [sv]

Effektivisering av industrins energianvändning ses som ett av de viktigaste redskapen för att minska koldioxidutsläppen i syfte att mildra klimatpåverkan och nå uppsatta klimat- och miljömål. Konkurrens och resursbrist driver industrin till att effektivisera och kopplingen mellan energi och tillverkningsprocesser i företagen betyder att energieffektivisering är av vikt då den även bidrar till effektivisering generellt inom företaget. Trots detta genomförs inte alla föreslagna åtgärder även om de är kostnadseffektiva, vilket gör att det finns en potential till ytterligare industriell energieffektivisering.

Förutom energibesparing och energikostnadsbesparing kan implementering av energieffektiviserande åtgärder även ge ytterligare positiva effekter för företaget, så kallade mervärden (eng. non-energy benefits), exempelvis i form av ökad produktivitet, ökad livslängd för maskiner och utrustning, förbättrad arbetsmiljö samt minskad mängd utsläpp och avfall. Denna avhandling har studerat mervärdens roller och potential i beslut kring energieffektiviserande åtgärder och investeringar samt energiledningsaktiviteter.

Resultaten visade att implementering av energieffektiviserande åtgärder och investeringar samt energiledningsaktiviteter gav flera olika typer av mervärden observerade på olika nivåer och inom olika delar av verksamheten i industriföretag. Genom att studera mervärden ur flera perspektiv synliggjordes nya typer av mervärden samt att implementering av en enstaka energieffektiviserande åtgärd kan generera ett flertal mervärden av olika typ. Vidare sågs även samband mellan olika mervärden, dvs att ett mervärde gav upphov till ett flertal andra mervärden.

Resultaten av dessa studier visade att användningen av mervärden vid beslut kring energieffektivisering begränsas av att många mervärden är svåra att mäta och kvantifiera. Trots att många mervärden var svåra att värdera i pengar och inkludera i investeringskalkyler, visade resultaten att mervärden ibland användes kvalitativt i investeringsunderlag som extra argument. Om mervärdet var av stor vikt kunde det till och med anses vara del utav syftet med en energieffektiviserande investering. Detta visade på mervärdens olika roller beroende på deras karaktär samt hur viktiga de ansågs vara för företaget.

Denna avhandling har studerat energieffektiviseringar och relaterade mervärden ur tre perspektiv. Genom att kombinera resultaten från varje perspektiv erhölls en bredare syn på beslut kring energieffektivisering. Resultaten i denna avhandling visade att mervärden kan bidra på olika sätt i beslut kring energieffektiviseringar beroende på deras olika roller samt att mervärdens potential i sådana beslut beror på om och hur mervärdens olika roller beaktas och används. Genom att använda kunskap om mervärden och deras olika roller som observerats i samband med tidigare energieffektiviserande implementeringar, kan mervärden bidra till att påverka beslut vid planering av nya energieffektiviserande implementeringar.

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2019. p. 114
Series
Linköping Studies in Science and Technology. Dissertations, ISSN 0345-7524 ; 1980
National Category
Energy Systems
Identifiers
urn:nbn:se:liu:diva-156297 (URN)10.3384/diss.diva-156297 (DOI)9789176851067 (ISBN)
Public defence
2019-05-29, ACAS, Hus A, Campus Valla, Linköping, 10:15 (Swedish)
Opponent
Supervisors
Available from: 2019-04-25 Created: 2019-04-11 Last updated: 2019-04-30Bibliographically approved

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