Why aren’t we realising $130 billion in annual savings

Why aren’t we realising $130 billion in annual savings

A recent report from the Environmental Defense Fund (EDF) said that although investors in the US stand to gain about $130 billion in savings annually** (with proportional savings available to Australian businesses) energy efficiency investment has been held back by certain institutional and managerial barriers.

The report (titled “Show Me The Money: Energy Efficiency Barriers and Opportunities”) identified the main barriers as:[bulletlist]

  • Upfront Capital Costs
  • Long Paybacks
  • Uncertainty over savings (NOT ANY MORE!)
  • Limited Capital Availability[/bulletlist]

Whilst the government and educational sectors, driven by public initiatives, are realising the high ROI energy efficiency can provide, demand from the commercial sector is relatively low.  EDFs report attributes this to a combination of financial myopia and perceived uncertainty about the returns of such investment.

The manufacturing industry is also held back by the temporary disruptions energy efficiency retrofits would impose.

A typical commercial organisations spending upwards of $20,000 per year in electricity can achieve a 20% energy reduction in costs with a payback period of approximately four years.  This would seemingly contradict the financial trepidations, particularly with rising electricity prices, yet most organisations do not fully accept such figures or wrongly believe that a reduction in energy is synonymous with a general downgrade in organisational functionality.

Energy efficiency has come a long way from “don’t forget to turn off the lights” both economically and technologically.  But until managerial perceptions change and corporate commitment to energy reduction picks up, the potential gains available to the private sector will go unrealised.

** “Unlocking Energy Efficiency in the U.S. Economy,” McKinsey & Company, July 2009

The full EPD report is available from: http://www.greenbiz.com/sites/default/files/Energy%20Efficiency%20Financing%20Barriers%20and%20Opportunities_July%202011.pdf