cas ee – making enhancement happen

CAS EEMaking

Enhancement Happen

Part 1: Basics

of Industrial

Energy

Efficency

CAS EE – Making Enhancement Happen

Part 1

The basics of industrial energy efficiency

Enersize Ltd

Pasi PeltomaaNovember 2010

Contents

Purpose of this document 1

Introduction 2

1 Concept and importance of energy efficiency 3

2 Potential and possibilities for energy efficiency of industry 5

3 Continuous improving of energy efficiency 7

3.1 Energy Efficiency System 8

4 Measuring of energy efficiency 10

4.1 Basic indicator groups 12

5 Barriers preventing energy efficient actions 13

5.1 Economic barriers 13

5.2 Behavioural barriers 14

5.3 Organisational barriers 15

5.4 Overcoming of barriers 15

Conclusions 16

References 17

Copyright © 2010 Enersize Ltd i

Purpose of this document

This document is the first part of Enersize Ltd’s CAS EE – Making Enhancement Happen

document. The complete CAS EE - MEH documentation consists of six parts. The purpose of this

first part is to introduce the reader to the basics of the term “energy efficiency”, and also help the

reader to understand why it is such an important issue today, and also in the future. The different

possibilities allowing industry to increase energy efficiency are also demonstrated. This first part of

the documentation also introduces the reader to barriers which typically prevent energy efficient

actions. Here the reader will achieve suitable awareness to better understand compressed air

systems from the energy efficiency point of view.

The following parts of the CAS EE – Making Enhancement Happen documentation concern

compressed air. Part two presents basic information on industrial compressed air systems. Part

three introduces the potential, possibilities, and barriers of compressed air energy efficiency. Part

four introduces the reader to the measurements and indicators of compressed air. Parts five and

six explain Enersize Ltd’s principles for making enhancement happen in industrial compressed air

systems and how these enhancements can be realize and what kinds of results can be achieved.

How Enersize Ltd implements these principles in industrial compressed air systems is

demonstrated with case study surveys in Finland.

Global energy efficiency markets are a fast growing area and Enersize Ltd’s vision is to grow fastest

in this area. With these documents Enersize aims to share information and knowledge concerning

energy efficiency.

Copyright © 2010 Enersize Ltd 1

Introduction

The importance today of solving the many complex energy challenges is an increasingly relevant

issue. A safe energy supply as well as energy itself is required by everyone. Climate change must

be tackled. Continuing along today’s energy path, without any changes in policy, will lead to a

dependence on fossil fuels and negative consequences for energy security [IEA 2007a; IEA 2009].

Something must be done to change global consumption to a more sustainable path.

Many studies and authors have argued in favor of decreasing energy consumption and

greenhouse gas emissions. Global industry plays a significant role in global energy consumption,

making up 42% of all electricity consumption [IEA 2009]. The IEA has argued that the energy

intensity of most industrial processes is at least 50% higher than the theoretical minimum

determined by the basic laws of thermodynamics [IEA 2006]. This means that industry is an

important sector in increasing energy efficiency.

Despite the huge energy efficiency potential, systematic operations for achieving continuous

improvement in energy efficiency is needed. In order to implement continuous improvement and

any kind of improvement in energy efficiency, certain measurements and indicators are required.

With such indicators it is possible to compare today’s information with the trends of the past and

the future.

Why haven’t industrial companies already optimized their systems in a more energy efficient way

even though there exists huge potential? The answer is the energy efficiency gap, which means

the actual level of investments in energy efficiency and the level which would be cost beneficial

from the consumer’s point of view [Brown 2001]. What is creating this gap? There exist different

kinds of barriers preventing investments in technologies which are energy efficient and

economically efficient [McKane et al. 2008; Sorrel et al. 2000]. Are there any possibilities for

overcoming these barriers?


1 Concept and importance of energy efficiency Energy is an essential component in a modern economy. It is needed almost everywhere serving

and providing goods. Energy itself is not a need, but it’s a good to fulfill our needs. When reducing

energy costs, there is a desire to retail its benefits. A key method for this is efficient energy use

[Congress of the U.S. 1993; de Beer 2000]. The first views on efficient energy use emerged after

the 1970s oil crises, which drove industrialized economies, which had been dependent on oil from

the Middle East, to carry out research into alternative energy sources and more efficient ways to

use energy [Brown 2001; Golove & Eto 1996; Lovins 1977]. In 1976, Amory B. Lovins argued for a

new concept: energy efficiency. Lovins argued that energy efficiency offers many social, economic,

and geopolitical advantages [Lovins 1977]. Today energy has become an increasingly important

topic, and it is well known that global economies and societies must move towards cleaner and

sustainable production and consumption.

Actors like the International Energy Agency and the European Union are concerned about energy

issues. The IEA is arguing for solving complex global energy challenges such as a safe energy

supply, energy use possibilities for everyone, and tackling climate change [IEA 2007b]. On the EU

level there are three important challenges to solve. First, tackling climate change. Burning fossil

fuels is the major anthropogenic source of greenhouse gases. Secondly, continuing large scale use

of irreplaceable fossil fuels must be decreased. It seems that if we continue with today’s policy

without any change, it will lead to dependence on fossil fuels. Finally, the energy supply must be

secured. Today the EU imports over 50% of energy and it is expected to rise over 70% in the next

20–30 years [EC 2009]. Other points of view on energy issues can be found in, for example, The

Hartwell Paper, which presents three challenges to solve: (1) ensuring energy access for all (also

World Energy Council (WEC) argues for the vital goal to ensuring energy access for all households

[WEC statement 2006]); (2) ensuring viable environments protected from various forcing; and (3)

ensuring that societies can live and cope with climate risk [Prins et al. 2010].

Before looking at industrial energy efficiency, let’s take a look at the basic principles of energy and

energy efficiency so as to better understand this wide topic.

Thermodynamics is the study of energy. Energy has the ability to do work or it can be said that

energy has the possibility to produce change. In thermodynamics (W) means the quantity of energy

transferred to one system from its surroundings. This is mechanical work and historically expressed

as raising a weight to a certain height. It must be understood that energy and power are not the

same things: power is energy per time unit and the SI unit for power is watt (W). The SI unit for

energy, work and quantity of heat is the joule (J). So one watt is one joule per second. Power

consumption is typically expressed in the following terms: kilowatt (kW), megawatt (MW), and

gigawatt (GW). So a kilowatt-hour (kWh) is the amount of energy equivalent to the power of one

kilowatt used in one hour. In the industrial sector, energy consumption is typically expressed using

the following terms: kilowatt-hour (kWh), megawatt-hour (MWh), and gigawatt-hour (GWh) [EC

2009].

In physics and engineering the energy efficiency of a process is defined as output per input, where

output is the amount of mechanical work (in watts) or energy released by the process (in joules),

and input is the quantity of work or energy used as input to run the process [EC 2009; Heikkilä et

al. 2008].


Efficiency is a dimensionless number between 0 and 1. Efficient use of energy means two things.

First, the output returned for the energy input. Thermodynamics says that the efficiency ratio can

never be over 100%, there are always losses in processes. Secondly, it means energy use

optimizing the energy needs of the process. Increasing energy efficiency also means the same level

of production with lower energy consumption or a higher level of production with the same amount

of energy and so an increment of the production level with relatively smaller increments of energy

consumption [EC 2009; Heikkilä et al. 2008].

As stated earlier, energy is a very important issue. A strong shift to more sustainable processes is

required. Global industrial energy use has been growing strongly in recent decades and today’s

industrial electricity consumption is around 42% of all electricity consumption [IEA 2009]. Industry

contributes directly and indirectly to about 37% of global greenhouse gas emissions, and 83% of

this comes from industrial energy use [Worrel et al. 2009]. The IEA argues that the energy intensity

of most industrial processes is at least 50% higher than the theoretical minimum determined by the

basic laws of thermodynamics [IEA 2006]. With the size of global industrial electricity consumption

and poor energy intensities, it is not completely wrong to argue that global industry is a significant

sector for reducing energy use and CO2 emissions by increasing energy efficiency [Worrel et al

2009].

Authors such as the IEA, Metz et al. (editors, IPCC 2001), Vuuren & Vries, and the EU have argued

that energy efficiency is easiest, fastest, and the most cost-effective way to decrease CO2

emissions and dependency on fossil fuels [Metz et al. 2001; Vuuren & Vries 2000; WWF 2006; IEA

2007b; EC 2009]. It has also been argued that cleaner and energy efficient technologies have a

relevant role in tackling environmental impacts, as they also enhance industrial productivity and

reduce manufacturing costs [Martin et al. 2000]. Although industry energy intensity is not very

good, the benefits of increasing energy efficiency can already be seen. Worldwide energy

consumption might now be over 50% higher if no political action would have been taken [IEA

2007c].

How much potential is there for improving energy efficiency and what are the different kinds of

possibilities in industry? The next section offers some answers to these questions.


2 Potential and possibilities for energy efficiency of industry

It has been said that environmental technology or cleantech is one of the most important markets

in the 21st century [GreenTech 2.0 2009]. Energy efficiency is globally the largest lead market for

environmental technology and overall markets for energy efficiency are valued at EUR 620 billion in

2010. This market is expected to rise by 5% annually and be over EUR 1,000 billion by 2020. The

Total Clean Energy Technology (energy efficiency and renewable energy) market is expected to be

around EUR 1,600 billion in 2020, making it one of the largest industries in the world after the

automotive and electronics industries [Roland Berger 2009; GreenTech 2.0 2009].

Historically, industrial energy efficiency has improved at a rate of 1% annually. This is often the

result of the implementation of new and more efficient technologies. Various countries have

demonstrated that it is possible to double this rate over medium or longer term time frames (i.e. 10

years or more) through the use of policy mechanisms [UNF 2007; Worrel et al. 2009]. Still, large

potential for further energy and carbon emissions savings exists [Mizera 2010; Worrel et al. 2009].

The largest savings potentials can be found in energy intensive industries such as the iron and

steel, cement, and chemical and petrochemical sectors [Mizera 2010].

In addition to the largest saving potential in energy intensives industries, there are almost countless

areas to improve industrial energy efficiency to achieve these large potentials. The following are

some reports which have realized different kinds of Best Available Techniques and different

technologies in different sectors and areas.

• Reference Document on Best Available Techniques for Energy Efficiency –report [EC 2009]

• Emerging energy-efficient industrial technologies –report [Martin et al. 2000]

• Technology Opportunities to Reduce U.S. Greenhouse Gas Emissions –report [National

Laboratory Directors for the U.S. DoE 1997]

The Reference Document on Best Available Techniques for Energy Efficiency has been widely

reported and techniques for improving energy efficiency are presented in the following systems:

combustion (e.g. fuel choice and oxy-firing), steam systems (e.g. operating and control techniques

and optimizing steam distribution systems), heat recovery and cooling (e.g. heat exchangers and

heat pumps), cogeneration (e.g. different types of cogeneration and trigeneration), electrical power

supply (e.g. power factor correction and energy efficient management of transformers), electric

motor driven sub-systems (e.g. energy efficient motors and variable speed drives), compressed air

systems (e.g. reducing system leaks and system design), pumping systems (e.g. pump selection

and pumping system control and regulation), HVAC systems (e.g. space heating and cooling and

ventilation), lighting (e.g. lighting requirements and lighting design and quality), drying, separation,

and concentration processes (e.g. thermal drying techniques and mechanical processes) [EC

2009].

The Emerging energy-efficient industrial technologies report has collected together 175 energy

efficient key technologies. Technologies have been divided into the following sectors: aluminum

(e.g. advanced forming and efficient cell retrofit design), ceramics (e.g. roller kiln), chemicals (e.g.

auto thermal reforming - ammonia and clean fractionation – cellulose pulp), plastics (e.g. plastics

recovery), electronics (e.g. continuous melt silicon crystal growth), food (e.g. electron beam


sterilization and cooling & storage), crosscutting (e.g. motor system optimizations and advanced

CHP turbine systems), mining (e.g. variable wall mining machine), pulp & paper (e.g. black liquor

gasification and condebelt drying), iron and steel (e.g. BOF gas and sensible heat recovery and

near net shape casting/strip casting), petroleum refining (e.g. biodesulfurization and fouling

minimization), textile (e.g. ultrasonic drying) [Martin et al. 2000].

The Technology Opportunities to Reduce U.S. Greenhouse Gas Emissions report presents

technology pathways, basic and applied research and crosscutting technologies supporting

greenhouse gas reductions. Pathways are found in the following areas: buildings (e.g. equipment

and appliances and intelligent building systems), industry (e.g. industrial process efficiency and

energy conversion and utilization), transportation (e.g. advanced conventional vehicles and hybrid,

electric and fuel cell vehicles), agriculture and forestry (e.g. conversion of biomass into bioproducts

and advanced agricultural systems), fossil resource development (e.g. energy efficiency for crude

oil refining and increased natural gas production), fossil power generation (e.g. low-carbon fuels

and high-efficiency power generation), nuclear (e.g. lifetime extension and generation optimization

and next-generation fission reactors), renewable energy (e.g. biomass electric, wind energy,

geothermal energy), carbon sequestration and management (e.g. terrestrial storage of CO2 and

carbon sequestration in soils) [National Laboratory Directors for the U.S. DoE 1997].

There is a lot of potential and many possibilities for improving energy efficiency, but what is best

method for implementing these improvements? Energy efficiency should not be a random project;

it must be about continuous improvement following a systematic procedure. The following section

offers information on the basic principles of the continuous improvement of energy efficiency.


3 Continuous improving of energy efficiency

The previous section discussed the potential and possibilities for improving industrial energy

efficiency. When we take a look at the typical principle for improving energy efficiency in, for

example, compressed air systems, we find that there is usually some vendor conducting analyses

for customer compressed air systems. After such analyses and efficient actions, the energy

efficiency of a compressed air system has improved and everything seems to be fine. However,

after a certain time, daily routines return to what they were before the analyses and efficient

actions. As a result, the efficiency stage of the compressed air system starts to decrease at return

to the original stage. Then the customer realizes that something must be done and they make a

contract with a vendor who analyses the customer’s system and makes a proposal for efficient

actions and so on. Such an approach leads nowhere. Energy efficiency should not be a random

project; it must be about continuous improvement following a systematic procedure.

Continuous improving of energy efficiency can be implemented with same kinds of management

principles that are used in other business areas. Continuous improvement of energy efficiency is

typically based on an environmental management system, where the most common is the ISO

14001 environmental system [Motiva 2007]. Like most business management systems, the ISO

14001 environmental system is based on the PDCA Cycle (Plan, Do, Check, Act). The cycle is a

model for the continuous improvement of a process. First, there is planning and then there is

doing. After that there is checking and finally acting. Improvement is like a spiral, an endless

process – after every cycle, the target is little bit closer. Dividing improvement into cycles is based

on the idea of continuous improvement. Information and knowledge is limited, but they improve as

a spiral. Instead of total perfection, we can accept “almost right” thinking [Wikipedia – PDCA

2010].

Picture 1: The PDCA Cycle (reproduced from Moen & Norman 2009).


3.1 Energy Efficiency System

In Finland, there is the developed Energy Efficiency System (EES) together with many instances:

EK (Confederation of Finnish Industries), ET (Finnish energy industries), Motiva (expert company,

which is 100% owned by the Finnish State, promoting the efficient and sustainable use of energy

and materials) and industrial companies. The basis of EES is the many energy efficiency system

standards from, for example, Sweden, Denmark, Ireland and Holland. EES is a management

system which allows a systematic procedure for the continuous improvement of energy efficiency.

EES can be integrated as part of a company’s ISO 14001 system or other management system, or

it may be used as a separate system to meet the needs of the company [Heikkilä et al. 2008;

Motiva 2007; Pekkarinen 2010].

Energy management consists of the following areas. Recognition of the fundamental effects related

to energy, such as costs, the environment, and dimensioning. Measurable targets are needed and

organizational targets must also be defined. Measures which are derived from targets must be

defined and implemented. Monitoring of these measures and also consumption is needed. Targets

must be reviewed and further measures decided [Motiva 2007]. Common actions which are

needed for continuous improvement of energy efficiency include [Motiva 2007]:

• Knowledge and monitoring of one’s own energy usage and also understanding one’s own

energy-saving potential.

• Defining and implementing energy-saving measures that are viable on technological and

economic terms and so energy efficiency must be included as standard procedures,

investments, and procurement.

• There is a need for good knowledge of different energy supply options and a good energy

supply strategy and its implementation.

The principles of Energy Efficiency System can be described using a five-stage circle, which is

based on the ISO 14001 environmental system (Picture 2). The original ISO 14001 system is based

on the PDCA Cycle, which is a basic model for continuous improvement [Motiva 2007]. Firstly,

there is energy policy. To implement continuous improvement a willingness to commit to agreed

energy efficiency targets is required. Energy issues might be included in a company’s policy. The

second stage is planning, where the company analyzes and recognizes energy aspects. Targets

are also set and actions and methods will be agreed to achieve the targets and goals. Thirdly, there

is implementation and action, which is needed in the execution of efficiency measures, such as the

organization, training, and briefing of personnel. Fourthly, there is surveillance and remedial action.

This area concerns the measurement and reporting of energy. Implemented deviations and

remedial and preventives measures also exist. The fifth and final stage is management review,

where the functionality of the system is evaluated, and targets which were set are also realized.

New targets will also be set.


Picture 2: Principle of continuous improvement of energy efficiency (reproduced from) Motiva

2007).

For implementing continuous improvement, we need reliable measurements and indicators which

are based on the measurements. As common actions of continuous improvement, knowledge and

measurement of one’s own energy usage, and understanding one’s own energy saving potential

are important. The next section offers basic information on measuring energy efficiency.


4 Measuring of energy efficiency

Measuring is action which has varied meanings in everyday life. If we want to know something

about some apparatus or phenomenon, we have to measure it. Energy efficiency measuring has a

variety of functions from energy efficiency monitoring all the way to policy analysis and evaluation

and estimating new technologies [APERC 2000; Sivill & Ahtila 2009]. Indicators give information on

the situation today compared to the trends in the past and future trends. Developing energy

efficiency measuring has increased awareness of how we use energy and it also helps in the

evaluation of different energy policies, programs, and energy conservation investments [APERC

2000; Worrel 1998]. Boonekamp has argued for caution in energy efficiency measuring, because

when measuring energy savings, it is energy which is not used; that’s why it is not possible to

measure directly [Boonekamp 2005].

Typically, energy efficiency indicators are related as end-use or output divided by input, where

energy is input [Klessmann et al. 2007; Schipper et al. 2000]. A European Union directive has

defined energy efficiency in the following form [EC 2006]:

As a result, it can be said that energy efficiency indicators tell us how well the energy is used to

produce output [APERC 2000]. The reverse of energy efficiency is input divided by output, often

indicated as “specific energy consumption” or “energy intensity” [Klessmann et al. 2007]. In a

simple way, energy intensity can be defined in the following form [EC 2009]:

There is a hierarchy of energy efficiency indicators. The energy efficiency indicator pyramid

describes this hierarchy (Picture 3). It shows that, depending on the pyramid level, the quantity of

required data varies. At the top level there are only a few indicators for energy efficiency that can

be constructed. When moving down the pyramid, understanding of the multitude of factors that

affect more aggregated measurements of energy efficiency increases. Also, when the quantity of

data required increases substantially, the acquisition of data becomes increasingly laborious

[APERC 2000].


Picture 3: Energy efficiency indicator pyramid [APERC 2000].

There is also a hierarchy for energy information handling (Picture 4) [Kilponen 2003]. We can

assume that the same hierarchy is suitable for energy efficiency information handling. Picture 4

demonstrates that, depending on the management level, the quantity of required data varies. At

the top level there are only annual reports which affect strategic planning. When moving down to

management level, there are monthly and daily reports which affect measures and projects and so

on to execution and supervision. The worker and operator levels handle real time information, and

this information affects operation and control.

Picture 4: nergy information flows (original from Caffal 1995 Kilponen 2003).


4.1 Basic indicator groups

According to Patterson, energy efficiency indicators can be divided into different kinds of groups:

thermodynamic indicators, physical thermodynamic indicators, economic thermodynamic, and

environmental indicators [Patterson 1996]. There is the possibility of adding environmental

indicators as a fifth category of basic energy efficiency indicators [Kilponen 2003].

Thermodynamic indicators are indicators which are derived from the science of thermodynamics

[Patterson 1996]. The following abbreviations are typical for thermodynamic indicators [W], [J] or

[%]. Some of these indicators are ratios and some are more sophisticated measures that relate to

actual energy usage to an “ideal” process. Thermodynamic indicators are good for specific

process analysis, but using thermodynamic indicators it is difficult to compare/combine efficiencies

across processes [Patterson 1996; Siitonen 2008; Kilponen 2003; Ang 2007; Boonekamp 2005].

Physical-thermodynamic indicators are hybrids where the energy input is measured in

thermodynamic units, but output is measured in physical units [Patterson 1996]. The following

abbreviations are typical for physical-thermodynamic indicators [GJ/t] or [MWh/t]. Physical units are

specifically designed to meet the end use service that consumers require, e.g. terms of tons

product. Physical-thermodynamic indicators measure energy efficiency well, but heterogeneity

might be a problem in some sectors [Siitonen 2008; Kilponen 2003; Ang 2007].

Economic-thermodynamic indicators are also hybrids where the input is measured in

thermodynamics and output is measured in terms of market prices [Patterson 1996]. The following

abbreviations are typical for economic-thermodynamic indicators [GJ/€] or [MWh/€]. Economic-

thermodynamic indicators allow the aggregation of energy services, but in some cases monetary

measures might not represent energy efficiency well [Siitonen 2008; Kilponen 2003; Ang 2007].

Economic indicators measure energy efficiency changes purely in market values. The following

abbreviations are typical for economic indicators [€/t] or [€/a]. Economic indicators are good for

giving the economic productivity of energy, but they are not truly energy efficiency indicators

[Siitonen 2008; Kilponen 2003; Ang 2007].

Environmental indicators measure energy-related specific emissions [Kilponen 2003] and Price et

al. have argued for creating industry specific environmental indicators to report and track

greenhouse gas emissions [Price et al. 2003]. The following abbreviations are typical for

environmental indicators [tCO2/t] or [tCO2/MWh] [Siitonen 2008].

The above mentioned indicator groups can be divided into descriptive and explanatory indicators.

Descriptive indicators (thermodynamic and physical–thermodynamic) describe the historical value

of a process (values, trends, indexes, and efficiencies) and they do not take account of factors

which are behind these indicators. This is why there are explanatory indicators. With these

indicators, there is a possibility to explain backgrounds and the changing of descriptive indicators.

These indicators are derived or calculated from other indicators and so on and they are not

available straight from measurements (outdoor temperature, water temperature, used technology,

production speed, quality, comparing BAT-values, energy sources, etc.). Economic-

thermodynamic, economic and environmental indicators are descriptive indicators [Bosseboeuf et

al. 1997; Eichammer & Mannsbart 1997].


5 Barriers preventing energy efficient actions

A lot of work on energy efficiency has been carried out, but there is still an energy efficiency gap.

This means the actual level of investments in energy efficiency and the level which would be cost

beneficial from consumer’s point of view [Brown 2001]. What is creating this gap? Several research

studies have been carried out on this topic and it seems that there are different kinds of barriers

preventing the investment in technologies which are energy efficient and economically efficient

[Sorrel et al. 2000].

The methodological question concerning this barrier is the following: What is a barrier and for who

or what is it an obstacle and what does it prevent? [Weber 1997] Barriers are, for example, hidden

costs, risks, lack of capital, lack of information, financial incentives, and also people, patterns of

behavior, attitudes, preferences, social norms, habits, needs, organizations, cultural patterns,

technical standards, regulations, and economic interests. Barriers are obstacles - for example,

firms, public organizations, individuals, departments within organizations and consumers. Barriers

prevent, for example, the purchase of more efficient equipment, establishing a monitoring and

targeting scheme, and improving operating practices [Sorrel et al. 2000; Weber 1997].

There has been wide research to tackle energy efficiency barriers: Reducing Barriers to Energy

Efficiency in Public and Private Organizations, [Sorrel et al. 2000]. The main conclusion was: there

are lots of cost effective possibilities in nearly all studied organizations. Many of these possibilities

have a short payback time. All cases have identified barriers, such lack of time, for the reason

which these possibilities have not taken up. The research identified the most important barriers and

split them into three divisions.

• First division: hidden costs and access to capital were the most important barriers of

research.

• Second division: risks, imperfect information, split incentives, bounded rationality and power.

• Third division: heterogeneity, principal-agent relationship, adverse selection, forms of

information/credibility/trust and values/organizational cultures.

The first division is very important to recognize and also the fact that three of the four most

important barriers can be represented as the rational behavior of organizations [Sorrel et al. 2000;

Weber 1997]. To understand better these barriers we have to take a closer look at them. In the

following section barriers are divided into three broad perspectives, which are the economic,

behavioral, and organizational perspectives, and we also take a look at barriers through this

perspective [Sorrel et al. 2000; Weber 1997].

5.1 Economic barriers

Economic barriers are, for example, hidden costs, risks, imperfect information, and asymmetric

information. The theory which explains these economic barriers is neo-classical economics. The

economic barrier can be split into two categories: rational behavior and market or organizational

failure [Sorrel et al. 2000].


Hidden costs and access to capital are barriers of rational behavior. Hidden costs argue against an

efficiency gap, meaning that the studies overestimate the efficiency potential. Hidden costs can be

split into three broad categories. The general overhead costs of energy management, such as the

cost of employing specialists, the costs of an energy information system. Costs specific to

technology investments, such as the costs of identifying opportunities, the costs of detailed

investigations and design, and the costs of formal investments appraisal. The loss of benefits

associated with an efficient technology, such as problems with safety, noise, and working

conditions. Limited access to capital applied at two levels: the overall reluctance to borrow by the

organization, and the low priority given to energy efficiency within internal capital budgeting

procedures. This can be explained by a combination of difficult business situations, perceptions

with risk and strategic management priorities [Sorrel et al. 2000].

Risks and heterogeneity are barriers of rational behavior. Risks can be split into three broad

categories. External risk: overall economic trends (recession), expected reduction in fuel and

electricity prices, political changes, and government policy. Business risks are, for example,

sectoral economic trends, individual business economic trends, and financing risks. Technical risks

are technical performance of individual technologies and unreliability. So it can be said that risks

have many dimensions [Sorrel et al. 2000]. Heterogeneity means that if a technology is cost

effective, on average it will not be so for some individuals or firms. If the relevant population is

heterogeneous with respect to the amount of energy use, so a technology which looks very good

for the average, might be unattractive for some of the population [Jaffe & Stavins 1994].

Imperfect information and adverse selection are barriers of market or organizational failure. For well

working markets, all participants must be fully informed [Sorrel et al. 2000]. If there is a situation

that a potential information user is not a party who pays for the energy, this is not a desirable

situation. A desirable situation occurs only if the information user can recover the investment from a

party who enjoys the energy savings [Jaffe & Stavins 1994]. Adverse selection exists when one

party has private information before entering into a contract. For example, consumers may be

unable to see the superiority of a product. They will select goods with visible effects such as price

and do not want to pay a price premium for high quality products. A result is that too few of high

quality products may prevent the existence of an effective demand [Sorrel et al. 2000].

The split incentive and principal/agent problem are barriers of market or organizational failure. The

split incentive is a very common energy efficiency barrier. A typical example is the landlord/tenant

problem. A landlord might be unwilling to retrofit an apartment because it will be realized to the

tenant. At the same time the tenant might be unwilling to retrofit an apartment because they might

move out before benefiting from the cost saving [IEA 2007a; Sorrel et al. 2000]. The principal/agent

problem generally refers to the potential difficulties when two parties make a contract with different

goals and different levels of information. In the context of energy efficiency, the principal/agent

problem can cause sub-optimal levels of energy efficiency [IEA 2007a].

5.2 Behavioural barriers

Behavioral barriers are, for example, the inability to process information, form information, trust,

and inertia. Theories which explain these barriers are transaction cost economics, psychology, and

decision theory. Behavioral barriers can be split two categories: bounded rationality and the human

dimension [Sorrel et al. 2000]. Bounded rationality takes account of rational choice and cognitive


limitations, which are the knowledge and computational capacity of the decision-maker [Simon

1997]. This leads individuals and companies to make satisfying decisions rather than expend time

and effort reaching the optimum choice. This also leads to using a rule of thumb and routines to

optimize the process [Sorrel et al. 2000].

The form of the information is important. Information should be specific and personalized, e.g.

energy audits are more effective than general cost savings opportunities. Information should be

clear and simple. Also, information should be available close to the time of the relevant decision.

The credibility of the information source is relevant. One explanation of why people ignore

information which is free and useful is that they don’t trust it. Credibility depends of many factors,

such as the nature of the source, past experience of the source, the nature of co-operation with

the source and recommendations from colleagues [Sorrel et al. 2000].

Inertia may be one of the explanations for the non-adoption of energy efficient technology. People

resist change because they are committed to what they are doing and they justify that inertia by

downgrading contrary information. Values are one explanation for the adoption or non-adoption of

energy efficient technologies. The economic consideration is only one explanation for decisions.

Environmental values have played an important role in energy efficiency for many years and global

climate change has made it an increasingly important factor in energy efficiency adoption or non-

adoption [Sorrel et al. 2000].

5.3 Organisational barriers

Organizational barriers are, for example, an energy manager’s lack of power and influence. It

means that an organizational culture leads to the neglect of energy and environmental issues. The

theory which explains this barrier is organizational theory. The responsibility of the energy matter is

usually assigned to engineering or maintenance departments and they typically don’t have a very

high status in organizations. Top managers often view energy as only a peripheral issue vis-a-vis

core business. Without power, funds and management support possibilities for effective actions

are circumscribe. There is an analogy between organizational cultures and between individual

values. Energy efficiency should be an important place for organizational culture when adopting

energy efficient technologies [Sorrel et al. 2000].

5.4 Overcoming of barriers

As the above sections reveal, there are several diverse barriers. There is no single best solution to

overcoming a certain barrier. Sorrel et al. preferred a multiple policy approach, addressing the

specific features of individual problems (e.g. markets for electric motors) [Sorrel et al. 2000].

They argued that policy approaches can be classified in many ways, but it should be a mix of the

following actions: changing the boundary conditions (e.g. broad based national climate policies,

like energy pricing), support for particular technologies (e.g. market transformations initiatives for

electric motors), support for particular delivery mechanism (e.g. promotion of ESCOs), support for

individual energy using sectors (e.g. capital allowances for energy efficiency investments by SMEs

and promotion of networks for information sharing with the public sector) and support for

improving organizational energy management (e.g. best practice program materials) [Sorrel et al.

2000].


ConclusionsAs we have seen earlier, the globalized world is facing complex energy challenges. Safe energy

supplies and allowing energy use possibilities for everyone are such huge issues to solve that there

is a need for immediate action. We need to concentrate on actions which give results right now,

because the best energy is energy which has not been used. The quickest way to start saving

energy is the efficient use of energy. It seems that global industry allows significant potential to

improve energy efficiency. There are lots of possibilities to improve energy efficiency by different

kinds of Best Available Techniques and different technologies in different sectors and areas.

We also need managerial actions to implement energy efficiency possibilities, because continuous

improvement is a route to sustainable results in energy efficiency. This leads to the consequence

that measurements and indicators are a relevant part of energy efficiency, because without

measurement it is almost impossible to realize any results from energy efficient actions. Despite the

possibilities for improving energy efficiency, there are still many different kinds of barriers which

prevent the implementation of these possibilities. To overcome these barriers we need a mix of

policy actions, with the mix depending on the barrier in question.

Instead of trying to overcome all the barriers which are preventing industrial energy efficiency, we

should concentrate very carefully on a particular area of energy efficiency and try to solve these

areas as well as we can. Of course, understanding energy efficiency from a bigger point of view

would help in solving problems in a particular area.


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