BEIS publishes research by Verco, Eunomia and CSE on Investing in energy efficiency

The report examines the total costs businesses face when investing in energy efficiency measures. It looks at the non-capital or ‘hidden’ costs associated with investment in energy efficiency and low carbon technology, as well as the associated decision making and appraisal processes used by businesses.

The analysis is based on interviews with 30 organisations from a range of industries that predominantly made large investments in energy efficiency for industrial processes. Its findings are not intended to be definitive as the report looks at a small sample of organisations. However it provides a more detailed examination of how some businesses make decisions around energy efficiency.

The research found strong diversity across the 30 interviews in respect of attitudes to investment in energy efficiency measures and the processes for approval. However, it was commonly found that organisations are typically risk averse towards energy efficiency – more so than some other forms of investment such as new product lines – this pervades all the mechanisms and approaches to investigating energy efficiency measures and ensures that there is investment in low risk measures only.

The templates used by organisations to appraise energy efficiency measures are typically pay-back calculations. They are targeted at non-finance professionals and ensure that only key pieces of information are captured. Risk is not generally monetised in investment appraisals at departmental level, albeit this does appear to take place at board level. The quantification of costs and benefits are controlled by the forms and the personnel completing them. The vast majority of these capture limited information, which focuses almost universally on capital costs.

Verco was part of the research consortium owing to our technical and commercial expertise coupled with close relationships with a variety of industrial manufacturing clients. Verco has also led or been the technical lead in a number of similar policy-research projects for BEIS including the Building Energy Efficiency Survey and recently-published EUETS-CRC cost simplification analysis.

Aside from bringing general technical and commercial expertise to the team, Verco brought first-hand experience of developing business cases and the decision making process for energy efficiency projects in an industrial setting. Working with project partners Eunomia and CSE in Bristol, we carried out semi-structured interviews of a variety of energy intensive manufacturing businesses. We helped assimilate the results to answer the research questions set by BEIS.