Effects of economies of scale and experience on the costs of energy-efficient technologies – case study of electric motors

Daniela Jardot, Wolfgang Eichhammer, and Tobias Fleiter, Fraunhofer Institute for Systems and Innovation Research (ISI), Germany

Keywords

composite price index, cost reduction, economies of experience, economies of scale, efficiency classification, electric motor, energy demand side, energy efficiency, learning rate, minimum efficiency standard

Abstract

Increasing energy efficiency is often discussed as an effective way to protect the climate, even though this is frequently associated with additional (investment) costs when compared to standard technologies. However, the investment costs of emerging energy-efficient technologies can be reduced by economies of scale and experience curve effects. This also brings about higher market penetration by lowering market barriers. Declining cost curves have already been analyzed in detail for renewable energy technologies, but are not as well documented for energy-efficient technologies despite their significance for energy and climate policy decisions. The wider use of energy-efficient electric motors, which are responsible for a large share of industrial electricity consumption, can help to further reduce greenhouse gases. The analysis is based on three methodologies: (1) The classification of energy efficient electric motors within a market analysis, (2) an expert survey with results on opportunities for cost reductions while penetrating the market and (3) the calculation of composite price indices for the years 1995 until 2006 which show the historical cost development for electric motors in a period when so-called "eff2" motors substituted less efficient "eff3" motors on the European market. The results are then compared with the cost reductions observed for other energy-efficient technologies in a literature review.