Strategic fit of energy efficiency (Strategic and cultural dimensions of energy-efficiency investments)

Panel: Panel 1: The foundations of a future energy policy. Longer term strategies

Author:
Catherine Cooremans, HEC University of Geneva, Switzerland

Abstract

What are the drivers of businesses’ energy-efficiency investments? Energy audits trying to promote, on a voluntary basis, energy-efficient technologies generally identify a significant energy-saving potential achievable in a cost-effective way. In addition, public support is often proposed in the form of subsidies, low-interest loans or fiscal deductions. Still, on average only 30‑40 % of recommended energy-saving measures are implemented by companies on the demand side. Using neo-classical finance investment theory, energy economics fails to explain this situation.

In taking a different approach, management science decision-making research has shown that financial factors partially explain businesses’ investments and has developed contingency models of decision-making: a decision is only one stage in a process influenced by individual, organizational and contextual factors and by the characteristics of the investment itself. These factors produce different decision-making situations.

Within this conceptual framework, our research tries to explain how and why firms act – or fail to act – on energy efficiency by testing three hypotheses: 1. the fact that energy-efficiency investments are often not perceived as strategic by the organizations is the main reason explaining negative decisions; 2. the cultural dimension of energy use partially explains why these investments are not perceived as strategic; 3. the level of energy management is an important driver of energy-efficiency investments decisions.

Undertaken in collaboration with the University of Geneva Business School (HEC) and the Geneva Energy Office Planning (SCanE), this research is based on interviews and questionnaires submitted to energy and finance managers of 70 major energy consumers participating in a free-of-charge audit campaign. Initial results, briefly presented in the third section of the paper, seem to confirm our hypotheses and open the way for a different approach to promoting energy efficiency and, more generally, to long-term market transformation, which is sketched in the conclusion.