Boosting industrial energy efficiency investment through distributed internal funds in energy efficiency networks

Panel: 5. Business models and financing: established practice and innovative approaches

Authors:
Diana Wang, University of Stuttgart, EEP Institute for Energy Efficiency in Production, Germany
Martin Reisinger, Institute for Energy Efficiency in Production EEP, University of Stuttgart, Germany
Alexander Sauer, Institute for Energy Efficiency in Production EEP, University of Stuttgart, Germany

Abstract

In large parts of the industrial enterprises in Germany the allocation of investment capital to energy efficiency (EE) projects is currently not sufficient enough to mobilize substantial parts of the technological and economic feasible EE potentials. Two of the obstacles are transaction costs and the competition with investments in means of production.

There are already approaches to overcome these obstacles. For example a company internal fund which dedicates capital directly to EE investments. Based on this money EE measures can be realized in a wide range of project size and ROI (compensatory pricing possible). The realized savings flow back to this fund and allow further investments. This presentation characterizes this existing approach and drafts a linkage to an innovative financing concept: distributed internal funds within Energy Efficiency Networks (EEN).

Under the assumption that companies joining an EEN have similar interests and have the intention to improve in EE a fund secures an amount of money that can only be used for EE investments in the participating companies. Firstly, members of the EEN determine EE measures. In a second step comparable measures are assigned in categories. Due to the pool of companies all realizing the same measure or measures of the same category a risk analysis for that measure/category can be made with lower transaction costs. The transaction costs in the second step are even lower if standardized (risks) checks are available to assess the measure. Furthermore, the fund enables the pooling of different (small) EE measures for financing these measures in bundles.

The fund could be capitalized in cooperation with classic bank loans, innovative financing concepts or financial instruments from the EIB. To support the initiative 500 EEN in Germany a “carrot and stick approach” could be used: Establishing a fund within an EEN could be a precondition for getting access to public promotional programs.