Transaction costs of energy efficiency improvement

Panel: Panel 2: Programme Evaluation

Authors:
Lars G. Hein, Dept. of Science, Technology & Society, Utrecht University, The Netherlands
Kornelis Blok, Dept. of Science, Technology & Society, Utrecht University, The Netherlands

Abstract

Various technical studies describe a large potential of energy efticiency improvement measures which can be implemented at low costs. However, it is often argued that these costs do not reflect the full costs of the measures as they do not include transaction costs. Transaction costs are the costs of collecting mformation on, making decisions about, and monitoring the performance of investments. In this paper the character and magnitude of transaction costs in the implementation of energy efficiency improvements are investigated. The research is based on a literature survey and twelve interviews with energy managers of large fms in the Netherlands. It was found that in the selected companies, the transaction costs mainly consist of information costs (2-6% of the investment), whereas the costs of decision making (1-2%) and monitoring (~1%) are much smaller. The firms gathered part of the information, on e.g. equipment and supplier options, after the investment decision. For the companies considered in this study, transaction costs of energy efficiency improvement measures are estimated to be between 3 and 8% of tbe investment.