Including non-energy benefits in investment calculations in industry – empirical findings from Sweden

Panel: 6. Business models to improve industrial efficiency, global perspective

This is a peer-reviewed paper.

Authors:
Therese Nehler, Linköping University, IEI/Department of Management and Engineering, Sweden
Patrik Thollander, Linköping university, Department of Management and Engineering, The division of Energy Systems, Sweden
Maja Dahlgren, Swedish Energy Agency, Sweden
Mikael Ottosson, Linköping university, Department of Management and Engineering, Business Administration, Sweden

Abstract

The threat of increased global warming accentuates the need for reducing anthropogenic emissions of GHG (Green House Gases). Improved energy efficiency in industry represents one of the most important means of reducing this threat. Furthermore, improved energy efficiency and cutting energy costs may be key factors for individual enterprises’ long term survival and success because of increased environmental legislation and rise of energy prices. Despite the fact that extensive potentials for improved energy efficiency exists in industry, a large part remains unexploited explained by the existence of various barriers to energy efficiency. The research on barriers is well-developed and regards the non-investment of cost-effective technical measures that improve energy efficiency. In these studies, the actual investment decision is the analysing variable. However, if one extends the system boundary, there are indications that not only the actual reduction of energy cost but also other potential benefits should be taken into account in energy-efficiency investments. Including such factors, named non-energy benefits (NEBs), in the investment calculation mean the investment may have a considerably shorter pay-back period. The aim of this paper is to study if NEBs are considered and measured in energy-efficiency related investments in Swedish industry, and to study factors inhibiting the inclusion of NEBs in investment calculations. Results of this study indicate that NEBs seems to exist in the Swedish industrial companies participating in this study, but only few of the mentioned NEBs were included in investment calculations, explained by among other factors, the hidden cost of monetizing the NEB.