Barriers Impede Industrial Energy Efficiency

The US Department of Energy (DOE) released the report “Barriers to Industrial Energy Efficiency,” which was prepared with collaboration from nearly 50 experts, including representatives from industrial associations, combined heat and power (CHP) groups, environmental stewardship organizations, associations of state governmental agencies and federal governmental agencies.

According to the report, industrial end-use energy efficiency includes a broad range of energy-efficient technologies and management practices, which include advanced electric motors and drives, high efficiency boilers, waste heat recovery, energy-efficient lamps and lighting controls, modernization or replacement of process equipment, improved process performance through the use of sensors and controls, and implementation of systematic energy management systems.

Barriers that impede implementing industrial end-use energy efficiency are found in three categories: i) economic and financial; ii) regulatory; and iii) informational.

Economic and financial barriers, for example, include such things as:

• Internal competition for capital. Manufacturers often have limited capital available for end-use efficiency projects and frequently require very short payback periods (one to three years).
• Corporate tax structures. US tax policies, such as depreciation periods, the treatment of energy bills, and other provisions can be a deterrent.
• Program planning cycles. There can be a mismatch between industrial planning cycles and utility and state energy efficiency program cycles, which can hinder industrial sites from moving forward with an energy efficiency project.
• Split incentives. Companies often split costs and benefits for energy efficiency projects between business units, which complicates decision-making.
• Failure to recognize non-energy benefits of efficiency. Not considering non-energy or co-benefits of an end-use energy efficiency project weakens the business case.
• Energy price trends. Volatile energy prices can create uncertainty in investment returns, leading to delayed decisions on energy efficiency projects.