Optimization as investment decision support in a Swedish medium-sized iron foundry – A move beyond traditional energy auditing

Due to increased globalisation, industries are facing greater competition that is pressing companies into decreasing their expenses in order to increase their profits. As regards Swedish industry, it has been faced with substantial increases in energy prices in recent years. Barriers to energy efficiency such as imperfect information inhibit investments in energy efficiency measures, energy audits being one means of reducing barriers and overcoming imperfect information. However, an evaluation of such energy audits in Sweden reveals that it is chiefly low-cost measures that are undertaken as a result of an audit. Moreover, these audits often tend to focus on support processes such as ventilation, lighting, air compressors etc., while measures impacting production processes are often not as extensively covered, which underlines the need for further support in addition to energy audits. Decision support is practised in a variety of different disciplines such as optimization and simulation and the aim of this paper is to explore whether investment decision support practices may be used successfully towards small and medium-sized manufacturers in Sweden when complex production-related investment decisions are taken. The optimization results from the different cases, involving a foundry’s investment in a new melting unit, indicate that with no electricity price fluctuations over the day, the investment seems sound as it lowers the overall energy costs. However, with fluctuating electricity prices, there are no large differences in energy costs between the option of retaining the existing five melting furnaces at the foundry and investing in a twin furnace and removing the holding furnaces – which was the initial investment plan for the foundry in the study. It would not have been possible to achieve this outcome without the use of investment decision support such as MIND. One of the main conclusions in this paper is that investment decision support, when strategic investment decisions are to be taken, may be a means of emphasising energy efficiency for energy-intensive SMEs beyond the level of traditional energy auditing.     

Development of rank ordering techniques based on the analytical hierarchy process for evaluation of energy conversion devices

Both producers and consumers of electric energy have challenging decisions to make. In some cases, these decisions are related to the selection of specific equipment for energy production or energy conversion. The important financial and operational decisions that face these companies merit the use of an analytic approach to decision making. Of special interest is the purchase of high volume equipment used in the daily operation of energy production or conversion. This paper presents a method that utilizes all available information when making a decision, regardless of the size of the problem. The method is based on the analytical hierarchy process (Saaty, 1980). An example is shown demonstrating the selection of one of the most common energy conversion devices, namely a distribution transformer. Distribution transformers are rank ordered according to manufacturers using this decision support technique. Finally, a user friendly software package implementing this method is fully developed on a personal computer.     

The appeal of the green deal: Empirical evidence for the influence of energy efficiency policy on renovating homeowners

The Green Deal is a major new energy policy designed to support the diffusion of energy efficiency measures in UK homes. This paper provides one of the first empirical examinations of the Green Deal′s success in influencing homeowners’ renovation decisions. Using a repeated measures design in which households were questioned before and after the Green Deal′s launch in January 2013, we assess the policy′s success in raising awareness of energy efficiency. In particular, we test the effectiveness of the Green Deal′s positioning to overcome barriers to renovation among homeowners already interested in or considering energy efficiency measures. Using the innovation decision process (Rogers, 2003) as a conceptual framing of the renovation decision process, we examine whether new information on energy efficiency provided by the Green Deal strengthened intentions and its antecedents. We find that (1) energy efficiency is of potential appeal to all renovators regardless of their attitudes about energy efficiency, (2) energy efficiency opportunities need to be identified in the early stages of renovation when homeowners are thinking about ways to improve their home, and (3) homeowners’ intentions towards energy efficiency are weakened by uncertainty about financial benefits, helping to explain the relatively slow uptake of the Green Deal to-date.     

Implementation of energy efficiency measures in compressed air systems: barriers,drivers and non-energy benefits

Increased global competition and resource scarcity drives industrial companies to cut costs. Energy can be a significant component of such cuts, particularly for energy-intensive companies. Improving energy efficiency in industry is complex, as it pertains to various energy-using processes that are heavily intertwined. One such process is the compressed air system (CAS), which is used in most industrial companies worldwide. Since energy efficiency improvement measures for various types of energy-using processes differ, technology-specific measures might encounter different barriers to and drivers for energy efficiency. The same applies to the non-energy benefits (NEBs) related to energy efficiency improvement measures; since measures vary between various energy-using processes, the perceived NEBs might be different as well. The aim of this paper is to study the barriers to, drivers for and NEBs of CAS energy efficiency improvement measures from the perspectives of three actors. Carried out as an interview study combined with a questionnaire, the paper merges the perspectives of users, audit experts and suppliers of CASs. The results showed that the major barriers are related to the investment, or are of an organisational character, and that organisational and economic factors seemed to be important for making positive decisions on energy efficiency investments and measures in CASs. Major NEBs for CASs include productivity gains and the avoidance of capital expenditures. The results of this study also address the importance of having a comprehensive approach to recognise additional effects of energy efficiency improvements in CASs.     

The role of psychology and social influences in energy efficiency adoption

Current energy efficiency policy and incentive programs tend to target economic motivations, which may misalign with other potentially important motivations arising from situational factors, individual differences, and social context. Thus, in this research, we review areas of work that have focused on psychological and social influences to energy efficiency adoption in commercial buildings. We then conduct an empirical scoping study interviewing 10 commercial building owners/managers (decision makers) and 10 experts/consultants (decision influencers) regarding perceived motives and barriers to energy efficient investments, decision-maker attributes, and the social context of the decision. Potential factors that emerge from the interviews, which are not yet extensively discussed in the energy efficiency literature, include owners/managers’ resistance to change and the influence of investment funding origins on the decision. Our results also suggest potential heterogeneity in energy efficiency decision-making philosophies between the two groups. Interviewed owners/managers prioritize corporate social responsibility (CSR) and prefer internal consulting (e.g., building engineers). Conversely, experts/consultants do not emphasize CSR and are more concerned with external policies. These findings suggest that accounting for the decision maker and the social context in which decisions are made could enhance the design of commercial sector energy efficiency programs.     

“十二五”节能服务产业发展前景与趋势

《国务院关于加快培育和发展战略性新兴产业的决定》明确宣布国家将重点培育和发展节能环保产业等七大战略性新兴产业,而节能服务产业属于节能环保产业范畴,被寄予引领整个节能环保产业发展的厚望。加快推行合同能源管理、加快发展节能服务产业是"十二五"加快经济转型的战略选择和迫切要求。我国现有的节能服务产业发展支持政策可归结为法律法规支持、行政规章支持、专项财政支持以及规划引导和工程推动等4类,这些政策的制定和施行为"十二五"期间我国节能服务产业的快速发展营造了较好的政策环境。"十二五"期间,我国节能服务市场需求的驱动力来自市场驱动和政策驱动两个方面,全社会对节能服务的市场需求巨大。届时节能服务公司数量将经历一个先增后减的过程,"十二五"后期全国公司数量将为1500家左右,有大型企业背景的节能服务公司可能带来不公平竞争,跨国公司或将成为我国节能服务市场重要的竞争参与者;节能服务市场的开发将主要集中在工业领域,同时在建筑领域业务活动将有所加强,东、中、西部节能服务市场开发的差距将缩小,节能服务市场将进一步细分。     

Planning versus implementation of energy-saving projects by industrial companies. Insights from the Dutch Long-Term Agreements

Companies participating in the Dutch voluntary agreements on energy efficiency are required to announce the energy-saving projects that they have planned for a specified reporting period in an Energy Efficiency Plan (EEP). All projects with a payback period less than 5 years should be implemented. The aim of this paper is to provide insight into the differences in planning and implementation of energy efficiency investments by companies. This analysis is based on the EEPs submitted in the period 2009–2012. By comparing the characteristics of projects that have been implemented with those that were planned, insight is gained in the adjustments that companies make in their energy efficiency investment plans. We look at external circumstances that could explain these adjustments. Our results show that over 12,000 projects have been planned by the 904 long-term agreement (LTA) participants, about half of which are planned ‘certain’, which means that companies are certain that these projects will be implemented. However, we find a large difference between the planned and realised savings of companies and a huge variation in the payback period of both planned and implemented projects. We do not find a correlation between implementation rate and payback period. This suggests that the payback period in the EEPs was not assessed properly or that other than economic motives are more decisive for investment decisions. Our results can be used to improve the effectiveness and efficiency of voluntary agreements.     

Modeling decision making as a support tool for policy making on renewable energy development

This paper presents the findings of a study on decision making models for the analysis of capital-risk investors’ preferences on biomass power plants projects. The aim of the work is to improve the support tools for policy makers in the field of renewable energy development.Analytic Network Process (ANP) helps to better understand capital-risk investors preferences towards different kinds of biomass fueled power plants. The results of the research allow public administration to better foresee the investors’ reaction to the incentive system, or to modify the incentive system to better drive investors’ decisions.Changing the incentive system is seen as major risk by investors. Therefore, public administration must design better and longer-term incentive systems, forecasting market reactions. For that, two scenarios have been designed, one showing a typical decision making process and another proposing an improved decision making scenario.A case study conducted in Italy has revealed that ANP allows understanding how capital-risk investors interpret the situation and make decisions when investing on biomass power plants; the differences between the interests of public administrations’s and promoters’, how decision making could be influenced by adding new decision criteria, and which case would be ranked best according to the decision models.     

The role of corporate reputation and employees' values in the uptake of energy efficiency in office buildings

Although office market actors in the United Kingdom show a growing interest in energy efficiency, the pace of takeup of energy efficient office features is slow. Previous studies have highlighted the roles of limited direct financial costs and benefits (‘efficiency gaps’) and market barriers in limiting the rate of technology adoption. This study provides further evidence on the importance of these factors, but the primary contribution is focused on the role of corporate reputation and on the importance of individuals' values in shaping corporate behaviour. The paper presents a theoretical framework to explain environmental decision making in firms and we present qualitative evidence drawing from sixteen semi-structured individual and group interviews with office market stakeholders in London, Glasgow and Edinburgh. The research finds that companies, despite gradually becoming more energy conscious, still regard energy costs as a negligible part of their business costs. Nevertheless, an increasingly important driver is the reputational gain obtained by corporate businesses implementing sustainable practices. All the interviewees agreed that the pace of change in the office market is slow and that only further policy interventions will accelerate it.     

A decision support tool for the analysis of pricing,investment and regulatory processes in a decentralized electricity market

After the liberalization of the electricity generation industry, capacity expansion decisions are made by multiple self-oriented power companies. Unlike the centralized environment, decision-making of market participants is now guided by price signal feedbacks and by an imperfect foresight of the future market conditions (and competitor actions) that they will face. In such an environment, decision makers need to better understand long-term dynamics of the supply and demand sides of the power market. In this study, a system dynamics model is developed, to better understand and analyze the decentralized and competitive electricity market dynamics in the long run. The developed simulation model oversees a 20-year planning horizon; it includes a demand module, a capacity expansion module, a power generation module, an accounting and finance module, various competitors, a regulatory body and a bidding mechanism. Many features, singularities and tools of decentralized markets, such as; capacity withholding, enforced divestment, long-term contracts, price-elastic demands, incentives/disincentives, are also incorporated into the model. Public regulators and power companies are potential users of the model, for learning and decision support in policy design and strategic planning. Results of scenario analysis are presented to illustrate potential use of the model.     

The dual sustainability of wind energy

Academics, practitioners, and policy makers continue to debate the benefits and costs of alternative sources of energy. Environmental and economic concerns have yet to be fully reconciled. One view is that decisions that incorporate both society's concern with the environment and investors’ desire for shareholder value maximization are more likely to be truly sustainable. We coin the term dual sustainability to mean the achievement of environmental and financial sustainability simultaneously.Many experts believe that wind energy can help to meet society's needs without harming future generations. It is clean and renewable. Because the fuel is free it provides the ultimate in energy independence. Wind energy has emerged as a leading prospect, in part, because it is considered by many to be environmentally sustainable.However, a key question that remains is whether wind energy is financially sustainable without the extensive government support that has helped to create and nurture this growth industry. Using reliable, proprietary data from field research, our analysis employs a capital budgeting framework to evaluate the financial economics of investments in wind energy. We find that because of the convergence of improved technology, greater efficiency, and with the increasing cost of traditional, competing sources such as oil and natural gas, wind energy is close to becoming self-sustaining financially without the extensive federal government support that exists today.Wind energy can provide the best of both worlds. It is sustainable from an environmental perspective and it is becoming sustainable financially. In short, those companies investing in wind energy will be able to do well by doing good. Perhaps the achievement of dual sustainability is true sustainability.Our research findings and dual sustainability have several interesting and important implications for public policy towards wind energy. All imply that public policy can now be executed in a more effective and efficient manner. In the paper we outline and offer these better and cheaper public policy alternatives for consideration.     

Development of a decision support tool for the assessment of biofuels

Alternative fuels for the transport sector are gaining growing attention as a means against fossil fuel dependence and towards greener forms of energy. At the same time, however, they are surrounded with doubts concerning sustainability of their production. This work presents the basic framework for a decision support tool to evaluate biofuel production pathways, with the purpose of providing the decision maker with a structured methodology that will lead him to the final decision. The tool integrates the most important aspects along the entire value chain (i.e. from biomass production to biofuel end-use), namely the technical, economic, environmental and social aspect. The tool consists of a computational part, which can be combined with the personal preferences of the user. The analysis provides a score for the respective pathway that can be used to rank different options and select among them the optimal solution. The functionality of the tool has been tested for the case of biodiesel from rapeseed in Germany.     

How fast can businesses in the new energy sector grow? An analysis of critical factors

For the new energy technology markets to grow, demand, prices, and business conditions need to be in balance. It is not just declining prices and increasing volumes that are important, but the business in the new energy sector also needs to be healthy, which is not always the case at present. We have analyzed the ability of businesses in the new energy sector to invest in new production capacity, which influences the total volume growth. Using the self-financeable growth rate (SGR) as an indicator, a declining trend was found among PV and wind power manufacturers. The prospects of initiating new investments through returns from operations are poor or negligible at present, which is explained by tougher competition, shrinking public support, and new entrants, among others. Reducing the cost of sales would be the most effective way to improve the growth prospects, though increasing revenues, e.g., through higher product prices, comes close to achieving the same result. Market measures such as consolidation, rationalization, better asset use, improving efficiency, etc. are equally important. The analysis results imply a growth limit of ca. 15–25% per year with present market conditions, which may also be a more permanent level, supported by findings from technology diffusion and growth model studies. The results suggest that it is not self-evident that the new energy technologies will meet the future goals set for these in the climate and energy policy strategies, unless policymakers and decision makers properly address the issue of restoring and securing sound business conditions.     

Block level energy planning for domestic lighting—a multi-objective fuzzy linear programming approach

Creating provisions for domestic lighting is important for rural development. Its significance in rural economy is unquestionable since some activities, like literacy, education and manufacture of craft items and other cottage products are largely dependent on domestic lighting facilities for their progress and prosperity. Thus, in rural energy planning, domestic lighting remains a key sector for allocation of investments. For rational allocation, decision makers need alternative strategies for identifying adequate and proper investment structure corresponding to appropriate sources and precise devices. The present study aims at designing a model of energy utilisation by developing a decision support frame for an optimised solution to the problem, taking into consideration four sources and six devices suitable for the study area, namely Narayangarh Block of Midnapore District in India. Since the data available from rural and unorganised sectors are often ill-defined and subjective in nature, many coefficients are fuzzy numbers, and hence several constraints appear to be fuzzy expressions. In this study, the energy allocation model is initiated with three separate objectives for optimisation, namely minimising the total cost, minimising the use of non-local sources of energy and maximising the overall efficiency of the system. Since each of the above objective-based solutions has relevance to the needs of the society and economy, it is necessary to build a model that makes a compromise among the three individual solutions. This multi-objective fuzzy linear programming (MOFLP) model, solved in a compromising decision support frame, seems to be a more rational alternative than single objective linear programming model in rural energy planning.     

Dynamic assessment of capacity investment in electricity market considering complementary capacity mechanisms

This paper proposes a decentralized market-based model for long-term capacity investment decisions in a liberalized electricity market. Investment decisions are fundamentally based on total revenues gained by investors. In most electricity markets, the complementary mechanisms are designed to ensure a desired level of reliability while covering investment costs of the suppliers. In such an environment, investment decisions are highly sensitive to expectation of price signals in both of energy market and capacity mechanisms. In this work, the system dynamics concepts are used to model the structural characteristics of electricity market such as, long-term firms’ behavior and relationships between variables, feedbacks, and time delays by appropriately bundling the energy market and capacity mechanisms. The market oriented capacity price as well as non-competitive capacity payments and a proposed hybrid capacity mechanism are linked with the energy market in the model. Such a decision model enables both the generation companies and the regulators gaining perfect insights into the possible consequences of different decisions they make under different policies and market conditions. In order to examine the performance of the electricity market with different capacity mechanisms, a case study is presented which exhibits the effectiveness of the proposed model.     

The principal–agent problem and transport energy use: Case study of company lease cars in the Netherlands

Barriers exist for improvement of energy efficiency, of which the principal–agent problem is considered an important one. The principal–agent problem is a potential barrier for energy policies based on economic instruments, as the decision maker may be partially insulated from the price signal given by such policies. We estimate the size and the impact of the principal–agent problem for cars provided by companies as a benefit to employees in the Netherlands. Of all passenger cars in the Netherlands, 11% is classified as company cars, which consume 21% of the total energy consumption by passenger cars. As company cars are newer, operate more diesel engines, but are also larger, the fuel efficiency is slightly worse than that of private cars. Company cars seem to drive longer distances for commuting than the national average of private cars. Together, this might result in a net 1–7% increase of all fuel use of passenger cars in the Netherlands. This indicates that there is potential to reduce energy consumption of company cars and a need for policies aimed at improving energy efficiency of company cars.     

Economy and CO2 emissions trade-off: A systematic approach for optimizing investments in process integration measures under uncertainty

In this paper we present a systematic approach for taking into account the resulting CO₂ emissions reductions from investments in process integration measures in industry when optimizing those investments under economic uncertainty. The fact that many of the uncertainties affecting investment decisions are related to future CO₂ emissions targets and policies implies that a method for optimizing not only economic criteria, but also greenhouse gas reductions, will provide better information to base the decisions on, and possibly also result in a more robust solution. In the proposed approach we apply a model for optimization of decisions on energy efficiency investments under uncertainty and regard the decision problem as a multiobjective programming problem. The method is applied to a case of energy efficiency investments at a chemical pulp mill. The case study is used to illustrate that the proposed method provides a good framework for decision-making about energy efficiency measures when considerations regarding greenhouse gas reductions influence the decisions. We show that by setting up the problem as a multiobjective programming model and at the same time incorporating uncertainties, the trade-off between economic and environmental criteria is clearly illustrated.     

基于能效竞争的我国电网节能减排调度

本文试图拓展电力系统调度的传统方法学,通过"节能调度"这一我国电网所面临的调度管理新目标,重建具有中国特色的、在中国能源新战略现实目标约束下,传承并创建基于能效的节能调度新方法,在外部节能减排和低碳经济体系中促进电网的市场化运营,进而独立创建中国电力工业市场化改革的新调度机制,挖掘我国电力工业绩效与能效的巨大潜力。     

Lessons learned from studying public initiatives to support energy efficiency finance in Thailand from 1992 to 2014

Despite the huge technical and market potential for cost-effective energy efficiency investments in Southeast Asian markets, only a small fraction of this potential has been realised. Given that the major share of global future energy demand, and associated greenhouse gas emissions, will come from emerging economies, it is important to understand the barriers to mainstreaming energy efficiency into the financial sector. This paper focuses on public initiatives that support one of the main barriers: access to capital. The researchers chose Thailand as a case study because of the range of energy efficiency finance programmes that have been designed and implemented since the early 1990s. Interviews with 21 experts from government, the private sector and academia provided the core data for this research. The analysis employed a multi-level perspective and focused on the historical evolution of public support of energy efficiency finance in the country. We identified three distinct phases of public policy development over the past two decades. Despite an impressive variety of ambitious and creative programmes, the initiatives have not yet succeeded in integrating energy efficiency into the financial sector in a meaningful way. Some of the key lessons found are that (a) it is better to treat energy efficiency and renewable energy in separate financing initiatives, (b) governments find it challenging to design effective mechanisms to de-risk financial investments, and (c) international organisations play an important role in testing and facilitating the introduction of new financing approaches and mechanisms. In emerging economies, cost-effective implementation of energy efficiency measures is a promising alternative that can reduce the need for investment in large-scale power generation capacity. The researchers hope that this paper will contribute to more effective design of programmes to incentivise energy efficiency financing in Thailand and in other economies in Southeast Asia.     

Exergetic analysis of hydrogen utilisation pathways – Part 1: Energy supply in buildings

This article analyses exergy losses along hydrogen utilisation pathways recently discussed in Germany and other countries. As a renewable fuel hydrogen will be an important part of sustainable future economies. Hydrogen can be used in all sectors, especially in buildings, for mobility and in industry, e.g. in steel production or ammonia synthesis. However, hydrogen has to be produced in a sustainable way. The most promising production is via water electrolysis using renewable electricity. In the first part of this work, exergy analysis is made for the complete hydrogen pathways from production until final utilisation for energy supply in buildings. The second part will focus on pathways for mobility. In the third part, the results are compared with available alternatives to hydrogen such as direct use of electricity in building supply or mobility. The results for building energy supply show that firstly transportation in pipelines (mixture with natural gas and pure hydrogen) is very efficient. Secondly, major exergy losses are caused by the electrolyser. Thirdly, combustion of renewable hydrogen for room heating in common boilers cause the highest exergy losses, but the use of combined heat and power (CHP) units or fuel cells can improve the exergy efficiency substantially.