Return on Investment from Industrial Energy Efficiency: Evidence from Developing Countries

Abstract

Energy efficiency is a foundation of any good energy policy. The economic, security, and environmental benefits of energy efficiency have been recognized for decades. We explore energy efficiency policy insights derived from survey work in developing countries in 119 projects across nine manufacturing sub-sectors. The methodology utilises financial return calculations to highlight gaps and opportunities for meeting the potential of energy efficiency projects in the manufacturing sector. We find a generally very high level of internal rates of return at a project level -with payback periods ranging from 0.9 to 2.9 years; but note that these metrics do not always appropriately influence corporate decision-making for a number of well-understood reasons. United Nations Industrial Development Organization, Vienna, Austria Abstract: Energy efficiency is a foundation of any good energy policy. The economic, security, and environmental benefits of energy efficiency have been recognized for decades. We explore energy efficiency policy insights derived from survey work in developing countries in 119 projects across nine manufacturing sub-sectors. The methodology utilises financial return calculations to highlight gaps and opportunities for meeting the potential of energy efficiency projects in the manufacturing sector. We find a generally very high level of internal rates of return at a project level -with payback periods ranging from 0.9 to 2.9 years; but note that these metrics do not always appropriately influence corporate decision-making for a number of well-understood reasons. Keywords

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“…The results show that most of the surveyed companies apply a pay-off criterion of three years or less for energy efficiency investments. Alcorta et al (2014) explored energy efficiency investments derived from survey work in developing countries in 119 projects across nine manufacturing subsectors. They found a generally very high level of internal rates of return at project level with payback periods ranging from 0.9 to 2.9 years but note that these metrics do not always appropriately influence corporate decision-making for a number of different reasons.…”