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Overcoming energy efficiency barriers through systems approach

A conceptual approach

Kah-Hin Chai a*, Catrina Yeo b,,

a Department of Industrial and Systems Engineering, National University of Singapore, Singapore

b Energy Studies Institute, National University of Singapore, Singapore

Abstract

In this paper we propose a framework which categorizes energy efficiency barriers based on the

stage at which the barriers exist. Barriers to energy efficiency have been widely studied but to

our knowledge, except for a few studies, we found inadequate consideration for barrier-barrier

interactions when proposing policy measures for improving energy efficiency. Leveraging

systems thinkings power as a problem solver which identifies underlying structure that explains

(similar) patterns of behavior in a variety of different situations, we attempted to identify patterns

of barriers to adoption of energy efficiency measures in industrial companies. Inspired by

systems thinking, the proposed framework has four stages, namely, Motivation, Capability,

Implementation and Results, as well as a feedback loop. Using a case study, we show that

following the four stages will lead to positive feedback for future energy efficiency

implementations. The framework highlights the interconnected nature of the barriers and a need

for policymakers to address these barriers in a holistic manner. We argue that the overall

effectiveness of energy efficiency policies is only as strong as the weakest link in the four-stage

framework. This differs from most prior research that addressed barriers in isolation, where a

solution is proposed for each of the barriers without considering the relationship between the

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barriers. Our framework also offers a way to understand the roles and responsibilities of major

stakeholders such as governments and energy service companies (ESCOs) in driving energy

efficiency. This allows the assessment and identification of weak links in energy efficiency

policies.

Keywords: energy efficiency; systems thinking; barriers; industrial energy

* Corresponding author. Tel.: +65-6516-2250; fax: +65-6777-1434

E-mail address: iseckh@nus.edu.sg (Kah-Hin Chai)

1. Introduction

Industrial energy use accounts for approximately one third of worlds energy demand. In

particular, the 1970s oil crises saw how the efficient use of energy become a priority

policymakers in many industrialized countries .Rising concerns about climate change has

heightened the importance of energy efficiency. Energy-related emission accounts for 9.9Gtong

of CO2 in 2004, which is an increase of 65% from 1971 levels (Worrell E., Bernstein L., et al,

2009). With the current best available technologies (BAT) and given the huge amount of energy

wasted (Energetics Study 2004, PNNL Study 2004), energy efficiency is almost regarded as the

most cost effective tool to battle carbon dioxide (CO2) emissions and hence climate change. At

the firm level, energy efficiency also reduces cost of production and increase firms

competitiveness (Worrell E., Bernstein L., et al, 2009). However, despite many years of trying,

numerous researchers lament that the potential of energy efficiency remains untapped.

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Much of the academic and policy research for industrial energy policy had focused on

improving energy efficiency by addressing the infamous energy efficiency gap. This typically

involves conducting studies to identify the barriers which inhibit the adoption of cleaner

equipment and manufacturing practices, as well as learning from the experience of other

countries such as Japan and those in Europe (HendelBlackford, Angelini and Ozawa 2007).

Given the multi-disciplinary nature of energy efficiency, it is not surprising that researchers with

different backgrounds, ranging from ecology to economics, have engaged in this research. Due to

this, advice on how to promote energy efficiency differs depending on the perspective adopted.

Mainstream economists have argued that the main barriers to energy efficiency are market

failures such as the principle-agent problem and imperfect information. On the other hand, non-

economic researchers, such as engineers and policymakers, have conducted surveys to identify

and rank the possible barriers. Based on the barriers identified, solutions are proposed on how

the barriers should be overcome.

Despite the myriad of studies, there remains no consensus on which barriers are the most

important. The attempt to classify barriers into different categories, while interesting, reveals

nothing substantially new on the nature of these barriers. With few exceptions, one commonality

to these studies is that the barriers (or groups of barriers) were usually treated in isolation where

standalone solutions were recommended to tackle the (groups of) barriers without considering

the possible relationships between the barriers. As will be explained later, according to the

systems perspective, such a piecemeal approach neglects the interconnected nature of the barriers

and is not likely to lead to a sustainable improvement in energy efficiency. Therefore, the

purpose of this paper is to address the energy efficiency problem following the systems

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perspective which takes into account the possible interactions between the various elements such

as barriers, stakeholders and policies.

The main objective of this paper is to introduce and illustrate through a conceptual

framework the advantages of addressing energy efficiency adoption from a systems

perspective. The development of such a concept requires that we review and dwell into the

existing literature in order to develop a theoretical framework that addresses some shortcomings

of typical assumptions and conventional views on barriers to energy efficiency. One major

commonality among the reviewed literature is the lack of consideration for the relationships and

interaction of barriers. Building on this and coupled with hints observed in the case interviews,

we are able to propose a novel perspective to energy efficiency barriers.

The remainder of this paper is organized in the following manner. The next section

presents an extensive literature review on energy efficiency. This is followed by a brief

description of systems thinking and its merits. After that, we present the research approach

adopted in this study. The section after that is on data collection, analysis and results. The paper

concludes with the studys contributions and implications for practice and research.

2. A Literature review on Energy Efficiency Barriers and Policies

2.1 Barriers to energy efficiency

It is widely discussed and recognized that the presence of certain barriers is the reason for

the energy efficiency gap, a term coined by Jaffe and Stavins to explain the paradox of

gradual diffusion of apparently cost-effective energy efficient technologies (Jaffe and Stavins

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1994). Weber (1997) proposed a methodological background to introduce the concept of barrier

models (for energy efficiency) in which three specific features were addressed. The three

features were, namely, the objective obstacle, the subject hindered and the action hindered. Some

years later, Sorrell defined barriers to energy efficiency as postulated mechanisms that inhibit

investment in technologies that are both energy efficiency and economically efficient (Sorrell

2000, page 27). In the following paragraphs of this section, we discuss how barriers have been

studied in the past and how the analysis of barriers has been done from a more interdisciplinary

perspective in recent years.

A review of studies on barriers to energy efficiency shows that countryspecific (e.g.

Nagesha and Balachandra 2006; Rohdin and Thollander 2006; Thollander and Ottosson 2008;

Wang, Wang et al. 2008), region-specific (e.g. UNEP 2006) and theoretical economic studies

(e.g. Howarth and Andersson 1993; Brown 2001) have been conducted. Countryspecific studies

are usually conducted for major sub-sectors (e.g. Rohdin, Thollander et al. 2007; Thollander and

Ottosson 2008) or for industry clusters such as small industry clusters (e.g. Nagesha and

Balachandra 2006) and small-medium enterprises (e.g. nt and Soner 2007; Thollander,

Danestig et al. 2007). We can see different approaches to barrier analysis among the

aforementioned studies. In the early years, barriers to energy efficiency were often explained

using theories from mainstream economics. The energy efficiency gap was largely attributed to

market failures, which occur due to flaws in the way markets operate. Mainstream economists

argued that an imperfect market is a major reason for slow adoption of energy efficiency

technologies and suboptimal energy efficiency investments. Commonly reported market failures

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include information problems, unpriced energy costs and the spillover nature of research and

development (R&D) (Brown 2001; Gillingham, Newell and Palmer 2009).

Information problems include a number of specific problems such as lack of information,

asymmetric information and the well-documented principle-agent problem. Asymmetric

information problems occur when one party involved in a transaction has more information than

the other (Gillingham, Newell and Palmer 2009), which may lead to suboptimal energy

efficiency decisions. The fact that energy efficiency cannot be observed (i.e. it is invisible)

further intensifies this asymmetric information barrier. Equipment sellers can advocate the

energy efficiency of a machine, but buyers often do not regard this as an important aspect.

According to Anderson and Newell (2004), this is a prevalent problem in the industrial sector

and they reported that managers are more concerned about initial costs rather than annual savings

when deciding to invest in an energy efficiency program.

Economists also believe that a correctly priced energy cost would spur energy efficiency

almost automatically. Mechanisms that try to incorporate negative externalities into energy

prices include practices such as domestic carbon trading (in selected EU countries) and the

embodiment of some emission costs as required by the Clean Air Act enforced by the US

Environment Protection Agency. However, schemes such as domestic carbon trading are not

problem free; they increase the business operating costs of the country concerned compared to

countries without such schemes. In addition, proper and efficient trading can only take place

when the data involved is accurate and verifiable (Egenhofer, 2007).

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Another frequently identified market failure is R&D spillover. R&D spillover occurs

when organizations which develop or adopt energy efficiency technologies absorb the market

and technological risks associated with it, but the payback and benefits, while benefiting the

organization involved, also flow to the public, competitors and other parts of the economy

indirectly. This spillover makes energy efficiency R&D investments unattractive (Brown 2001).

However, market failures can only account for part of the energy efficiency gap.

Increasingly, analysts as well as policymakers are seeing industrial energy efficiency as a multi-

faceted topic entailing technical, economic and organizational challenges. In recent years,

researchers have adopted a more inclusive and open approach by conducting interviews and

surveys (questionnaires) and performing case studies to identify barriers present in the industrial

sector. Typically, barriers are identified, classified and discussed according to their nature

(Rohdin and Thollander 2006). In addition to economic, organizational and behavioral

classifications (Sorrell 2000), we saw UNEP (2006) classifying barriers into areas of

management, information and knowledge, financing and government policy. Based on these

classifications, suggestions may be offered on possible remedies to overcome these barriers.

Examples include energy labeling programs to overcome information problems and incentives or

grants to alleviate financial barriers. Some researchers have also attempted to identify the most

significant barrier in their respective areas of study by ranking the barriers (Rohdin, Thollander

et al. 2007). The nature of such surveys is that the results are contingent, i.e. the degree of

importance of the barriers is applicable only at the place and time at which the survey was

conducted, and therefore the findings may not be applicable to other countries and/or industrial

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sectors. Nonetheless, the list of identified barriers remains fairly similar despite the different

rankings and classifications by different analysts.

In recent years, researchers in other disciplines have also taken an interest in energy

efficiency. In particular, we see an increasing number of other social science perspectives on

barriers to industrial energy that largely discusses social barriers to technology adoption and

innovation diffusion. For instance, Owens and Driffill (2008) and Stephenson, Baron et al.

(2010) argued that behavioral and attitude changes to energy consumption contribute to energy

efficiency. Similar and newer perspectives on identifying and creating socio-technical transition

pathways to sustainable energy systems have also been introduced (Adamides and Mouzakitis

2009; Smith, Vo et al. 2010). These perspectives largely discuss social barriers to technology

adoption and innovation diffusion. A recent study by Palm and Thollander (2010) highlighted the

interdisciplinary nature of energy efficiency and investigated the effects of social networks and

regimes on energy efficient technology diffusions. They emphasized the need for analysts to

steer away from traditional approaches to barrier analysis.

Collectively, previous studies have identified a somewhat comprehensive list of barriers

to adoption of energy efficiency in the industrial sector. However, there is no consensus on

which barriers are the most important. While analysts such as Nagesha and Balachandra (2006)

and Rohdin, Thollander et al. (2007) concluded that financial barriers are the most significant

barriers, others have identified production risk and information barriers as the most significant

barriers (Kounetas, Skuras et al. 2009; Rohdin and Thollander 2006). Perhaps more importantly,

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it is unclear whether overcoming the most significant barriers will automatically lead to better

energy efficiency adoption, especially if the barriers are interconnected.

It must be highlighted that, of the references cited in this study, only three studies implied

that the barriers are interconnected. The first study, Wang (2008), explored the interactions of

barriers using Interpretive Structural Modelling (ISM) to map and rank the energy efficiency

barriers in China. The second study, Nagesha and Balachandra (2006), employed Analytical

Hierarchy Process (AHP) to identify the structure of energy efficiency barriers in several small

sector industry (SSI) clusters in India. The results suggest that barriers may have a multi-

structural level model or a form of hierarchy. The third study, Hasanbeigi, Menke et al. (2009),

showed the connections between barriers in Thailand, upon which a framework for the process

of decision-making for investment in energy efficiency was proposed. Together, these three

studies allude to the fact that there is some sort of connection between the various barriers which

needs to be recognized when overcoming energy efficiency barriers.

To aid subsequent data collection and discussion, we attempted to identify and sieve out

key barriers from literature, since many barriers reported in different references are essentially

similar but labeled differently by different authors (for example, limited access to capital is

similar to lack of funding from management which was theoretically categorized under

economic non-market failure). Table 1 shows how key barriers to energy efficiency were

derived from the relevant literatures.

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Table 1: Identifying key barriers to energy efficiency from reviewed literature

Category Typical Barriers References Key Barriers identified Economic non-market failure or market barriers (Sorrell 2000, Brown 2001)

Low priority of energy issues Brown, 2001 Fear of technical risk/ cost of production loss

Perceived high cost of energy investment

Other capital investments are more important

Uncertainty about future energy price

Lack of experience in technology

Lack of information in energy efficiency and savings technology

Lack of trained manpower/staff

Lack of energy metering Lack of access to

capital/budget Lack of government

incentives Weak policies and

legislations Resistance to change Legacy system

Cost of production disruption Rohdin, Thollander 2006, Thollander, Ottosan 2008, Thollander, Dotzauer 2010

Other priorities for capital investments Rohdin, THollander 2006, Thollander, Dotzauer 2010, Sardinou 2008

Lack of time/ other priorities Rohdin, THollander 2006, Nagasha , Balachandra, 2006, Thollander, Dotzauer 2010

Reluctant to invest because of high risk Wang, Wang et al, 2008 Technical risk such as risk of production disruptions

Thollander, Ottosan 2008

Competition from other projects Ren, 2010 Lack of management support UNEP, 2006 Limited access to capital Rohdin, THollander 2006, UNEP 2006, Thollander, Dotzauer

2010, Sardinou 2008 Capital market barriers Brown 2001 Lack of investment capability Balachandra, Nagasha, 2006 Lack of funding/ financing capabilities Wang, Wang et al, 2008 Uncertainty about future energy price Thollander, Dotzauer 2010, Sardinou 2008 Increased perceived cost of energy conservation measures

Sardinou 2008

Cost of identifying opportunities, analyzing cost effectiveness and tendering

Thollander, Ottosan 2008, Thollander, Dotzauer 2010, Rohdin, Thollander 2006

Economic Market Failure (Sorrell 2000, Brown 2001)

Split incentives Brown, 2001 Un-priced cost and benefits Brown, 2001 Insufficient and inaccurate information Brown, 2001, Wang and Wang et al 2008, REn 2010, UNEP

2006, Nagasha an Balachandra 2006, Thollander, Ottosan 2008 Lack of experience in technology and management

Wang and Wang et al 2008, Ren 2010

Difficulties in obtaining information about the energy consumption of purchased equipment

Thollander, Dotzauer 2010,

Lack of technical skills Thollander, Dotzauer 2010, Sardinou 2008 Lack of trained manpower Wang and Wang et al 2008, Thollander, Dotzauer 2010,

Thollander, Ottosan 2008, Rohdin, Thollander 2006, Sardinou

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2008 Lack of information on profitability of energy saving measures

Sardinou 2008, Wang and Wang et al 2008

Lack of information with respect to energy conservation opportunities

Sardinou 2008

Behavioral (Sorrell 2000)

Resistance to change Nagasha, Balachandra 2008

Institutional (Weber 1997)

Weak legislations and/or enforcement UNEP 2006, Nagasha and Balachanndra 2006 Lack of government incentives UNEP 2006,

Organizational (Sorrell 2000, Weber 1997)

Lack of sense of corporate social responsibility or environmental values

Rohdin, Thollander 2006,

Lack of environmental policies within company

UNEP 2006

Energy manager lacks influence Sardinou 2008 Lack of sub-metering Thollander, Dotzauer 2010, THollander, Ottosan 2008

Physical Constraints

Inappropriate technology at site Thollander, Dotzauer 2010, Wang and Wang et al 2008 Inappropriate industrial framework Wang and Wang et al 2008

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2.2 Policies for promoting industrial energy efficiency

Having reviewed the literature on barriers, we will now examine policies which aim to

promote energy efficiency. For many governments, energy efficiency is often a first measure in

reducing energy intensity. Perhaps not surprisingly, the countries which first drove energy

efficiency like Japan and the United Kingdom (UK) have little or no indigenous energy

resources and import most of their energy (Hendel-Blakford, Angelini and Ozawa, 2007). Their

vulnerability to energy supply and prices led to the need for higher energy efficiency. In an era

of climate change mitigation and adaptation, energy efficiency is further viewed as a practical

means to reduce CO2 emissions.

As prices of renewable energy are still uncompetitive, the industrial sector is expected to

rely heavily on conventional fuels for operations. Therefore, energy efficiency remains a highly

valued government strategy for the industrial sector. Not only does it drive down operating

costs, energy efficiency also provides a practical means to meet CO2 emission reduction targets.

A myriad of government tools and policies to improve industrial energy efficiency can be found

in the literature. Broadly, energy efficiency policies and programs take the form of regulation

and legislation, economics and voluntary measures (UNEP 2006).

Depending on the countrys culture and legal tradition, the extent of regulation and

legislation measures varies. Of notable success is Japans Energy Conservation Act of 1979

under which an energy efficiency program took place (Hendel-Blackford, Angelini and Ozawa,

2007). Japan has a history of strong legal tradition therefore when the Energy Conservation Act

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was passed, implementation was relatively smooth and results were effective: Japan saw a 37%

reduction in its energy intensity during the 1979-2003 period (Hendel-Blackford, Angelini and

Ozawa, 2007). Some European Union (EU) countries like the United Kingdom (UK) also

experienced some success with industrial energy regulatory policies. Industrial regulations and

legislation programs include minimum efficiency standards for common equipment such as air

compressors and combined heat and power (CHP) plants, mandatory appointment of an energy

manager, mandatory energy audits and factory energy conservation plans (Geller, Harrington,

Rosenfield et al. 2006).

On the other hand, more countries (including Netherlands and Germany) took to

voluntary agreements (VA) and fiscal measures to stimulate industrial energy efficiency

improvements. Voluntary measures have been more popular with governments because,

compared with regulations, voluntary measures have fewer negative impacts on industrial

competitiveness (Hendel-Blackford, Angelini and Ozawa, 2007). The main objective of a

voluntary agreement is to gather participation from industrial organizations to reduce energy

consumption and CO2 emissions. The details and rigors of voluntary agreements differ in

different countries but, generally, VA are complemented by fiscal measures such as tax

incentives, such as subsidies or exemptions, and investment grants (Geller, Harrington,

Rosenfield et al. 2006). The success of a VA usually depends on the incentives offered, the

potential for energy efficiency improvement in the company as well as the social-culture nature

of the sector. For example, it was found that VA was less effective with small enterprises

compared to big enterprises (Rietbergen, Farla and Blok 2002). Although fiscal measures alone

already provide some form of motivation for organizations to adopt energy efficiency

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technology, voluntary agreements create an increased awareness about the available

government financial incentives.

Alongside the abovementioned programs, educational and informative programs are also

commonly implemented. One well-known example is the energy labeling program which serves

to inform consumers about the energy consumption of equipment. We are seeing an increase in

the number of countries that make energy labels mandatory. US Energy Star labeling, for

example, has achieved great success over the past few decades. Energy audits, energy

management systems and energy manager training and certification are also awareness

programs that are usually part of VA. Japan and Singapore are two examples of countries which

employ energy auditing and energy management systems in the industrial sector to create

awareness about energy consumption.

A relatively new development in the arena of energy efficiency measures is energy

efficiency financing where organizations (borrowers) can obtain financial support from energy

service companies (ESCOs) themselves or from a third party financer such as large commercial

banks and international financial institutions like the World Bank. The financial support occurs

in a manner that allows the borrower to repay the lender from the energy savings.

Clearly, various policies have been deployed in order to promote energy efficiency over

the years in many countries. However, there is no established advice or theory on when and

what policies should be applied. The disparity between promise and actual progress suggests

that there is an urgent need to develop a framework which links these policies together. This

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lack of an overarching framework may stem from the fact that many energy efficiency studies,

as discussed in the first part of this paper, neglect the possible relationships between the

barriers. Developing a holistic framework which takes into account the relationships between

the barriers is thus necessary in order to achieve greater energy efficiency in industries.

3. The systems approach to Problem Solving

The systems approach or systems thinking is a perspective which views an event or a

system in a holistic manner by placing explicit emphasis on the relationships and interactions

between the systems elements and constituents (Senge, 1990).In the early years, concepts and

applications of systems thinking were recognized as general systems theory (Bertalanffy 1950).

The core concepts included parts/wholes/sub-systems, system/boundary/environment,

structure/process, emergent properties, hierarchy of systems, feedback effects, information and

control, open systems and holism (Mingers and White 2010). These fundamental concepts have

not changed much throughout the years and the emphasis on relationships and interactions

could not have been more valued. Much of systems thinkings power lies in its ability as a

problem solver to identify underlying the systems structure that explains (similar) patterns of

behaviour in a variety of different situations. Systems thinking also requires that we shift our

mind from event orientation (linear causality) to focusing on internal system structure (circular

causality), as the underlying system structure is often the root cause of the problems. This

probably explains why the systems approach is considered useful for dealing with complex,

large scale and interdisciplinary problems (Boulding, 1956).

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Hawkesburys hierarchy (Bawden et al, 1985) presented types of research approach to

problems, from basic research to applied research and to systems research. Basically there are

two types of systems approach, the hard and soft systems approaches. Stephen and Hess (1999)

illustrated the application of hard and soft systems using the concept of level and output,

where level can be loosely understood as the unit of analysis ranging from individual CEOs,

companies or industrial subsectors. The level of system being studied has a direct implication

on the choice of approach adopted for analysis. Naturally, the higher the level, the interplay of a

larger number of factors, the higher the degree of subjectivity and the lower the degree of

reductionism (breaking it into components) (Bawden, 1985). To further illustrate, Checkland

(1981) refers to a spectrum of systems approaches from those relatively hard systems

characterized by easy-to-define objectives, clearly defined decision taking procedures and

quantitative measures of performance to soft systems in which objectives are hard to define,

decision taking is uncertain, measures of performance are at best qualitative and human

behavior is irrational.

Therefore, hard systems approaches are appropriate for lower level (i.e. more well-

defined system) of analysis which often leads to quantitative modeling, where a simulation of

the functioning of the system mathematically allows researchers to investigate the response of

the system to alternative stimuli (Stephen, Hess, 1999). Soft systems on the other hand are

appropriate for problems less clearly defined and takes into account the different perspectives of

all relevant valid stakeholders (Stephen, Hess 1999). In our case, a soft system approach would

help to better define the problem. Some examples of application of systems approaches to

research are provided in Table 2. In addition, systems thinking is also applied quite extensively

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to policy and economic analysis due to its ability to model feedbacks (e.g. Chi, Nuttall and

Reiner 2009; Qudrat-Ullah and Baek 2010; Gielen, Feber and Gerlah 2000).

Table 2: Application of systems approach to problem analysis

Application Area Type of systems approach References Water management Hard systems approach Stephens and Hess (1998),

Mathews et al (1997), Perry (1996)

Soft systems approach Uphoff (1996) Energy management Soft systems approach Freeman, Tryfonas (2011),

Ngai,E.W.T.,et al (2011) Waste management Hard systems approach

(systems engineering) Pires, Martinho, Chang (2010)

Shipbuilding industry Systems thinking Anh et al (2009) Product/ project management Systems thinking Lin and Ng (2010) Socio-technical transitions Systems thinking Bennett and Pearson (2009)

Driscoll (2008) pointed out that we are unable to view system level behaviors and

interactions (or the systems structure) when we decompose a system into its elements. Bearing

that in mind, we recognized and considered a multifaceted energy efficiency adoption system in

a company that takes into consideration the interplay of barriers to energy efficiency internal

and external to the company, as well as the influence of the actions of different stakeholders in

the process of energy efficiency adoption. We argue that there is a lack of consideration for

interactions among barriers, which is why barriers persisted despite the efforts of trying to

remove them. Fundamental to the holistic approach is the concept of the whole being greater

than the sum of its parts due to interactions (Rountree, 1977). Barriers to energy efficiency

cannot be properly studied by looking at them in isolation, which is what we observed in many

prior studies. Often, recommendations were proposed for one barrier or a group of barriers with

similar nature, disregarding the possible interactions between barriers which may well render

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the recommendation ineffective. This we shall argue display a lack of systems thinking, which

will enable us to identify possible relationships among the (groups of) barriers. Understanding

the relationships is important in making effective recommendations.

In the context of this study on energy efficiency, our interest is the removal or reduction

of barriers to energy efficiency and we recognize and accept the validity and relevance of all

actors or stakeholders (i.e. industrial organizations, manufacturers, government agencies,

customers, and energy service companies), related polices, energy efficient technologies and

practices. As will be shown later, by adopting a systems thinking perspective, we avoid falling

into the trap of assuming that barriers to energy efficiency are solely caused by external events

such as market failures (a form of linear causality), and thinking that barriers are independent of

each other. We attempted to identify possible interactions, relationships, feedbacks and delays

in the system to develop a framework for improving industrial energy efficiency.

4. Research approach

Given the relative lack of established theories from a systems perspective on barriers to

energy efficiency, a theory-building approach (Strauss and Corbin 1990, Eisenhardt, 1989was

adopted in this study). In contrast to the theory-testing approach which aims to test hypotheses

by using quantitative methods, theory-building or theory generation involves the formation of

abstract concepts and generation by observing and reflecting real life experiences through an

inductive and qualitative process. This approach is commonly adopted when there is a lack of

established theories in the area of research (Eisenhardt, 1989, Gill and Johnson 1991). In such

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cases, framework and conceptual constructs, rather than robust and rigorous models, are more

useful for understanding the issue (Adler 1989).

Figure 1 shows the research design and implementation adopted in this study. It begins

with an extensive literature review of both academic and practitioners publications which was

continued throughout the research. It is important to have an up-to-date understanding of

approaches to barriers analysis and organizations perceptions of energy efficiency.

Preliminary findings were used to guide data collection and analysis. The second stage of this

approach is data collection through semi-structured interviews with practitioners as well as by

examining the relevant documents. The interview questions included: What are the challenges

or barriers faced in implementing energy efficiency? How are they overcome? Are the current

government measures adequate? Why? Etc. A more detailed case study was conducted with

Glaxo Wellcome Manufacturing Pte Ltd Singapore, one of the companies interviewed, because

of its success in energy efficiency efforts over a long period of time. We analyzed the multiple

sources of data collected (i.e. interview transcripts and those listed in Table 3) and applied

principles of systems approach in the third phase to develop a conceptual framework. It is

worth mentioning that, while Figure 1 depicts a linear research process, in reality the stages

overlapped and were iterative; we refined the framework according to each new and relevant

finding during the process of our research.

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Figure 1: Research Approach

A key strength of the qualitative method is the variety of data and the ways it can be

collected. This allows triangulation the confirmation of findings through the convergence of

multiple data to take place. There is more than one method of triangulation. Triangulation can

happen by data source (persons, times, places, etc.), by method (observations, interviews, etc.),

and by the use of different researchers on the same subject, by theory and by data type (texts,

numbers, etc.) (Miles and Huberman 1994). In this research, triangulation by data source,

method and data type were adopted.

Triangulation by researcher and theory were not possible due to time and resource

constraints. In reality, as Miles and Huberman (1994) pointed out, triangulation is more a way

of research life than a tactic. When a researcher consciously double-checks findings by using

multiple sources and modes of evidence, the verification processes is built into the data

collection. Throughout this research, whenever possible, attempts were made to obtain data

from different sources (e.g. asking similar questions to different managers in the same

company), from different methods (e.g. formal interviews, observations, informal

conversations, project reports) and from different data types (e.g. numbers, descriptions in

interviews). In total, interviews were conducted with eleven industrial organizations and five

energy service companies (ESCOs) which have extensive experience with energy efficiency.

Literature ReviewJournal and conference articles

Trade and industry reports

Data Collection and Analysis

Interviews with companies

Case study on GWM Singapore

Framework Development

Systems thinking application

Policy implications

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Majority of the industrial organizations studied are from the petrochemical industry, where

energy cost is a substantial component of their operating cost.

Table 3 lists the primary and secondary data collected and triangulation used throughout

the case studies. For confidentiality purposes, the actual names of the organizations have been

replaced by letters. In this study, based on the research objectives, the unit of analysis is

industrial organizations that have attempted energy efficiency improvements. Unit of analysis

refers to the core subject around which the research is focused and draws the boundary for data

collection. The choice of unit of analysis is determined by the research questions (Yin 1989). A

well-defined unit of analysis helps to impose boundaries on data collection (Miles and

Huberman 1994). Several ESCOs were included as they offer interesting insights from a

solution providers perspective.

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Table 3: Details of data collected from industrial organisations. All interviews were conducted in 2010

Company Industry / Notes Interviews (Primary Source) Secondary Sources Status on Energy Efficiency A Petrochemical

Multinational Annual revenue over USD250 billion One of the largest players in the world

Technology/Development Manager

General Manager (External Affairs & Communications)

Corporate website Project documents Annual report Hydrocarbon Asia

Energy efficiency is taken as a continuous improvement. Generally, energy efficiency practices have been quite successful

B Petrochemical Multinational Annual revenue over USD250 billion One of the largest players in the world

Manager (Public & Government Affairs)

Advisor (Public & Governmentt and Media Relations & Communications)

Corporate website Project documents Annual report Energy dialogue

Energy efficiency is taken as a continuous improvement. Generally, energy efficiency practices have been quite successful

C Petrochemical Joint-venture between a local and

foreign multinational company

Manager (Business Development) & Planning-cum-Energy Manager

Manager (Process & Operation Technology)

Corporate website Energy efficiency is taken as a continuous improvement. Generally, energy efficiency practices have been quite successful but noted that low hanging fruits have been exhausted

D Pharmaceutical Multinational

Director (Engineering Solutions) Corporate website CSR report Company posters

Energy efficiency is taken as a continuous improvement. Generally, energy efficiency practices have been quite successful

E Pharmaceutical and healthcare Multinational Annual revenue over USD50 billion

Engineering Service Director / Team Leader Mechanical Engineering Manager

Corporate website Project documents Annual report

Energy efficiency is taken as a continuous improvement. Generally, energy efficiency practices have been quite successful

F Petrochemical A small subsidiary of a multinational

company

Plant Manager Engineering Manager

Corporate website Limited energy efficiency measures due to small scale operation. Take cues from parent company.

G Petrochemical Multinational

Plant Manager Corporate website Energy efficiency is taken as a continuous improvement. Generally, energy efficiency practices have been quite successful

23

H ESCOs Multinational A global leader in heating, ventilating

and air-conditioning (HVAC) system Annual revenue over US10 billion

Technical Director Corporate website Project documents

Energy efficiency is taken as a continuous improvement. Generally, energy efficiency practices have been quite successful

I ESCOs Multinational

Director (Urban Solutions) Director (Future Clean Technology)

Corporate website Brochures Project documents

Not applicable

J ESCOs Multinational

Director (Energy Efficiency) Corporate website Not applicable K ESCOs

Local, Small medium enterprise Managing Director Corporate website Not applicable

L ESCOs Multinational, HQ in US

Regional Marketing Director (Building Solutions) Program Manager (Building Solutions)

Corporate website Brochures

Not applicable

M Food Manufacturing National Local, small medium enterprise

Executive Director and CEO Group Project Manager (Group Technical Department) Head (Electrical Department)

Corporate website Limited energy efficiency measures due to lack of knowledge. Consider themselves beginners

N Engineering Services Local, small medium enterprise

Managing Director Corporate website Limited energy efficiency measures due to various barriers like lack of technical expertise, physical constraints

O Petrochemical A small subsidiary of a multinational

Research &Technology Manager Corporate website Company profile report

Energy efficiency is a continuous improvement process. Generally, energy efficiency measures have been successful

P Engineering Services A small subsidiary of a multinational

Corporate Facilities Manager Corporate website Energy efficiency is a continuous improvement process. Generally measures have been relatively successful but measures taken were not extensive.

24

5. Results

A summary of the barriers identified from the interviews is presented in Table 4 where

A1 to A5 denote the five barriers in no order of significance reported by company A, B1

and B2 were barriers by company B, etc. It can be seen that, by and large, the barriers identified

from the interviews are similar to those reported in the literature, though the significance of

different barriers differed in different organizations. For example, we recorded from the

interviews with the local small-medium enterprises that smaller organizations like them tend to

face more technical and financial barriers than larger organizations.

Table 4: Key barriers faced by industrial organisations interviewed

Key Barriers Industrial Organisations A B C D E F G H I J K L M N O P

1. Fear of technical risks/ cost of production loss

2. Perceived high cost of energy investments 3. Other capital investments are more

important

4. Uncertainty of future energy prices 5. Lack of experience in technology 6. Lack of information in EE and energy

saving technology

7. Lack of staff awareness / trained manpower

8. Lack of energy metering 9. ESCOs lacking in specialised knowledge

(empirically recorded)

10. Limited access to capital / budget 11. Lack of government incentives 12. Weak policies & legislations 13. Too many government stakeholders

(empirically recorded)

14. Resistance to change 15. Legacy System (Efficiency levels may

currently be structurally based, or merely be an artefact of initial installation and construction specifications)

16. Space Constraint (empirically recorded)

25

In addition to the list of barriers, a few interesting observations were made and worth

reporting:

There is a varying degree of commitment or motivation (and maturity) to energy efficiency

among the organizations. Drivers or motivations for energy efficiency are stronger for

companies where energy cost is a substantial part of its operating cost (e.g. petrochemical

companies), and those with a stronger sense of corporate social responsibility. In general,

the motivation factors can be categorized as either economic (e.g. to reduce operating costs)

or environmental (e.g. to be a good corporate citizen);

Larger organizations have more resources (time, staff, and financial resources) and technical

ability for energy efficiency investments. Larger organizations enjoy wider international

networks and, as reported by some foreign multi-national companies (MNCs), they were

able to perform internal benchmarking with their factories in other locations. The same

reason that larger organizations are faster and more successful in adopting new technologies

may be used to explain this observation (Rogers 1995). Nevertheless, some smaller

organizations are still able to overcome this disadvantage by seeking ESCOs consultancy

services, such as installation of energy monitoring and control systems;

Many energy efficiency investments are not implemented due to fear of disrupting

production. Plant managers and ESCOs revealed that the cost of loss in production tends to

be greater than the savings projected from energy efficiency improvements. In addition,

energy is a factor of production in the industrial sector and, therefore, efficiency levels may

be structurally based or merely an artefact of initial installation and construction

26

specifications. Also, given that much production runs 24 hours a day, the window to modify

the production process for energy efficiency reasons is few and far between.;

There is a lack of data showing positive returns of energy efficiency adoption in industrial

organizations and this poses a big barrier to sustaining energy efficiency efforts. In most

industrial organizations, the existing energy monitoring and control systems were not

designed to capture energy efficiency improvements. Traditionally, the energy consumption

data has been used for deciding products costs and prices. With the increased pressure on

being more energy efficient, some organizations started using their existing systems to

monitor energy efficiency. While these systems can measure system level energy efficiency

improvements, it is difficult to capture component level efficiency improvements.

Component level improvements are easily offset by other changes occurring in the

production system such as changes in production mix, volume, operating conditions, etc.

Thus, although there is a general agreement that energy efficiency is important, it is still

difficult to convince top management about the benefits of energy efficiency as savings are

often not visible. In fact, the lack of appropriate energy efficiency metrics is a gap

between industrial needs and scientific literature that has been identified by Bunse, Vodicka

et al. (2010), though their main argument for the need for appropriate energy efficiency

metrics was for benchmarking purposes.

One objective of this analysis is to recognise possible relationships among barriers. We

observed that some barriers were more commonly reported in the presence of barriers. For

example, companies that reported high cost of energy investments as a barrier also reported

technical risks/cost of production, lack of information on energy efficiency and energy saving

27

technology, limited access to capital / budget, legacy system. Companies who found lack of

information on energy efficiency also faced barrier of lack of staff awareness or trained power.

Fear of technical risks was also commonly reported with lack of energy metering and lack of

information on energy efficiency. These observations indicated that barriers could form a

process through how a company adopt energy efficiency measures which will be elucidated in

Section 6. In the following paragraphs of a case study, we specifically discuss how a company

overcomes barriers to energy efficiency which also contributes to the conceptualisation of the

framework in Section 6.

To understand how companies overcome related barriers to energy efficiency and the

relationships between the barriers, we conducted an in-depth case study on Glaxo Wellcome

Manufacturing (GWM) Pte Ltd Singapore, which is one of the companies listed in Table 3.

GWM Singapore is a wholly owned subsidiary of GlaxoSmithKline (GSK), a leading global

pharmaceutical based in the UK. Pharmaceutical products are generally less energy intensive

compared to products from industrial sectors such as steel, cement and petrochemicals. That is,

energy cost is only a small part of their overall operating expenses. Hence, it was particularly

useful to draw lessons from GWM Singapore as they have pursued energy efficiency

improvements despite not having a strong financial motivation, and able to achieve remarkable

results.. In the following paragraphs, we discuss how GWM Singapore achieved energy

efficiency by first examining the primary drivers and then identifying the critical success factors

for their improvements in energy efficiency.

GWM Pte Ltd Singapore has been active and successful in pursuing energy efficiency

and conservation since 2002. It all started with a production transfer from their manufacturing

28

plant in the United Kingdom to the plant in Singapore. As a result of the increase in production,

the energy consumption was forecasted to increase by 40%. In order to maintain price

competitiveness of the products, the top management decided to pursue energy efficiency and

conservation with the goal that the increase in production would not lead to increased energy

costs, effectively lowering the cost of production. To meet this goal, the Director of

Engineering Services and his cross-functional teams began a series of projects focusing on

energy efficiency. These projects successfully avoided the forecasted 40% increase in energy

expenses even though the production volume increased substantially.

There are notable success factors for GWM Singapores energy efficiency drive.

Clearly, there was a strong motivation displayed by top management. The first notable major

success factor was top management support. The top management was motivated to pursue

energy efficiency and conservation to reduce the energy cost of production and therefore

rendered ample support to energy efficiency activities and projects. Top management support

has been commonly reported in the literature as one of the critical success factors for

overcoming common barriers to energy efficiency such as limited access to capital and lack of

dedicated staff (for energy efficiency). In this case, the management helped overcome barriers

like high perceived cost of energy investments in the company by allowing a longer payback

period for those energy investments, i.e. more access to capital. However, it must be noted that

GWM, being an established multinational companies possessed a stronger financial capabilities

to do so.

29

To facilitate implementation of energy efficiency, GWM Singapore was divided into

several zones, each led by a senior manager responsible for energy initiatives and performance.

Because of the clear division of responsibilities, there is no running away from really

pursuing energy efficiency. In addition, there is a real time monitoring system that monitors the

energy use in each zone. This system allows the team to verify the actual energy savings as a

result of the improvements made.

More recently in 2008, the management established an annual energy savings target of a

5% reduction in energy consumption year on year. Indeed, energy consumption is one of the

plants top five key performance indicators, prominently displayed at the central common area

of the plant alongside safety and quality indicators. This served to overcome resistance to

change and in fact fear of risk to production as energy is viewed as importantly as quality. As a

result of these factors, GWM Pte Ltd Singapore has enjoyed seven years of positive returns

from their energy efficiency efforts since 2002.

It is notable that when the management has motivation, many other barriers can be

overcome as the management would put in measures to overcome other barriers. These actions

by management alluded to the fact that there is a process for a companys decision on energy

efficiency investments.

6. Discussions

Applying the principles of systems approach to the results attained, we are able to (1)

identify points of interactions, (2) integrate perspectives of various stakeholders and (3)

30

conceptualise a framework addresses this multidisciplinary issue. Integrating the qualitative

results of data collection with the following thoughts led to the development of our generic

framework in Section 6.1:

1. Viewing the industrial sector as a heterogeneous system:

The industrial sector comprises of a large number of organizations with variation in their degree

of energy intensiveness and corporate social responsibility, number of employees and extent of

socio-technical networks

2. Interplay between technological, organizational and behavioral barriers to energy

efficiency:

Barriers to energy efficiency influence each other. For instance, if the engineering department

of an industrial organization is perceived to have low technical capability, it is likely that the

production operation will be reluctant to give a "window" to implement energy efficiency

improvements for fear of disrupting production quality. This shows that the barriers are inter-

related, i.e. a technological barrier can affect an organizational behavior barrier.

3. Interests and objectives of stakeholders (organizations and governments):

It is inevitable that tensions exist between the interests and objectives of an organization and of

a government. Organizations and governments both have short-term economic concerns and

long-term sustainability concerns to take care of. Such conflicting interests result in trade-offs.

Often the consideration for short-term gains takes precedence over long-term benefits.

31

4. Energy efficiency adoption as a change process:

During the discussions with the managers from the various organizations, it was apparent that

achieving energy efficiency involves changing existing practices and also involves adopting

new and more energy efficient technologies (in terms of equipment and processes). Therefore,

from an organizational perspective, energy efficiency improvements are innovations which

involve changes that have to be managed properly.

6.1 Motivation Capability Implementation Results (MCIR) framework

We propose a conceptual generic framework that is based on a stage-wise process with

feedback. This framework, as depicted in Figure 2, shows the adoption and implementation of

energy efficiency practices as a process which comprises of four important stages, namely,

Motivation, Capability, Implementation and Results, with a feedback effect. For each stage, we

pose questions that capture factors affecting energy efficiency adoption and reflect the interests

and objectives of stakeholders.

Figure 2: Motivation-Capability-Implementation-Results (MCIR) framework

CAPABILITY Do organisations have the capability to implement EE??

MOTIVATION Are organisations aware of EE opportunities? Why should they be interested in EE?

IMPLEMENTATION Will organisations be able to implement EE successfully??

RESULTS Was it worth the effort? Can organisations demonstrate the returns??

32

The framework begins with Motivation as the first stage. At this stage, the primary

concerns are the organizations interests in pursuing energy efficiency and their awareness of

energy efficiency opportunities.

Capability is identified as the second stage of energy efficiency adoption. At this

stage, organizations are now concerned with their capability to pursue and implement energy

efficiency competently, having been made aware of the opportunities in the earlier stage,

Motivation. Organizations will be interested in where and how they can access the capabilities

needed.

The third stage of energy efficiency adoption, Implementation, is the stage where

organizations actually implement energy efficiency projects. Here, the concern is whether the

capabilities acquired in the previous stage can result in successful energy efficiency projects.

Results is the final stage of the process of energy efficiency adoption. It refers to the

outcomes of implementing energy efficiency projects. Top management will now ask if the

efforts to implement energy efficiency were worthwhile. Given that what you can measure you

can manage, it is necessary to be able to quantitatively demonstrate the returns on such efforts.

The outcome of the Results stage is feedback to the Motivation stage. Positive

outcomes in terms of financial and economic gains are likely to ensure the continued adoption

of energy efficiency programs. That is, positive and convincing results from energy efficiency

projects will have a positive feedback effect, motivating top management to further invest in

33

energy efficiency. As the saying goes, success breeds success. This positive feedback needs to

be emphasized as it is often overlooked despite reports of its importance. It was reported in a

2006 UNEP report that the management of a Vietnamese fertilizer company supported the

implementation of additional (energy efficiency) options due to the validation of savings from

projects implemented earlier (UNEP 2006).

In the sections that follow, we will use the framework to analyze barriers to energy

efficiency, GWMs successes in energy efficiency efforts and stakeholders roles in energy

efficiency adoption. Finally, we illustrate how the framework can be used as a theoretical

guiding framework for energy efficiency policies.

6.2 Mapping barriers into MCIR framework

In this section, we attempt to map barriers identified in this study and the literature into

Motivation, Capability, Implementation and Results as shown in Figure 3. Though one

may argue that the approach of categorising barriers is similar to the literature, we considered

the interactions of barriers and the possible sequence in which they may occur. By doing so, the

MCIR framework can identify chokepoints of energy efficiency.

34

Figure 3: Mapping barriers into the MCIR framework

Motivation barriers to energy efficiency are those barriers which lower

managements interest in pursuing energy efficiency. These barriers can be a lack of financial

incentives (e.g. if energy expenses are only a small fraction of overall operating cost, lack of

capital to pursue capital-intensive technology), split incentives (Brown 2001) or simply a lack

of awareness of energy efficiency opportunities.

Motivation

Economic sense (brain) Perceived high cost of investment Uncertainty about future energy prices Low proportion of energy cost versus operating cost (manufacturing census) means low on CEO agenda Lack of government incentives Other capital investments are more important Environmental sense (heart) Culture and Values (Rohdin and Thollander, 2006)

Capability Implementation Results

Technical (know-how) Lack of information on energy efficient and energy saving technology Lack of trained manpower Lack of ESCOs with specialized knowledge Financial Limited access to

Window of opportunity Legacy system (long lifetime of energy intensive industrial equipment, lack of window of opportunity to install EE technologies) Resistance to change Fear of technical risk/cost of production loss

Moment of truth Lack of energy metering (difficulty of demonstrating and quantifying the impact/ benefits of EE, if motivated by economic concern) Feel good factor? High CSR ranking? (if motivated by environmental concerns)

35

Capability barriers can be broadly classified into technical and financial barriers, as

shown in Figure 3. Typical barriers at this stage are a lack of information on energy efficiency

technologies, a lack of trained manpower or a lack of financial resources.

Implementation barriers are barriers that inhibit the implementation of the energy

efficiency projects. Common Implementation barriers include resistance to change and short

windows of opportunity for engineering changes given that many manufacturing organizations

operate on a 24/7 basis and there is a fear of disrupting existing production processes.

Barriers in the Results stage are widely reported but often articulated in different

ways. Essentially, the biggest barrier is the lack of positive results from energy efficiency

investments. To the organizations, results can be interpreted as economic and financial gains.

Companies expressed that there are often little or insignificant energy savings from

energy efficiency efforts, failing to recognize the fact that energy costs often do not constitute a

large portion of total operating costs, and hence energy savings through energy efficiency

adoption may be easily offset by other changes such as increased manpower and production

changes.

After the conceptual development of our framework, we applied it to analyze GWMs

success with energy efficiency efforts. Matching qualitative data from GSKs interview to the

framework reveals that efforts must follow through all the stages of the MCIR framework to

actualize energy efficiency improvements. Figure 4 shows how possible barriers were prevented

36

or reduced in each stage of the MCIR framework. This analysis shows that the framework

provides a sound reasoning for energy efficiency adoption by organizations. More importantly,

it implies that the level of energy efficiency adoption in an organization is only as strong as the

weakest link.

Figure 4: Analysing energy efficiency in GWM using the MCIR framework

6.3 Understanding the roles of stakeholders from the MCIR perspective

Having explained the rationale of the framework and barriers associated at each stage,

the MCIR framework can be applied to understand the roles of the major stakeholders in

improving energy efficiency. This step is taken following the advice of systems thinking on

the need to see the bigger picture. This big picture enables us to see the complex dynamics

between the various stakeholders in driving energy efficiency. In this study, we identified the

stakeholders as those who have a more direct influence on energy efficiency actions. They

include governments, the organizations themselves, energy service companies (ESCOs) and

customers.

Motivation

Economic concern The need to maintain/reduce operating cost despite production increase Environmental concern Strong corporate social responsibility

Capability Implementation Results

TechnicalEngineers with know-how Energy audits Consultants Financial Access to capital (lower than usual investment hurdle rate)

Managers given clear targets for improvement Active energy teams with members from various functions helped to overcome resistance for change Very visible KPI

Tracking of success Electricity and steam metering improvements with centralized monitoring and targeting software systems

37

Government The nature of energy efficiency is such that individual projects often fetch little

energy savings for the company, but collectively they can save a substantial amount of energy

for a large corporation or a nation. Energy efficiency is especially important for energy

importing nations as it is almost always the most powerful tool for combating climate change

and achieving energy security. Therefore, governments should be major stakeholders in

realizing the potential of energy efficiency in the industrial sector. Countries like Netherlands,

Japan and Korea have shown how voluntary agreements are effective for energy efficiency in

the industrial sector without affecting industry competitiveness. Voluntary agreements are

examples of motivation for the industrial sector to pursue energy efficiency as they can provide

win-win situations. In these countries, the government also provides capabilities for the

industrial sector such as the provision of energy manager training and financial incentives.

Governments can also help to overcome Implementation and Results barriers through target

setting and establishing a standard protocol for energy reporting respectively (refer to Table 5).

Industrial Organizations Industrial organizations are often motivated to pursue energy

efficiency to reduce costs and display corporate social responsibility. Top management can

induce an energy efficiency culture to promote energy efficiency adoption in their organization

(such as GWM). Seeking help from technical consultants and appointing energy managers are

ways to reduce Capability barriers in organizations. In the case of GWM Singapore, cross-

functional teams were formed which helped in implementing energy efficiency across the

organization. For sustained efforts in energy efficiency, organizations should collect relevant

and accurate data on energy savings and energy efficiency improvements. Such data can also be

used for benchmarking.

38

ESCOs The role of ESCOs in the framework is mostly recognized for reducing

Capability barriers, in particular the technical capability barriers. They do so by performing

energy audits and recommending energy efficiency improvement plans. Experienced ESCOs

also provide a source of information for industry best practices and benchmarks.

Customers Customers are the reason for a companys existence. Their demands will

direct the companys market and developmental policies. Therefore, as the number of green

customers increases, motivation for energy efficiency is expected to increase.

While research and academic institutes also play a part in the energy efficiency

landscape, we have excluded them for two reasons: (1) in this study, we analyze the adoption of

energy efficient technologies and practices to improve energy efficiency rather than developing

new energy efficiency products, which we assume are available in the market, and (2) their

activities may be dependent on governments and private organizations funds and directions,

and the latter two are already identified as important stakeholders.

Table 5 provides a holistic picture (but not exhaustive) of the contributions of various

stakeholders in reducing or removing certain barriers across the stages that can help to

facilitate a smooth process transition to energy efficiency adoption. In other words, stakeholders

help to strengthen the link between stages.

39

Table 5: The roles of stakeholders

6.4 A possible contribution to policymakers using MCIR to assess policy effectiveness

The systems thinking approach has helped to develop the MCIR framework. Although

the MCIR framework reflects the process of adoption of energy efficient technologies by

organizations, given its generic nature, policymakers can also use it to analyze energy

efficiency shortfalls in the industrial sector of their countries.

Depending on the prevalence of the type of barriers, the country could be facing

Motivational, Capabilities, Implementation or Results barriers, or it could also be a

Motivation Capability Implementation Results Government Voluntary

agreements Education &

awareness Regulations &

legislations

Financial grants & incentives

Provision of energy manager training

Target setting Benchmarking Provision of

network platforms R&D of energy

efficient technologies

Standard reporting protocol to account for economic benefits of EE improvements

Industrial Organizations

Corporate Social Responsibility (CSR)

Meeting employees expectations

Energy audits Engage

consultancy

Overcome resistance to change/ alignment to values

Target setting ISO 50000 Outsourcing R&D of energy

efficient technologies

Energy data collection and monitoring

ESCOs Energy audits and improvement recommendations

Sharing of best practices

Follow up sessions ISO 50000 Benchmarking Lean & Six Sigma

Techniques or tools to measure and quantify benefits of EE

Customers Demand for green product (lower carbon footprint)

40

combination of two or more categories. Such an analysis gives clues to the weakest link in the

framework, which then aids governments to determine the type of policies to introduce. The

following simplified scenario depicted by Figure 5 illustrates how the framework may help

policymakers. The vertical axis shows the number of organizations involved in each stage of the

adoption. It is implied that the higher the level of the stage, the greater the number of

organizations are involved, thus the fewer the barriers faced in that stage and higher adoption of

energy efficient technologies and practices.

Figure 5 depicts a situation where a large number of organizations are motivated to

pursue energy efficiency, as indicated by the high vertical in the Motivation column.

However, these organisations lack technical capabilities among these organizations, as shown

by the partially shaded column. To strengthen the link from one stage to another, the

government should first try to raise the capabilities of the organizations for energy efficiency,

such as by promoting ESCOs or providing energy efficiency and management training. If

Implementation barriers exist after building capabilities, the government can enforce

implementation energy efficiency actions. Table 5, presented earlier, lists a few examples of

government programs in each stage of the MCIR framework.

41

Figure 5: Big gap between the number of organizations which are motivated and that with EE capabilities.

Possible Solutions: (1) build the ESCOs industry, provide financial grants & incentives, (2) enforce

implementation, (3) monitor and track returns

7. Conclusion

This paper reviewed the various classifications of barriers to energy efficiency in the

literature and proposed a systems thinking perspective to barrier analysis by considering

interactions between the barriers and different categories of barriers. Other elements such as

stakeholders and government policies were also taken into perspective, resulting in a process-

oriented, sequential, closed-loop framework that was introduced to increase energy efficiency

adoption. The framework, which we termed the MCIR framework, consists of four stages

connected in series: Motivation, Capability, Implementation and Results. The outputs

from Results form a feedback loop into Motivation where positive results (demonstration of

energy savings) sustain energy efficiency adoption. The framework also reveals that the level of

energy efficiency is only as strong as the weakest link (between the stages).

Our paper makes three important contributions. Firstly, by adopting a systems

perspective, our proposed holistic framework takes into account the relationship between the

Motivation Capability Implementation Results

1 2 3 No. of organisations

42

barriers based on the process of energy efficiency implementation. The feedback effect that

existing implementation has on future energy efficiency is explicitly recognized. This is

different from previous studies which traditionally treated barriers in an isolated and piecemeal

manner. Secondly, our framework can be used a policy guiding tool to analyze stages which

need improvements, as shown in Section 6.4. This is an important contribution because, to the

best of our knowledge, it is the first systematic method for analyzing shortcomings in energy

efficiency policy. Thirdly, our framework, when extended to include the stakeholders, shows

the roles and responsibilities of the stakeholders involved in implementing energy efficiency.

This big picture view allows policymakers to formulate policies and actions which can help to

establish the necessary stakeholders so that they can contribute to the specific stage of energy

efficiency.

8. Limitations and Future Research

The conceptual framework proposed in this paper presents a novel perspective on the

relationships between the energy efficiency barriers in the industrial sectors. However, as it is

built upon inductive research approach through literature review and retrospective cases, the

framework needs to be tested using the conventional hypothesis testing methodology (e.g. a

large scale survey) in different industries. Future research in this direction will be needed in

other to advance and validate the framework. In addition, refinement may be needed for other

sectors (e.g. residential) because of the different dynamics between the various stakeholders

involved.

43

9. Acknowledgements

The authors would like to acknowledge and thank colleagues B.W. Ang, K.G. Neoh,

M.Quah, Elspeth Thompson, Neil Sebastian dSouza and W.H. Chua for their useful

comments and contributions to the completion of this work. We are grateful to the Energy

Studies Institute for funding this project.

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