Barriers to Energy Efficiency

Lack of information

Consumers, vendors, manufacturers, banks and policy makers often have inadequate information about energy efficiency technologies and their costs and benefits. Though many organizations are working to address this challenge, a harmonized framework for technologies and source of comprehensive information on energy efficiency does  not yet exist. As a consequence, consumers and firms are frequently unaware of cost effective practives and technologies available to save energy. They are also not aware of the energy demands of their appliances, buildings and homes with which to compare new technologies. For example, the IEA estimates that energy used by appliances in "standby" mode accounts for between 3 and 13 percent of residential electricity demand in OECD countries. But few customers or manufacturers realise that the same conveniences could be provided using 75% less standby power.²

False or absent price signals

Energy is often pirced below its full economic cost including externalities. The economic cost of energy is distorted by subsidies and uncounted external environmental costs. Moreover, energy pricces to consumers do not account for real time or marginal production costs.

Energy prices are diluted by other costs. For consumer purchases  the energy cost makes up a small enough percentage of the full cost of the product as to be perceived as in consequential. For example, in the United States gasoline is only an eighth of the total cost of driving. For firms, energy is only 1-2% of most industries costs.¹

Appraisers and leasing brokers rarely take into account a building's energy efficiency such that the value of energy efficiency measures is not capitalized.²

Financial barriers

Expectation for short consumer payback periods

Lack of investment capital

Competing inestment priorities

High transaction costs

Incomplete markets and property rights

Institutional Barriers

Lack of leadership

Aversion to new technologies

Lack of capacity

Lack of dedicated energy management position

Lack of benchmarking

Regulatory Barriers

Lack of government support

Perverse utility incentives

Technology and Access Barriers

There are a number of technology and access barriers that stand in the way of

Transation costs or "hassle factor." Efficient equipment is often not available when and where it's needed. For example, in the U.S. compact fluorescent lights are often sold only in hardware stores rather than local grocery stores. Household appliances decisions are often made in a rush when water heaters, furnaces or refrigerators break. Manufacturers also seek to replace broken equipment as quickly as possible rather than first considering energy consumption.

Lack of infrastructure. New efficient technologies might not be available in some countries or regions.

Low quality technologies. examples of low quality CFLs.

Divergent Actors and Incentives

Split incentives

Differing discount rates and perceptions of risks

Compensation to architects and engineers

Manufacturers vs. end-users

References

¹ See for example the International Energy Agency's Energy Technology Perspectives and the Mckinsey Marginal Abatement Cost Curve analysis.

 ²IEA. 2001. Things that go blip in the night: Standby Power and how to limit it.

Amory Lovings. 1997. Climate: Making Sense and Making Money. www.rmi.org/images/PDFs/Climate/C97-13_ClimateMSMM.pdf

²Lovins, Ibid.