9.4.1 Barriers to Technology Transfer
Under perfect market conditions all additional needs for energy services are
provided by the lowest cost measures, whether energy supply increases or energy
demand decreases. There is considerable evidence that substantial energy efficiency
investments that are lower in cost than marginal energy supply are not made
in real markets, suggesting that market barriers exist. We first discuss barriers
to the transfer of climate change technologies that apply to all economies,
followed by a discussion of additional barriers that are of particular importance
to developing nations.
Decision-making processes in companies are a function of their rules
of procedure, business climate, corporate culture, managers' personalities and
perception of the firm's energy efficiency (DeCanio, 1993; OTA, 1993). Energy
awareness as a means to reduce production costs seems not to be a high priority
in many companies, despite a number of excellent examples in industry worldwide
(e.g. Nelson, 1994). Cost?effective energy efficiency measures are often not
undertaken as a result of lack of information on the part of the consumer, or
a lack of confidence in the information, or high transaction costs for obtaining
reliable information (Reddy, 1991; OTA, 1993; Levine et al., 1995; Sioshansi,
1991). Information collection and processing consumes time and resources, which
is especially difficult for small companies (Gruber and Brand, 1991; Velthuijsen,
1995). Especially in many developing countries and CEITs, public capacity for
information dissemination is lacking, which suggests the importance of training
in these countries, and is seen as a major barrier for technology transfer (TERI,
1997). The problem of the information gap concerns not only consumers of end?use
equipment but all aspects of the market (Reddy, 1991). Many producers of end?use
equipment have little knowledge of ways to make their products energy efficient,
and even less access to the technology for producing the improved products.
End?use providers are often unacquainted with efficient technology. In addition
to a lack of information at least two other factors may be important: a focus
on market and production expansion, which may be more effective than efficiency
improvements to generate profit maximisation; and the lack of adequate management
tools, techniques and procedures to account for economic benefits of efficiency
improvements.
Limited capital availability will lead to high hurdle rates for energy
efficiency investments, because capital is used for competing investment priorities.
Capital rationing is often used within companies as an allocation means for
investments, leading to even higher hurdle rates, especially for small projects
with rates of return from 35 to 60%, much higher than the cost of capital (~15%)
(Ross, 1986). In many developing countries cost of capital for domestic enterprises
is generally in the range of up to 30-40%. When energy prices do not reflect
the real costs of energy (without subsidies or externalities) then consumers
will necessarily underinvest in energy efficiency. Especially for SMEs, capital
availability may be a major hurdle in investing in energy efficiency improvement
technologies due to limited access to banking and financing mechanisms, as was
also shown in the evaluation of a Japanese energy audit programme for SMEs (Oshima,
1998). Energy prices, and hence the profitability of an investment, are also
subject to large fluctuations. The uncertainty about the energy price, especially
in the short term, seems to be an important barrier (Velthuijsen, 1995). The
uncertainties often lead to higher perceived risks, and therefore to more stringent
investment criteria and a higher hurdle rate. Lack of skilled personnel, especially
for small and medium sized enterprises (SME), leads to difficulties installing
new energy-efficient equipment compared to the simplicity of buying energy (Reddy,
1991; Velthuijsen, 1995).
In many companies (especially with the current development toward lean companies)
there is often a shortage of trained technical personnel, as most personnel
are busy maintaining production (OTA, 1993). In CEITs the disintegration of
the industrial conglomerates may lead to loss of expertise and hence similar
implementation problems. In most developing countries there is hardly any knowledge
infrastructure available that is easily accessible for SMEs. In Brazil, the
SEBRAE programme provides institutional and technical assistance for SMEs, financed
through a federal industry tax. SMEs are often a large part of the economy in
developing countries. Special programmes may alleviate this barrier (see below).
In addition to the problems identified above, other important barriers include
(1) the "invisibility" of energy efficiency measures and the difficulty
of demonstrating and quantifying their impacts; (2) lack of inclusion of external
costs of energy production and use in the price of energy; and (3) slow diffusion
of innovative technology into markets (Levine et al., 1994; Fisher and Rothkopf,
1989; Sanstad and Howarth, 1994). Regulation can, sometimes indirectly, be a
barrier to implementation of low GHG emitting practices. A specific example
is industrial cogeneration, which may be hindered by the lack of clear policies
for buy-back of excess power, regulation for standby power, and wheeling of
power to other users. Cogeneration in the Indian sugar industry was hindered
by the lack of these regulations (WWF, 1996), while the existence of clear policies
can be a driver for diffusion and expansion of industrial cogeneration, as is
evidenced by the development of industrial cogeneration in the Netherlands (Blok,
1993). In addition, alternative models may be found important in focusing public
policy on the need to raise end-user awareness and the priority to increase
energy efficiency. This is likely to be an effective route to ensuring industry
takes a comprehensive view of energy efficiency.
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