The potential for energy efficiency in the industrial sector is enormous. In the Netherlands, plans are in place for investments totalling € 2.2 billion, yielding an impressive emissions reduction of 13 million tonnes of CO2.
However, these plans do require proper financing arrangements between industry, investors and technology suppliers in order to reach their full potential. This is the substance of a recent research report entitled 'A Model Approach to Finance Industrial Energy Efficiency Projects'.
In this report, researchers analysed the proposed energy saving measures of some 1.000 businesses for the 2017-2020 period. They concluded that, of those investments, half are either uncertain or are not being implemented, due to a lack of investment capacity, enforcement, coordination, knowledge or suitable financing arrangements.
By not realising the full investment potential, industry is missing opportunities – to reduce CO2 emissions, for example. According to the researchers, industrial energy efficiency offers high returns on investment. The effect of the proposed energy saving measures, for instance, would be 4 times that of a large offshore wind farm in terms of reducing fossil fuel consumption per euro of offshore wind generated.
The investment volume of € 2.2 billion would provide economic opportunities as well, and these would not be limited to industry alone. It would offer an attractive investment opportunity for financers, and technology suppliers would gain a large sales market and thereby contribute to the spread of innovation.
Recommendations from the research
The report contains recommendations that would allow the industrial sector to realise more of the energy savings potential. For SME technology suppliers, the researchers advise deploying other financing instruments in order to increase the market potential of savings measures.
One possibility would be to establish a fund for the purpose of bundling project financing. This would require energy intensive industry, financers like institutional investors and project developers to develop a uniform method. Such a fund would unite the demand from industry with the supply from investors and technology providers. This might involve residual-heat exchange or high-quality technology to improve internal processes.
Secondly, the industrial sector would be able to meet its obligations by issuing contracts for energy efficiency projects to Energy Service Companies (ESCOs). These companies, which (especially in Italy) have expanded into an entire sector, have been successfully providing project development, financing and energy performance contracts to industrial businesses for a decade. ESCOs help these businesses so they can focus on their primary process.
The researchers also recommend that the Dutch government take steps to strengthen enforcement of the Environmental Management Act (Wet milieubeheer) and prioritise implementation of the ISO 50001 energy management system.
This research was commissioned by the Netherlands Enterprise Agency, with the support of the Dutch employers' organisation in the technology industry FME, investment agency NLII, the Dutch organisation of energy companies 'Energie Nederland' branch organisation of industry in Rotterdam harbour area Deltalinqs, Utrecht University and the Dutch Ministry of Economic Affairs and Climate Policy, in connection with the Energy Top Sector / TKI Energy & Industry.