Driving Business Decisions: A Look at Business Drivers of Industrial Energy Efficiency

Business conditions typically drive energy efficiency decisions more than purely technical opportunities. How industrial companies operate and their major business costs may determine how effectively these firms respond to energy efficiency programs and other opportunities. Based on an ongoing industry characterization study, this paper identifies key factors that influence participation in energy efficiency initiatives for select industrial segments. Competitive issues and economic factors, such as the operational model, cost structure, business cycles and the availability of capital and credit are considered. Regulatory issues that drive decision-making are discussed and tied to industry competitiveness. For example, sectors that are dominated by a small number of large sophisticated companies will have different needs from an energy efficiency program than sectors that are comprised of many small players. Capital expenditures for large companies often are planned strategically for the long term; energy efficiency programs can be designed to partner with the customer to improve the project’s energy efficiency. Sectors that consist of mostly small companies may be more focused on day to day operations and regulatory compliance, requiring a different program design to encourage energy efficiency. This paper reviews strategic business factors that differentiate priorities for decision making. The paper will be of interest to energy efficiency program implementers, policymakers, and industrial facility managers, and will provide insights for more effective interventions to increase adoption of efficiency in the industrial sector.