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UK Cos Miss Boat on $ 2.5 Billion-Yr Energy Efficiency Savings

UK businesses are walking away from a £1.6bn (US$ 2.5bn) annual saving potential from energy investments ecause finance directors are undervaluing the financial returns from investments in energy efficiency by more than half, according to The Business of Energy Efficiency from the Carbon Trust Advisory.

The research spanning three years of energy-efficiency investments found that projects such as upgrades to heating and lighting, implementation of energy-saving policies and staff training delivered on average a 48% return on investment. This is four times the minimum level demanded by most UK senior finance officers.

Meanwhile, most finance directors estimate the average return to be less than 20%.

“The business case for energy efficiency is clear and compelling. Few other investments get anywhere near that rate of return,’ said Hugh Jones, managing director of the Carbon Trust Advisory.

“Yet our data suggests big businesses are leaving around half the investment opportunities on the table and continuing to waste billions of pounds on unnecessary energy use every year.”

The report identified three core reasons: Energy efficiency as an investment opportunity needs to be presented more convincingly within some businesses, to improve access to capital, resources and expertise; energy efficiency is given a low priority within organizations, and changes to company culture is seen as too difficult; incentives are not targeted effectively enough to inspire energy-efficiency investments.

A 2010 study from Johnson Controls found that energy management was a higher priority in regions such as China and India than in Europe and North America. As well, cost saving as an impetus for investment ranked lower in Europe and North America.

Also worth noting, a 2009 study from Verdantix found that including projects with a short-term investment return were beneficial in clearing roadblocks to energy efficiency investments.

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