Making the business case for energy efficiency more compelling

At the recent 2 Degrees Energy Performance in Property[1] event in London, the theme was “How to Make a Compelling Business Case for Energy Efficiency.”  Not a topic likely to be turned into a Hollywood film but one of vital importance.  I was asked to give my views.

There is a massive gap between the potential for economically attractive, energy efficiency projects and those that are actually implemented – the so-called “energy efficiency gap”.  Closing the gap will help towards achieving our energy security and climate goals – saving money, protecting the environment and creating jobs..

One of the primary reasons I see for the energy efficiency gap in corporations is the inability of energy managers developing projects to create a sufficiently compelling business case for them to board level decision makers, particularly the CFO.

Part of this problem is clearly that energy managers and CFOs speak different languages – energy is typified by engineering and technology speak – MWh, tonnes CO₂ etc;  while finance is dominated by ROI, ROCE, risk etc.  One thing is for sure – the CFO is unlikely to learn “energy speak” so the energy people need to learn how to talk so CFOs will hear them, understand their message and take action. The easiest way for an energy manager to bridge this gap is to take some time prior to an encounter with “finance types” and look for compelling ways to state the positive effect that implementing the proposed changes will have on  the bottom line – and this certainly needs to be phrased in the financial language used by the CFO.

All investment decisions are based on financial analysis – however good or bad and even if the investment is mandated by law or regulation.  Only by talking about the financial benefits to the CFO, will those working to implement more energy-efficient solutions meet with greater success.

Understanding the decision making process is critical.  Catherine Cooremans[2] of the University of Geneva has researched energy efficiency decisions.  She explains how investment decision making is influenced by many factors, including the financial and human capital that will be involved, the organizational context, and of course market pressure and regulations.

[1] 2 Degrees Network Energy Performance in Property 2015

http://2degreeslive.com/event/energy-performance-summit1

[2] Cooremans, C. “Strategic fit of energy efficiency”, 2007 ECEEE Summer Study

http://www.eceee.org/library/conference_proceedings/eceee_Summer_Studies/2007/Panel_1/1.177