No one company, individual or even government will solve today’s global sustainability challenges. It will be the collective actions of many players that clean our air, water and land. At NiSE we are interested in how we can aggregate and incentivize the actions of individual actors and scale up sustainability from one individual, one firm, or one state to system-wide improvements. This work requires looking into aggregation mechanisms, changes in financing, and the institutional arrangements necessary to incentivize coordinated sustainability actions. We hypothesize that aggregation will enable economies of scale to lower project transaction costs, provide new opportunities to incentivize actors and improve total investment potential in sustainability initiatives.
For over forty years the energy savings and financial returns from energy efficiency have been well established, yet energy efficiency financing is only one-tenth its potential in the US (Katz 2011), and likely to be significantly less in developing country settings. Our current project on aggregation and incentives focuses on this energy efficiency enigma. Through our “Supply Chain Coordination and Energy Efficiency” project we are researching global industrial energy efficiency opportunities in small and medium enterprises and working to determine what role supply chain coordination can play in aggregating and financing smaller scale sustainability projects.
We are exploring the barriers and opportunities to industrial energy efficiency projects in small and medium enterprises through a small exclusive symposium co-hosted with the Environmental Defense Fund and The Johnson Foundation. The purpose of this symposium is to discuss how supply chain coordination can facilitate and incentivize industrial energy efficiency initiatives in small and medium enterprises. In conjunction with this symposium, we have been identifying data opportunities to examine global supply chains and the how actors within these supply chain can incentivize sustainability improvements with their suppliers.
From this initial project, we hope to create an important foundation for understanding how to bundle, aggregate and finance other sustainability assets including water efficiencies, toxin improvements or waste reductions.
Potential Impact and Expected Outcomes
This initiative will provide much needed information describing the emerging roles of organizations and institutions external to the factory/facility implementing energy efficiency upgrades, where multiple actors operate and cooperate toward assessing, identifying, analyzing, financing, and implementing industrial energy efficiency process improvements. It will also provide a methodological template for exploring the financing of other sustainability improvements beyond energy efficiency.
- Cursory look at data from Xcel Energy on commercial building energy efficiency potential, showing promising opportunities for energy efficiency savings in MN.
- Presentation by Terry Foecke, SDCL, at our annual networking meeting (May 23, 2012), followed by rich discussion in our energy efficiency financing breakout session.
- Two week “China Tour” (Summer 2012) to see firsthand the small and medium manufacturing facilities and meet with key players in the Chinese industrial energy efficiency field.