The 5 reasons why Energy Efficiency doesn’t work naturally

Everybody agree that Energy Efficiency is an important matter, and that it’s a priority. However, in practice, it looks as if implementing massive energy savings is much more complex than it seems to be initially. Amongst numerous reasons detailed in the attached document, 5 definitely shape the perception we have about Energy Efficiency. Here they are:

  1. Nobody sends you a cheque when you implement an Energy Conservation Measure! So, you can’t see it in your P&L, you can’t discount it, and you can’t value it in a Business Plan.
  2. It’s physically impossible to prove an energy saving! So, you can’t measure it with a meter.
  3. You can’t see energy savings! So, it’s less sexy than a wind turbine or a solar panel.
  4. We naturally value more €10 spent now than €10 earned tomorrow. So, I discount less the money I spend now than the money I’ll get tomorrow.
  5. Energy Conservation Measures involve a statu quo loss. So, implementing energy savings is risky and I might not be able to make it.

By definition, a famous energy saving’s characteristic is that it can be measured. Indeed, an energy saving is a non energy consumption. This is the difference between an absolute energy consumption (real and often measured) and an absolute energy consumption (“virtual” and impossible to measure) that we would have got if we hadn’t implemented the Energy Conservation Measure. This has a threefold fundamental consequence:

  • Thus, we can’t a priori generate a cash inflow from an energy saving. This is only a cash outflow saving.
  • And, as it’s impossible to measure, an energy saving is potentially always debatable.
  • Finally, it’s not concrete, and hard to figure it out. This induces a psychological bias: energy savings are less “sexy” tangible stuff.

A fourth issue is due to our short-termism appetence. We give more value to physical or time-related proximity. One of the consequences in our day-to-day economy is discounting practices: one euro earned (or spent) today has more value than one euro earned (or spent) tomorrow. This clearly impacts our way to value things over time. Usually to get energy savings financial benefits later, you need first to invest in a product (good or service). Thus, €10 spent now doesn’t have the same value as €10 earned tomorrow.

A fifth hurdle strengthens the previous: loss aversion. We tend to naturally avoid taking risks, because we anticipate the potential related utility loss, which could follow. Practically speaking, in some circumstances, especially during economic depression, we tend to prefer statu quo even though when an action could help us be better off. Why should I take that risk? I’m better off doing nothing. Otherwise I need a guarantee.

These are amongst the numerous obstacles a proactive firm, local authority or individual has to face while willing to implement energy savings.

We’ll try here through this blog to provide partial solutions post after post.



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