Economic barriers to energy services and energy efficiency ...
Transcript of Economic barriers to energy services and energy efficiency ...
Economicbarrierstoenergyservicesandenergyefficiency
improvementprojectsinGermanIndustrialSector–
amultiple-casestudy
by
MatthiasBergmann
AthesissubmittedinpartialfulfilmentfortherequirementsforthedegreeofDoctorofBusinessAdministrationattheUniversityofCentralLancashire
July2019
II
Abstract
Themember states of the European Union have committed themselves to the reduction of energy
consumptioninordertoreducetheemissionofgreenhousegases,towhichglobalwarmingisattributed.
TheFederalRepublicofGermanyhasannounced its intentionto increaseenergyefficiencybyusing
EnergyServicesfromEnergyServiceCompanies.
Contrarytotheassumptionsaboutexistingpotentials,thedevelopmentofthismarket–bothglobally
andinrelationtoGermany–hassofarbeensuboptimal,theexistenceofbarriersisheldresponsible
forthis.Althoughthereisagrowingvolumeofpapersondifferentaspectsofthesebarriers,theareaof
economicbarriersfortheindustrysectorinGermanyhasnotyetbeenexamined.
Thisresearchfilledthisgap.
Themultiple-casestudystrategyemployingsemi-structuredinterviewswasusedforthisresearch,in
ordertounderstandthephenomenonindepth,identifythemostimportantbarriersonthebasisofa
conceptualbarrierframeworkanddeveloprecommendationstoovercomethesebarriers.Theuseofthe
multiple-casestudyresearchstrategymadeitpossibletoobtaintransferableresultswhosecredibility
wasunderpinnedbycarefullycollecteddata.
ResearchparticipantscamefromthestakeholdersEnergyServiceCompany,customerorganisationsas
wellasthirdpartyfinancingorganisationsinvolvedinenergyefficiencyimprovementprojects.
Itwasfoundthatfromthecommonpointofviewofthestakeholdersinvolved,'ExternalRisks'and'Low
CapitalAvailability'werethemostsignificantbarriers.
Furthermore, it was found that additional barrier issues were not yet part of the existing barrier
frameworks.Thebarrier'AccountingStandards'wasthereforeaddedasafurtherbarrier.
RecommendationswerederivedbothforpolicyandpracticeoftheEnergyServiceCompanyinvolved.
Thesafeguardingofthestatusofenergylegislationwasrecognisedasamajorpoliticalcontributionin
ordertocreateasufficientlysecurebasisfordecision-makingonthenecessaryinvestments–atleast
forexistingmeasures.
TheEnergyServiceCompanyrecognised theneed tooffera comprehensiveenergyservice scope in
ordernottolosegroundtoprovidersofspecialisedservices.
III
TableofContents
ACKNOWLEDGEMENTS 1 LISTOFTABLES 2 LISTOFFIGURES 4 LISTOFABBREVIATIONS 5 GLOSSARY 7 CHAPTER1:INTRODUCTION 17
1.1BackgroundoftheResearchandRationale........................................................................................................18 1.2ResearchObjectives......................................................................................................................................................19 1.3ResearchQuestions.......................................................................................................................................................19 1.4StructureoftheResearch...........................................................................................................................................20
CHAPTER2:LITERATUREREVIEW 21 2.1EnergyEfficiencyImprovementMeasuresandEnergyServices..............................................................21 2.2The‘EnergyEfficiencyGap’........................................................................................................................................24 2.3PreviousResearchonBarrierstoEnergyEfficiency......................................................................................24
2.3.1GreyLiterature 28 2.3.2AcademicLiterature 30
2.4PreviousResearchonBarrierFrameworks.......................................................................................................34 2.4.1BarrierFramework1HirstandBrown(1990) 35 2.4.2BarrierFramework2Weber(1997) 35 2.4.3BarrierFramework3Sorrelletal.(2000) 36 2.4.4BarrierFramework4DeGrootetal.(2001) 36 2.4.5BarrierFramework5Thollanderetal.(2010) 37 2.4.6BarrierFramework6Cagnoetal.(2013) 38 2.4.7BarrierFramework7Reddy(2013) 38 2.4.8BarrierFramework8Vogeletal.(2015) 39 2.4.9BarrierFramework9Stede(2017) 40 2.4.10Comparison,EvaluationandSelectionofappropriateBarrierFramework 40
2.5ConclusionsfromLiteratureReview.....................................................................................................................45 CHAPTER3:METHODOLOGY 47
3.1ApproachtoTheoryDevelopment–FirstLayerofthe‘ResearchOnion’.............................................47 3.1.1Deduction 48 3.1.2Induction 48 3.1.3Abduction 49 3.1.4SelectionofappropriateApproachtoTheoryDevelopment 49
3.2ResearchPhilosophy–SecondLayerofthe‘ResearchOnion’...................................................................49 3.2.1Positivism 50 3.2.2CriticalRealism 50 3.2.3Interpretivism 51 3.2.4Postmodernism 52 3.2.5Pragmatism 53 3.2.6SelectionofappropriateResearchPhilosophy 53
3.3ResearchMethod–ThirdLayerofthe‘ResearchOnion’..............................................................................54 3.3.1Quantitativevs.Qualitativevs.MixedMethods 54 3.3.2ResearchPurpose 56 3.3.3SelectionofappropriateResearchMethod 57
3.4ResearchStrategy–FourthLayerofthe‘ResearchOnion’..........................................................................57 3.4.1Experiment 58 3.4.2Survey 58 3.4.3ArchivalandDocumentaryResearch 59
TableofContents
IV
3.4.4CaseStudy 59 3.4.5Ethnography 59 3.4.6ActionResearch 60 3.4.7GroundedTheory 60 3.4.8NarrativeInquiry 60 3.4.9SelectionofappropriateResearchStrategy 61
3.5TimeHorizon–FifthLayerofthe‘ResearchOnion’.......................................................................................61 3.5.1Cross-SectionalTimeHorizon 62 3.5.2LongitudinalTimeHorizon 62 3.5.3SelectionofappropriateTimeHorizon 62
3.6ConclusionfromSelectionofMethodology........................................................................................................62 3.7QualityofResearch........................................................................................................................................................63 3.8SummaryofChapter3..................................................................................................................................................64
CHAPTER4:EMPIRICALWORK 66 4.1DataCollectionandAnalysis–ResearchDesign..............................................................................................66
4.1.1EthicalIssues 66 4.1.2SelectionofStakeholdersandCases,AccesstotheInterviewParticipants 68 4.1.3InterviewPractice 69 4.1.4DataAnalysisandWrite-up 70
4.2OverviewofStakeholderOrganisationsinvolved............................................................................................71 4.2.1EnergyServiceCompany 72 4.2.2CustomerOrganisations 74 4.2.3ThirdPartyFinancingOrganisations 79
4.3DetailsontheCasesselected.....................................................................................................................................81 4.3.1CaseA 81 4.3.2CaseB 83 4.3.3CaseC 85 4.3.4CaseD 87 4.3.5CaseE 88 4.3.6ScopeofEnergyServicesprovidedintheCases 89
4.4SummaryofChapter4..................................................................................................................................................90 CHAPTER5:ANALYSESANDFINDINGS 92
5.1OverviewofFindingsderived...................................................................................................................................92 5.2DetailsontheeconomicBarriersfoundfromAnalyses................................................................................96
5.2.1ExternalRisks 97 5.2.2LowCapitalAvailability 101 5.2.3Interventionnotsufficientlyprofitable 107 5.2.4HiddenCosts 109 5.2.5Investment(Transaction)Costs 110 5.2.6Intervention-relatedRisks 112 5.2.7UncoveredIssues–ComplementaryeconomicBarrier 113
5.3SummaryofChapter5...............................................................................................................................................118 CHAPTER6:RESEARCHSUMMARYANDCONCLUSION 119
6.1DiscussionofFindingstoanswertheResearchQuestions.......................................................................119 6.1.1ResearchQuestiona) 119 6.1.2ResearchQuestionb) 120 6.1.3ResearchQuestionc) 121
6.2RecommendationsforPolicyandPractice.......................................................................................................122 6.3ContributionstoKnowledge...................................................................................................................................123 6.4LimitationsandOpportunitiesforfutureResearch.....................................................................................124
REFERENCES 125 BIBLIOGRAPHY 132 ANNEX 133
1
Acknowledgements
Firstofall,IwouldliketothankmyResearchSupervisorProfessorYusufYahayaandinparticularmy
Research Director of Studies Doctor Claire Worthington for their continued assistance in my DBA
research,fortheirpatience,motivationandgreatknowledge.Theirguidancehelpedmethroughoutthe
timeofresearchandwritingthisthesis.EspeciallyonthehomestraightClairewasaninvaluablesupport
forme!
MysincerethanksalsogotoDoctorDorotaMarsh,whogavemeduringthetaughtphaseoftheDBA
programmethegreatopportunitytodeveloptheknowledgeaswellasthecriticalandreflectiveskills
necessaryforthejourneyforward.
LastbutnotleastIwouldliketoexpressmysinceregratitudetomyfamily:Aheartfeltthank-yougoes
tomyparents for alwaysbelieving inmeandencouragingme to followmydreams– and finally to
Alexsandra,whostoodbymethroughout theentireDBAprogram,who livedeveryminuteof itand
withoutwhomIwouldneverhavemadethisjourney.
2
ListofTables
TableG-1–KeyTerms:Energy,EfficiencyandcorrespondingLegislation...........................................................7 TableG-2–KeyTerms:StakeholderSystem.......................................................................................................................9 TableG-3–KeyTerms:FinancingMethods.......................................................................................................................11 TableG-4–KeyTerms:EnergyServiceContracts..........................................................................................................14 TableG-5–KeyTerms:AccountingStandards.................................................................................................................16 Table2-6–OverviewofgreyandacademicLiteratureconcerningBarrierstoESCOBusiness.................26 Table2-7–CoverageofEuropeanCountriesbyacademicLiterature...................................................................31 Table2-8–CoverageofEuropeanCountriesbyMarketSectors..............................................................................32 Table2-9–OverviewoftheStakeholdersinvolvedintheLiteraturereviewed................................................33 Table2-10–OverviewofBarrierFrameworksfromLiterature...............................................................................41 Table2-11–BarrierFrameworkEvaluationbasedonaCriteriaSystem.............................................................42 Table2-12–SelectedBarrierFramework6–ExcerptofeconomicBarrierArea............................................43 Table4-13–OverviewofInterviewDetails.......................................................................................................................70 Table4-14–OverviewofStakeholders,OrganisationsandParticipantsinvolved..........................................71 Table4-15–ESCO:CompanyProfile,economicProjectRequirementsandSpecifics....................................73 Table4-16–CustomerA:CompanyProfile,economicProjectRequirementsandSpecifics.......................75 Table4-17–CustomerB:CompanyProfile,economicProjectRequirementsandSpecifics.......................76 Table4-18–CustomerC:CompanyProfile,economicProjectRequirementsandSpecifics.......................77 Table4-19–CustomerD:CompanyProfile,economicProjectRequirementsandSpecifics.......................78 Table4-20–CustomerE:CompanyProfile,economicProjectRequirementsandSpecifics.......................79 Table4-21–TPF1:CompanyProfile,economicProjectRequirementsandSpecifics...................................80 Table4-22–TPF2:CompanyProfile,economicProjectRequirementsandSpecifics...................................80 Table4-23–TPF3:CompanyProfile,economicProjectRequirementsandSpecifics...................................81 Table4-24–CaseA:Stakeholders,OrganisationsandParticipantsinvolved....................................................82 Table4-25–CaseB:Stakeholders,OrganisationsandParticipantsinvolved....................................................84 Table4-26–CaseC:Stakeholders,OrganisationsandParticipantsinvolved.....................................................87 Table4-27–CaseD:Stakeholders,OrganisationsandParticipantsinvolved....................................................88 Table4-28–CaseE:Stakeholders,OrganisationsandParticipantsinvolved.....................................................89 Table4-29–OverviewofESprovided(effectively/potentially)byESCOintheCases..................................90 Table5-30–OverviewofeconomicBarriersidentifiedbyCases,NominationsofStakeholders..............92 Table5-31–OverviewofeconomicBarriersidentifiedbyStakeholders,NominationstoCases..............93 Table5-32–OverviewofeconomicBarriersidentifiedbyStakeholders,furtherIssueswith
intrinsicRelevancetoResearchQuestions.............................................................................................94 Table5-33–OverviewofeconomicBarriersidentifiedbyCases,NominationsofCustomer
Participants...........................................................................................................................................................95 Table5-34–OverviewofeconomicBarriersidentifiedbyCases,NominationsofESCO
Participants...........................................................................................................................................................95
ListofTables
3
Table5-35–OverviewofeconomicBarriersidentifiedbyCases,NominationsofTPF
Participants...........................................................................................................................................................96 Table5-36–TransferabilityofFindingsacrossCasesregardingtheeconomicBarrier‘External
Risks’.....................................................................................................................................................................101 Table5-37–TransferabilityofFindingsacrossCasesregardingtheeconomicBarrier‘Low
CapitalAvailability’.........................................................................................................................................107 Table5-38–TransferabilityofFindingsacrossCasesregardingtheeconomicBarrier
‘Investment(Transaction)Costs’.............................................................................................................112 Table5-39–TransferabilityofFindingsacrossCasesregardingthecomplementaryeconomic
barrier‘AccountingStandards’..................................................................................................................118 Table6-40–ComplementedBarrierFramework–Addingthe'AccountingStandards'Barrier............124 TableA-41–BarrierFramework1:Barriers,structuredaccordingto‘Types’....................................................ii TableA-42–BarrierFramework2:Barriers,structuredaccordingto‘Types’...................................................iii TableA-43–BarrierFramework3:Barriers,structuredaccordingtounderlyingTheoriesand
‘Perspectives’.........................................................................................................................................................iv TableA-44–BarrierFramework4:Barriers,structuredaccordingto‘Categories’,contrastedto
BarrierFramework6...........................................................................................................................................v TableA-45–BarrierFramework5:Barriers,structuredaccordingto‘Areas’,contrastedto
BarrierFramework6.........................................................................................................................................vi TableA-46–BarrierFramework6:Barriers,structuredaccordingto‘Areas’,contrastedto
BarrierFramework6........................................................................................................................................vii TableA-47–BarrierFramework7:HierarchicalStructureofthe‘Spheres’........................................................ix TableA-48–BarrierFramework8:Barriers,structuredaccordingto‘SystemStructure’,
contrastedtoBarrierFramework6..............................................................................................................x TableA-49–BarrierFramework9:Barriers,structuredaccordingto‘Categories’,contrastedto
BarrierFramework6........................................................................................................................................xii
4
ListofFigures
FigureG-1–FinancingbyCustomer:ContractStructure.............................................................................................11 FigureG-2–FinancingbyESCO:ContractStructure......................................................................................................11 FigureG-3–FinancingbyTPFOrganisation:MethodofLoanaswellasHirePurchaseFinancing;
ContractStructureinthreecases................................................................................................................11 FigureG-4–FinancingbyTPFOrganisation:MethodofLeaseFinancing(OperateLease);
ContractStructureintwoCases...................................................................................................................12 FigureG-5–FinancingbyTPFOrganisation:MethodofLeaseFinancing(FinanceLease);
ContractStructureintwoCases...................................................................................................................12 FigureG-6–FinancingbyTPFOrganisation:MethodofForfeiting;ContractStructure...............................12 Figure2-7–SelectedBarrierFramework6:Decision-makingProcess–economicBarriers
potentiallypreventingorinhibitingtheProgress................................................................................44 Figure2-8–SelectedBarrierFramework6:ConnectionsbetweeneconomicBarriersand
BarriersfromotherAreas..............................................................................................................................45 Figure3-9–‘ResearchOnion’:LayersofResearchMethodology.............................................................................47 Figure3-10–‘ResearchOnion’:SelectedElementsinLayersofResearchMethodology..............................62 Figure4-11–CaseA:ContractStructure............................................................................................................................81 Figure4-12–CaseB:ContractStructureofinitialEEIProject..................................................................................83 Figure4-13–CaseB:ContractStructureofproposedEEIProject..........................................................................85 Figure4-14–CaseC:ContractStructure.............................................................................................................................86 Figure4-15–CaseD:ContractStructure............................................................................................................................87 Figure4-16–CaseE:ContractStructure.............................................................................................................................88
5
ListofAbbreviations
BAT.....................................................................................................................................................BestAvailableTechnology
ca......................................................................................................................................................................................................circa
CCHP..........................................................................................CombinedCooling,HeatandPower(=Trigeneration)
CHP................................................................................................................CombinedHeatandPower(=Cogeneration)
CO2..................................................................................................................................CarbonDioxide(=GreenhouseGas)
DBA....................................................................................................................................DoctorofBusinessAdministration
e.g.................................................................................................................................Latin:'exempligratia'(=forexample)
EC................................................................................................................................................................EuropeanCommission
EE...........................................................................................................................................................................EnergyEfficiency
EED....................................................................................................................................................EnergyEfficiencyDirective
EEG................................................German:'ErneuerbareEnergienGesetz'(=GermanRenewableEnergiesAct)
EEI............................................................................................................................................EnergyEfficiencyImprovement
EPC...............................................................................................................................................EnergyPerformanceContract
ES.................................................................................................................................................................................EnergyService
ESC............................................................................................................................................................EnergySupplyContract
ESCO......................................................................................................................................................EnergyServiceCompany
etal..................................................................................................................................................Latin:'etalii'(=andothers)
EU.............................................................................................................................................................................EuropeanUnion
EUR.....................................................................................................................Euro(=officialCurrencyoftheEurozone)
FY..........................................................................................................................................................................................FiscalYear
GAAP......................................................................................................................GeneralAcceptedAccountingPrinciples
HGB...................................................................German:'Handelsgesetzbuch'(=GermanCodeofCommercialLaw)
i.e.................................................................................................................................................................Latin:‘idest’(=thatis)
IAS....................................................................................................................................InternationalAccountingStandards
IFRS...............................................................................................................InternationalFinancialReportingStandards
KfW...................................German:'KreditanstaltfürWiederaufbau'(=GermanNationalDevelopmentBank)
KWKG..........................German:'Kraft-Wärme-Kopplungsgesetz'(=GermanCombinedHeatandPowerAct)
LED.................................................................................................................................................................LightEmittingDiode
Max.......................................................................................................................................................................................Maximum
Mio..............................................................................................................................................................................................Million
N/A...............................................................................................................................................................................notapplicable
NACE.............French:'NomenclaturestatistiquedesActivitéséconomiquedanslaCommunautéEuropéenne'
.........................................(=StatisticalClassificationofeconomicActivitiesintheEuropeanCommunity)
NEEAP......................................................................................................................NationalEnergyEfficiencyActionPlan
p. ......................................................................................................................................................................................................Page
pp...................................................................................................................................................................................................Pages
TPF................................................................................................................................................................ThirdPartyFinancing
UK.............................................................................................................................................................................UnitedKingdom
ListofAbbreviations
6
UN...............................................................................................................................................................................UnitedNations
UNFCCC...........................................................................UnitedNationsFrameworkConventiononClimateChange
USA.........................................................................................................................................................UnitedStatesofAmerica
7
Glossary
Thisglossarycontainsessentialterminologyforthisresearch.InadditiontothosetakenfromtheEnergy
Efficiency Directive (EED) of 2006 (European Parliament, 2006), further key terms are added and
defined below, cross references are highlighted in bold. For reasons of systematic presentation, the
definitionsofthekeytermsarenotsortedalphabetically,butaregroupedtogetherthematicallyinfive
clusters:
• ‘Energy,EfficiencyandcorrespondingLegislation’;
• ‘StakeholderSystem’;
• ‘FinancingMethods’;
• ‘EnergyServiceContracts’;
• ‘AccountingStandards’.
TableG-1–KeyTerms:Energy,EfficiencyandcorrespondingLegislation
ThefollowingdefinitionsarebasedontheEnergyEfficiencyDirective(EED)of2006(EuropeanParliament,2006);furthertermsrelevantinthiscontext,whosedefinitionsarenotprovidedbytheEED,havebeenaddedaccordingly.
Energy
“Allformsofcommerciallyavailableenergy,includingelectricity,naturalgas(…),liquefiedpetroleumgas, any fuel for heatingand cooling (includingdistrict heatingand cooling), coal and lignite, peat,transportfuels(excludingaviationandmaritimebunkerfuels)andbiomass(…)”(EuropeanParliament,2006).CoveredbythedefinitionprovidedbytheEEDareonlytypesandsourcesofprimaryenergy(non-renewable/fossil like natural gas, crude oil, coal; renewable like sunlight, wind, hydropower,geothermalheat)orfinalenergy(likeheatingoil)respectively.Inawidersensethetermenergyalsocansubsumeusefulenergystreams.Examplesofusefulenergystreamsincludesteam,coolingorhotwater,compressedairandelectricity,orfinalserviceslikethermalcomfort(i.e.heatingandcooling)andillumination(Noldenetal.,2016,p.421),aswellasventilation,processheatandmotivepower(Sorrell,2007,p.509).
Reducing useful energy consumption leads to a reduction in final energy use and hence primaryenergydemand.
Inthecontextofthisresearch,finalenergyaswellasusefulenergystreamsareintegratedintheterm‘Energy’.
EnergyEfficiency(EE)
“A ratio between an output of performance, service, goods or Energy, and an input of Energy”(EuropeanParliament,2006).ThedefinitionprovidedbytheEEDwillbeusedinthisresearch.
EnergyEfficiency
Improvement(EEI)
“An increase inEnergy end-use efficiencyasa result of technological, behaviouraland/or economicchanges”(EuropeanParliament,2006).EED’sdefinitionofEEIdoesnotdistinguishbetweenEEIandEnergysaving–thelatterissubsumedtoEEI.
In this research, the following distinction is used:Energy saving refers to a change in consumerbehaviour using existing technology, while EEI refers to lowering Energy use without changingconsumerbehaviour,butwiththeapplicationofspecific–bestavailable–technologies(BAT)thatreduceEnergy consumption (Oikonomou et al., 2009, p. 4787). So, EEI in general is an effect oftechnologicalbutnotbehaviouraland/oreconomicchanges.
BATaretechnologies,thatarealreadydevelopedandsuccessfullyapplied(CagnoandTrianni,2012,p.2).
Furthermore,allactivitieswithinthemeaningofimprovingEEarereferredtoas(EEI)measures,theyarephysicallyandorganisationallyimplementedvia(EEI)projects.
In certain contexts of this research, nevertheless, the terms ‘Measure’ and ‘Project’ may be usedsynonymously.
EEIprojectsconsistofthreemainphases–thedesign,implementationandoperationphases.Thesephasesmaybesubdividedinseveralprocesssteps.
Summing up, in the context of this research EEI can be reached viameasures in the area ofES,providedbyanEnergyServiceCompany (normally inthe formofanEnergyServiceContract),correspondentinvestmentsinBATtobefinancedup-frontmaybefundedbyastakeholderotherthan theCustomer, ingeneralaThirdPartyFinancing organisationusingoneof theFinancingMethods–ortheEnergyServiceCompanyaswell,asthecasemaybe.
Glossary
8
EnergyService(ES)
“The physical benefit, utility or good derived from a combination of Energy with Energy efficienttechnologyand/orwithaction,whichmayincludetheoperations,maintenanceandcontrolnecessarytodeliver the service,which isdeliveredon thebasisofa contractand innormal circumstanceshasproven to lead to verifiable andmeasurable or estimable Energy Efficiency Improvement and/orprimaryEnergysavings”(EuropeanParliament,2006).WithinthedefinitionofEED,thetermESisdefinedinanarrowsense,inwhichacontributionfromaprovider,whichdoesnotnecessarilyhavetobeanEnergyServiceCompany,isalreadyenclosed.Inhisconceptualreview,Fell(2017,p.132)identified173(slightlydiffering)variationsofthetermES.
Inthisresearch,thedefinitionabovefromEEDwillbeusedintheamendedformofDuplessisetal.(2012, p. 268),where services offered by anEnergy Service Company, such as implementationengineeringaswellasfinancialservicesmaybeincludedinES.
AsasubsetofES,Duplessisetal.(2012),usedtheso-calledEnergyEfficiencyServices(EES).Theseare additionally characterised by contractually agreed performance criteria. This additionaldistinctionisnotrelevantforthepurposeofthisresearch.SoEESissubsumedandreferredtoasES.In the literature, ES is also sometimes referred to asEnergy contracting service. Both terms aresynonymous,inthefollowing,onlyESisused.
GermanRenewable
EnergySourcesAct–
GesetzfürdenAusbau
erneuerbarerEnergien
(ErneuerbareEnergien
Gesetz,EEG,2017)
ThepurposeoftheGerman‘GesetzfürdenAusbauerneuerbarerEnergien’(2017)is,aboveallintheinterestofclimateandenvironmentalprotection,toenablethesustainabledevelopmentofenergysupply, to reduce the costs of energy supply for the German economy, to conserve fossil energyresourcesandtopromotethefurtherdevelopmentoftechnologiesforthegenerationofelectricityfrom renewable energies. Another goal is to increase the share of electricity generated fromrenewableenergiesingrosselectricityconsumption.
Theoriginalversionoftheactdatesfrom2000andwasamendedin2004,2009,2012,2014andforthelasttimein2017.Withsignificanceforthisresearch,theactregulatesaboveall...
• ...feed-in tariffs granted for self-generated electricity (the act below – KWKG – regulates thesituationforelectricitygeneratedinCHPplants).
• ...levieschargedbyutilityorganisationinconnectionwithenergyconsumptionofallconsumers(as well as exemptions from these levies for energy-intensive organisations, when certainconditionsaremet),whichinturnareusedtocoverthefeed-intariffsgrantedbythisact.
GermanCombined
HeatandPowerAct–
Gesetzfürdie
Erhaltung,die
Modernisierungund
denAusbau
derKraft-Wärme-
Kopplung(Kraft-
Wärme-
Kopplungsgesetz,
KWKG,2018)
ThepurposeoftheGerman‘GesetzfürdieErhaltung,dieModernisierungunddenAusbauderKraft-Wärme-Kopplung’ (2018) is to increasenetelectricitygeneration fromcombinedheatandpowerplantsintheinterestofsavingenergyandprotectingtheenvironmentandclimate.
Theoriginalversionoftheactdatesfrom2002andwasamendedin2004,2009,2012,2015andforthelasttimein2018.Withsignificanceforthisresearch,theactregulatesaboveall...
• ...feed-intariffsaswellassurchargesforelectricityfromCHPplants.
• ...paymentofbonificationsbygridoperatorsforCHPplants.
• ...allocationofcosts.
Glossary
9
TableG-2–KeyTerms:StakeholderSystem
Basic EEI measures can be executed without advanced support from specialised organisations. In contrast, complex EEImeasures typically require the expertise of specialised and experienced organisations and normally involve significantinvestments,soseveral(atleasttwo)stakeholdersparticipateintheseprojects.FundingofinvestmentscanbeprovidedbyeachofthetwocompulsorystakeholdersofEEIprojectsoranoptionalthirdstakeholder.SomeofthefollowingdefinitionsagainareprovidedbytheEED.
Customer
Asthe initialstakeholderandcompulsorytoanEEIproject, theCustomerorganisation isset.Theconsumption of Energy attributable to this organisation is to be reduced by an EEI measure,implementingBAT.
Customer organisations come from private households, public/ municipal sector, realestate/residential sector as well as the industrial sector. Hence,ES provided byEnergy ServiceCompaniesareseenasanunsuitableoptionforprivatehouseholds.ThisCustomersectoristhereforeomittedinallfurtherconsiderationsinthisresearch.
The public/municipal sector is a major Customer for ES with Energy Performance Contracts.However, the focus of this research is primarily on the field of industrial Customers andEnergySupplyContracts.
EnergyService
Company(ESCO)
“AnaturalorlegalpersonthatdeliversEnergyServicesand/orotherEnergyEfficiencyImprovementmeasuresinauser's[=theCustomer]facilityorpremisesandacceptssomedegreeoffinancialriskinsodoing.Thepaymentfortheservicesdeliveredisbased(eitherwhollyorinpart)ontheachievementofEnergyEfficiency Improvements and on themeeting of the other agreed performance criteria”(EuropeanParliament,2006).ThedefinitionprovidedbytheEEDwillbeusedinthisresearch.
Components of a complexEEI measure can be bundled together in ES. For the purposes of thisresearch ESCOs are seen as providers of ES, so ESCOs are treated as the second compulsorystakeholderinanEEIproject.EEIcanbeseenasthestrategytoreduceEnergyconsumptionthroughtechnology (on the Customer side), as well as the business model for ESCOs, the providers oftechnologyandservicescombinedinES.
InGermany,ESCOsoffercomprehensiveEnergyServiceContractswithatypicalpaybacktimeofbetween five and 15 years (Bertoldi et al., 2007, p. 29), thatmay includeEnergy analysis, audit,managementandcontrolsystems,projectdesign,implementationofEnergyconversion,distributionand control equipment, operation and maintenance of equipment, facility management, primaryEnergy (and/or final Energy) purchase, the supply of useful Energy streams, monitoring andevaluationofsavingsaswellasfinancingofEEIinvestments.ThebusinessmodelofanESCOincludesbillingforservicesinsteadofbillingdirectlyfor(primaryorfinal)Energyused(Fell,2017,p.132),BycontractinganESCO,theCustomercanreduceEnergycostsandtransfertechnicalandfinancialrisks. Through the opportunity for theCustomer to refocus on its core activities, thismodel hasstrongparallelstootherformsofoutsourcing(Sorrell,2007,p.507;Noldenetal.,2016,p.421).
Risks for the business of ESCOs may emerge from volatile primary Energy and dependent finalEnergypricesduringthelongEnergyServiceContractterm.InthecontextofguaranteedsavingsinEPCthesearetobecoveredandbornebytheESCObecauseofperformanceandbillingmechanisms.
The remuneration of the ESCO can be linked directly to the achievement ofEEI and on reachingspecificperformancecriteria(Marinoetal.,2011,p.6191).
ThirdPartyFinancing
(TPF)
“Acontractualarrangementinvolvingathirdparty–inadditiontotheEnergysupplier[theESCO]andthe beneficiary of theEnergyEfficiency Improvementmeasure [theCustomer] – that provides thecapitalforthatmeasureandchargesthebeneficiaryafeeequivalenttoapartoftheEnergysavingsachievedasaresultoftheEnergyEfficiencyImprovementmeasure.Thatthirdpartymayormaynotbe anESCO [in the positive case it is therefore not the third but also the secondparty]” (EuropeanParliament,2006).The definition provided by the EEDwill be used in this research, however, in the context of thisresearchESCOandTPFaredistinctparties.
Asoptional furtherpartyandhencethirdstakeholder, theTPForganisation isrequiredto financethoseEEImeasuresbyTPF,whichcannotbecoveredbytheCustomer'sortheESCO'sinternalfunds.
VariousFinancingMethods are used, depending on a) the type ofEnergy Service Contract, b)underlyingpoliciesconcerninginvestmentsinfixedassetsinrelationtotheAccountingStandardsappliedandc)availableformsofcollateralonthepartofthefirsttwostakeholders.
AccordingtoLabanca(2010,p.50),theTPFcanactascontractualpartnerforoneofthecompulsorytwostakeholders,whichresultsinthefollowingtwoconceptuallydifferentTPFarrangementoptions:
a) TheCustomerborrowsthefinancialresourcesnecessaryfortheEEIproject,or
b) TheESCOborrowsthefinancialresourcesnecessaryfortheEEIproject.Asacollateralinoptionb),thecreditmaybebackedbycontractingratesfromtheEnergyServiceContractbetweentheCustomerandtheESCOshowingthatthepaymentscontractedwillcoverthedebt.TheTPForganisationcanalsotakeovertherightsonEnergysavingsortheinvestedfixedassetsascollateralinoptionsa)andb).GovernmentalfundingschemessuchassubsidiesandtaxdeductionsreducethenetinvestmentrequiredandhencecanbeseenasasupplementtoTPF(Labanca,2010,p.51).
Hence, importantaspectsofTPFarecollateralisationandaccountingissues(capitalisationoffixedassets).
Glossary
10
FurtherStakeholders
DependingonthetypeofEnergyServiceContract,twoorallthreeoftheabovestakeholdersmaybecontractuallyconnected.
In addition, other partiesmay be directly or indirectly involved in an EEI project, such as utilityorganisations,Energyconsultants,manufacturersofEEtechnology(BAT)and(handcraft)installers.
Thesemayactas...
• ...suppliertoanESCOasthesecondcompulsorystakeholder–assuchoutsidetheEEIstakeholdersystem,or
• ...providerofspecificESontheirown–assuchintheroleofthesecondstakeholder(=theESCO)inthiscontext.
EEI,withitsinherentobjectiveofreducingEnergyconsumption,isatoddswithutilityorganisations'businessmodel,whichisbasedonmeetingthe(primaryandfinal)EnergyneedsoftheirCustomers-thehighertheconsumption,thebetter.However,inESCOliteratureutilityorganisationsaretreatedasEEIstakeholders.
Beyondthese(potential)partiesinanEEIproject,otherstakeholdersareindirectlyinvolved,suchas(governmental) authorities – as well as academics, energy consultants and experts and energyagencies.
Thus,inthescopeofthisresearchthestakeholdersystemdoesnotincludeanyotherpartiesbesidesthosethreestakeholdersdefinedaskeytermsabove.
Glossary
11
TableG-3–KeyTerms:FinancingMethods
EspeciallyintheareaofEEIprojectsintheindustrialsectorsignificantinvestmentshavetobefinanced.
Asoptionalthirdstakeholder,aTPForganisationmayberequiredtofinancethosemeasures,whichcannotbecoveredbytheCustomer'sortheESCO'sinternalfunds.
In connectionwith the chosen financingmethod, theAccountingStandards tobeapplied result indifferenteffects for theStakeholders.ThesemainlyrelatetothecapitalisationofEEIequipmentandarealsofurtherexaminedbelow.
Theunderlyingcontractstructureispresentedspecificallyforeachofthemainfinancingmethodsdescribed.
CustomerFinancing
(ownFunds)
TheeasiestwaytofinanceEEImeasuresistousetheCustomer'sownresources.Thetransactioncostsituationofthemeasurealsobenefitsfromsuch‘streamlined’contractdesign.
FigureG-1–FinancingbyCustomer:ContractStructure
ESCOFinancing
(ownFunds)
EEImeasuresmayalsobefinancedbytheESCO,usingownfunds.
FigureG-2–FinancingbyESCO:ContractStructure
Forthefinancing,theESCOchargesadebtservicethatformspartoftheremunerationandispaidover the contract term. Customer or ESCO can achieve economic ownership with this financingmethod.
FinancingofEEIinvestmentsprovidedbytheESCOmayalsoinvolvefundingthroughother(external)instruments–asdescribedinthefinancingmethodsbelowbyusingTPFwiththeESCOascontractualpartneroftheTPForganisation.
ESCOscanuseguaranteedsavingsstreamstosecurethefinancingandserveasmarketaggregatorsby openingEEI project portfolios toTPF (Sarkar and Singh, 2010, p. 5565). Furthermore, ESCOsintroduce a way to facilitate access to commercial financing and to private financing ofpublic/municipalsectorinfrastructure.
LoanFinancing//
HirePurchasing
Inthecaseofloanfinancing,aTPForganisationprovidestheborrowingStakeholder(theCustomer–casea))ortheESCO–caseb))withcapitalfortheEEIinvestment.Incasesa)andc)financingisusedtopaythepurchasepricefortheequipmenttotheESCO.Incase(c),theESCOusesthefundsreceived to refinance its investment.Dependingon thecase,CustomerorESCO respectivelygainlegalaswellaseconomicownershipofthefixedassetsinvested.
Inthecaseofhirepurchase(casec)),theTPForganisationfinancestheEEImeasureandgainslegalownershiponthefixedassets,whiletheeconomicownershipoftheEEIequipmentistransferred–ingeneral – to the Customer. At the end of the hire purchase term, the legal ownership is alsotransferredtotheCustomer.
Figure G-3 – Financing by TPF Organisation: Method of Loan as well as Hire Purchase Financing;ContractStructureinthreecasesBasedon(Bleyl-AndroschinandSchinnerl,2010,pp.19-35)
Theloanincasesa)andb)(orthehirepurchaseincasec))issettledoverafixedperiodoftime,withaschedulednumberofinstalments(=debtservice).Theseinstalmentshavetocoverthetotaloftheamountborrowed(orthepurchasepricerespectively)andresultinginterestrates.
Concerning capitalisation of assets, in the case of loan financing as well as hire purchasing nosubstantialdifferencescanbeseenbetweentheAccountingStandardsconsidered.
Lease
LeaseisanotherwayofobtainingtheusagerightofanassetfromanEEImeasure,hencetheeconomicbutnotthelegalownership.Inafirststep,theequipmentinvestedissoldfromtheESCOtotheTPForganisation,thatpaysforthepurchaseprice.Then,theuser(theCustomerortheESCO)onlyhastopayfortheuseoftheassetinformofleaseinstalments(=debtservice),whileexclusiverightstothisuse are granted by the (legal) owner. Lease is based on a contract between the owner (TPForganisation=thelessor),andtheuser(CustomerorESCO=thelessee).
CustomerLEGALand
ECONOMICOwneroffixedAssets
ESCO
FundingCapitalisationoffixedAssets
EnergyServiceContract
Customer(ECONOMICOwneroffixedAssets)
ESCOLEGAL(and
ECONOMIC)OwneroffixedAssets
Funding(CapitalisationoffixedAssets)
EnergyServiceContractincl.DebtService
(CapitalisationoffixedAssets)
Customer(a)LEGALand)c)ECONOMICOwneroffixedAssets)
ESCO(b)LEGALand
ECONOMICOwneroffixedAssets)
TPF(c)LEGALOwnerof
fixedAssets)
a)LoanContract//c)HirePurchaseContract b)LoanAgreement
a)//c)EnergyServiceContract
b)=a)incl.DebtService
Funding
a)//c)CapitalisationoffixedAssets
b)CapitalisationoffixedAssets
Glossary
12
Twobasicleasetypescanbedistinguished:operateleaseandfinancelease.ThedistinctionisrelevantwithregardtocapitalisationaspectsresultingfromAccountingStandards.
Beyondthattherearealsomorecomplicatedleasemodelswhichdistinguishbetweenfull-andpart-amortisation(withresidualvalue)contractsaswellascontractsincludingadvancepaymentsornot,allofwhichareapplicabletoESfinancing.Theirdetailswillnotbefurtherinvestigated.
Inthecaseofoperatelease,thelessorholdsbothlegalandeconomicownershipoftheinvestedfixedassets.Thisenablesanoff-balancesolutionforboththeCustomer(casea))and/ortheESCO(caseb)),i.e.theoperateleasedoesnotrequiredisclosureinoneofthebalancesheetitemsofoneofthesetwostakeholders.
Figure G-4 – Financing by TPF Organisation:Method of Lease Financing (Operate Lease); ContractStructureintwoCasesBasedonBleyl-AndroschinandSchinnerl(2010,pp.36-58)
Onthecontrary,inthecourseofthefinanceleasethelessee(i.e.theCustomer,casea)orESCO,caseb))receivestheeconomicownershipofthefixedassetsinvested,whichontheonehandleadstotheircapitalisation andon theotherhand to the recognitionof corresponding liabilities in thebalancesheet.
Figure G-5 – Financing by TPF Organisation:Method of Lease Financing (Finance Lease); ContractStructureintwoCasesBasedonBleyl-AndroschinandSchinnerl(2010,pp.36-58)
Up to now, there have been no significant differences concerning lease accounting between theAccountingStandardsconsidered.
ThenewIFRS16standardhasnowresultedinchangesintheaccountingtreatmentoffinancelease–onthepartofboththeCustomerandESCO.
Forfeiting
Withforfeiting,inafirststep,theCustomeracquirestheimplementedEEIequipmentfromtheESCOand thereby becomes the legal and economic owner. The associated purchase price is not paidimmediatelybutoverthetermandasapartoftheEnergyServiceContracttotheESCO.
TheESCO as theoriginal creditor cedes its claims in future receivables from theEnergyServiceContracttotheTPForganisation,that,asthenewcreditorgainstherighttoclaimfutureinstalmentsfromtheCustomerasthedebtor.TheTPForganisationbuysthisportionoffuturecontractingratesfrom theESCO and on return pays a discounted present value. Finally, theCustomer has to paycontractingratestotheESCO,thathastoforwardthecededinstalmentstotheTPForganisation.
FigureG-6–FinancingbyTPFOrganisation:MethodofForfeiting;ContractStructureBasedonBleyl-AndroschinandSchinnerl(2010,pp.59-72)
Concerningcapitalisation,inthecaseofforfeitingnosubstantialdifferencescanbeseenbetweentheAccountingStandardsconsidered.
Collateralisation
Ingeneral,TPFrequiresacollateralinreturnforthegrantoffunds,eitherfromtheCustomerortheESCO. In the context of ES, there are various forms of collateralisation (Bleyl-Androschin andSchinnerl,2010).
Customer ESCO
TPFLEGALand
ECONOMICOwneroffixedAssets
a)LeaseContract b)LeaseContract
a)EnergyServiceContract
b)=a)incl.DebtService
FundingCapitalisationoffixedAssets
Customer(ECONOMICOwneroffixedAssets)
ESCO(ECONOMICOwneroffixedAssets)
TPFLEGAL(and
ECONOMIC)OwneroffixedAssets
a)LeaseContract b)LeaseContract
a)EnergyServiceContract
b)=a)incl.DebtService
Funding
(a)CapitalisationoffixedAssets) (b)CapitalisationoffixedAssets)
CustomerLEGALand
ECONOMICOwneroffixedAssets
ESCO
TPF
EnergyServiceContractincl.DebtService
Funding
ForfeitingContract
CapitalisationoffixedAssets
Glossary
13
Dependingonthedebtor(CustomerorESCO),essentialformsofcollateralare...
• ...projectbased,e.g.:
o Waiver of the objection on debt service, i.e. thewaiver of paying certain portions of theremunerationfromtheEScontractintheeventofdefaultinordertocoverthedebtservice
o Cessionofreceivables,i.e.theESCOasdebtorcedesfuturecontractingratesorfeed-intariffsfromtheCustomer
• ...financial,e.g.:
o Guarantee,i.e.abankore.g.theparentcompanywarrantsfortheCustomerorganisation
• ...tangible,e.g.:
o Easement,i.e.reservationofpropertyrights
o Mortgage,i.e.registrationofdebtinalandregister
o Pledge,blanketassignment
o Legalownershiponfixedassetsinvested
Glossary
14
TableG-4–KeyTerms:EnergyServiceContracts
ESaredeliveredonthebasisofdistinguishableEScontracttypes.Inthesecontracts(concludedbetweenCustomerandESCO),detailsandtechnicalaspectsoftheequipmentandEnergystreams,financing,decisionrightsandrightsofownership,savingguaranteesandpaymentsaswellasdiversificationofrisks(performance,Energyprices,credit)typicallyaredocumented.
GeneralAspects
Inhispaper,Sorrell(2007)developedaframeworkofthesedifferenttypes.So,typicalEScontractsin common have the incentivising of the ESCO tomaintain and improve the performance of themeasureovertime.Inaddition,thecontractscovercontentsuchas...
• ...implementationofmeasure,i.e.BATforEnergyconversion,distributionandcontrol,
• ...fundingoftheinvestmentorprovision(byTPF),
• ...assumptionofrightson...
o ...decision over useful Energy streams and final services as well as over organisationalactivitiestoprovidethesewithinthesiteoftheCustomer,
o ...ownershiponthefixedassetsnecessarytoprovidetheseES,
• ...guaranteeofreductionsofEnergyconsumptionandhencecorrespondingcosts,
• ...coverageofrisksrelatedtotheprovisionofESlike...
o ...(technology)performancerisk,
o ...Energypricerisk,
o ...creditrisk.
FollowingSorrell(2007,p.508),allEScontractscanbedescribedbythefollowingthreevariables:
• Scope–maybedefinedastheamountanddegreetowhichusefulEnergystreamsaswellasfinalservicesareunderthecontroloftheESCO;scopemayrangefromasingleusefulEnergystreamorasinglefinalservicetoallusefulEnergystreamsandallfinalservicesfortheentiresiteoftheCustomer.
• Depth–canbeseenastheamountoforganisationalactivitiesundercontroloftheESCOrequiredtoprovidetheusefulEnergystreamorthefinalservice–setbythescopeofthecontract;depthmayvaryfromonestreamorservicetoanother,henceitislikelytoberelativelyhomogeneousoverthestreamsandtheservices;theprovisionofeachusefulEnergystreamorfinalserviceinvolvesseveralorganisationalactivities,includingpurchaseofprimaryandfinalEnergy,designengineering and financing of the project; specification, purchasing, implementation andmaintenanceofequipment;operationandcontrol,monitoringandverificationofperformanceofmeasure.
• Sourceoffunding–referstotheFinancingMethodfortheinvestmentintheEEImeasure;ingeneral,EScontractsinvolveinvestment.
In the maximum value of scope and depth, all Energy systems and services and correspondingactivitiesfortheentiresiteoftheCustomerofthisESmaybeoutsourcedtotheESCO.
According from their characteristics from thevariabledepthamainpairof contract types canbecontrasted:
• EnergySupplyContract(ESC);
• EnergyPerformanceContract(EPC).
Maindifferentiatorsaretheassignmentof thecontrolover finalEnergyuseandthepossibilityofreducingfinalEnergyconsumption,hence,theassignmentofperformancerisksofthemeasurement(PätäriandSinkkonen,2014,p.265).
Thesetwomaincontracttypesaredescribedinmoredetailbelow.
EnergySupply
Contract
(ESC)
ESC–alsoknownasEnergydeliverycontracts–arefocusedonthesupplyofoneorasetofusefulEnergystreamsorfinalservicesviaoutsourcingofthesupplytoanESCOasserviceprovider.TheESCOmayalsotakeoverthepurchaseoffuelandelectricity.Remunerationsnormallyarecalculatedonthebasisof theavailableEnergybillsof theCustomer, reducedbycertain levelsofsavingsaspriceperunitofEnergy typeorservice(NoldenandSorrell,2016,p.1407),orpersquaremetrerespectively,whereapplicable(Bertoldietal.,2014,p.7),andmayincludeasurchargefortheserviceaswellasforavailabilityguarantees.
TheESCOgetscontroloverEnergyconversionequipment(fromprimaryandfinalEnergytousefulEnergystreamsandfinalservices)buthaslittleornocontroloverthedemandfordeliveredEnergy(Sorrell,2007,p.510).Hence,EEImeasuresintheareaofESCO’sresponsibilityareaimedsolelyonconversionequipment.So,theESCOhastocoverlessperformanceriskthancharacterisedbyEnergyPerformanceContracts(PätäriandSinkkonen,2014,p.265)andrathernoenergypricerisks.
EnergyPerformance
Contract(EPC)
“Acontractualarrangementbetweenthebeneficiaryandtheprovider(normallyanESCO)ofanEnergyEfficiency Improvementmeasure,where investments in thatmeasure are paid for in relation to acontractuallyagreedlevelofEnergyEfficiencyImprovement”(EuropeanParliament,2006).ThedefinitionprovidedbytheEEDwillbeusedinthisresearch.
EPCsarefocuseduponthedeliveryoffinalserviceslikeheating,lighting,refrigerationatanagreedannualEnergycostbelowadefinedbaseline(NoldenandSorrell,2016,p.1407).
In contrast to theESC, in anEPC theESCO notonlyguarantees for theavailabilityof theEnergydemandedbutalsoforapreviouslyagreedlevelofsavingsfromEnergycosts(BertoldiandRezessy,2005,p.18)–thustheoverallperformanceoftheEEImeasure.Inthemostcomprehensivecontracts,theESCOhascontroloverthedemandforfinalEnergyservicesandthereforeoverthedemandforusefulanddeliveredenergy,andhencethecompleteusefulEnergystreamsandfinalservicesforthe
Glossary
15
Customer’s site (Sorrell, 2007, p. 511). So, theESCO has overall control of both the demand fordeliveredEnergyandthetotalcostofprovidingfinalES.
Theremunerationforthisserviceisbasedonandconnectedtothedemonstrationoftheperformanceofthemeasure(PätäriandSinkkonen,2014,p.265).
EPCmay be an instrument to deliverEEI toCustomers that lack skills, manpower, funding andunderstanding of risk or technology. Credit-worthy but cash-poor organisations therefore arepotentially good Customers for EPC, as EEI measures may solely funded from cost reductions(BertoldiandRezessy,2005,p.18).
From themodeof riskdiversification–or funding respectively, two subtypesofEPCaredistinct.AccordingtoLimayeandLimaye(2011,p.137)andBertoldietal.(2006,pp.1821-1822),themaincriterionisthesourceoffunding–providedbytheCustomer(frominternalfundsorTPF),orbytheESCO(alsofrominternalfundsorTPF):
• Sharedsavings:Inthissubtype, fundingingeneral isprovidedonthepartoftheESCO,whichassumesthecreditriskandinturngetsashareofthesavingsrealisedbytheEEImeasure,sothattheESCOcanrecoveritsimplementationcostsandobtaintherequiredreturnonitsinvestment(Bertoldi et al., 2014, p. 6). At the end of the contract, the equipment invested passes to theCustomer,aswellasallfollowingsavings.PerformanceandEnergypriceriskinthissubtypearecoveredbytheESCO(Qinetal.,2017,p.424).
• Guaranteed savings: In this subtype, theCustomer takes the credit risk by financing theEEImeasureinternallyorbyTPF.Inreturn,theESCOtakestheperformanceriskbyguaranteeingacertain level of Energy savings. Any breach of the guaranty shall be borne by the ESCO byreimbursing the remaining amount to the Customer, any excess of the guarantee shall bedistributedbetweenCustomerandESCOaccordingtothequotasagreedupon(Qinetal.,2017,p.424).
Glossary
16
TableG-5–KeyTerms:AccountingStandards
AccountingStandardsdefinetheprinciplesaccordingtowhichcompaniesmustpreparetheirannualfinancialstatements.Inthecontextofthisresearch,theregulationsdescribedbelowaswellasdifferencesbetweenthesestandards,accordingtowhichthebalancesheetreportingoffixedassets(i.e.theircapitalisation)frominvestmentsinEEImeasuresinconnectionwiththevariousFinancingMethodsareregulated,areofparticularimportance.
Inadditiontolocalaccountingstandards,inGermanytheapplicationofinternationalstandardsisalsopermittedundercertaincircumstances.Thisisimportantforinternationallyactiveorganisationsaswellasforthoseinvolvedinthecapitalmarkets.
GermanCommercial
Code(GermanGAAP)–
Handelsgesetzbuch
(HGB,2018)
The HGB contains the core of commercial law in Germany. It regulates the legal relations of themerchants,inits3.book(§§238-342eHGB)thetradingbooksaretreated.
In§246HGBitisregulatedthatfixedassets(property,plantandequipment)aretobeincludedintheowner'sbalancesheet.Ifeconomicandlegalownerdiffer,theassetmustbeaccountedforbytheeconomicowner,measuredatacquisitioncost.TheFinancingMethodusedintheEShasanimpactonwhichstakeholderassumestheroleofeconomicowner.
InthecaseofLoanFinancing,theborrower(CustomerorESCO)andinthecaseofForfeiting,theCustomeristheeconomic(andalsothelegal)owner.
InthecaseofaHirePurchase,theCustomeristheeconomicownerrightfromthestartandalsoassumeslegalownershipattheendofthecontractterm.
In the caseofLeaseFinancing, economicownershipdependson its specific form, two formsaredistinct:‘Financelease’and‘Operatelease’.Inthefirstcase,economicownershipisallocatedtothelessee(theCustomerortheESCO,inthesecondtothelessor.
CapitalisationofLeaseFinancingisgovernedbydecreesoftheGermanFederalMinistryofFinance.Amongotherthings,leaseisregardedasfinancelease,hencethelesseeisregardedastheeconomicowner,if...
• ...theleaseisafullamortisationleaseformovableassets,• ...theleasetermisbetween40%and90%oftheusefullifeofthefixedassetandthelesseehasa
bargainpurchaseoption,• ...theleasetermislessthan40%ormorethan90%oftheeconomiclifeoftheassetwithouta
bargainpurchaseoption;or• ...theleasedassetisofaspecialisednature,sothatonlythelesseecanuseitwithoutsignificant
modifications.LeaseunderHGBthereforebasicallyoffersthepossibilitytostructureanoff-balancesolutionforbothCustomerandESCO,aslongastherequirementsforanoperateleasearemet.
Anoff-balancesolutionisadvantageousforcertainbalancesheetratios,whichareused,amongotherthings, toassesscredit-worthinessorareregulatedincovenantsofexistingcreditagreements.Anexampleofthis isthedebt-equityratioontheliabilitiesside,whichwouldbeworsenedbyanon-balancesolution.Thesameappliestotheinvestmentintensity,aratioontheassetssideofthebalancesheet.
InternationalFinancial
ReportingStandards
(IFRS,2019)
TheInternationalFinancialReportingStandardsFoundation(IFRSFoundation)wasestablishedtodevelop consistent and globally recognised accounting standards and to promote the adoption ofthesestandards(TheInternationalFinancialReportingStandardsFoundation,2019).
The International Accounting Standards Board (IASB) is the independent, accounting standard-settingbodyoftheIFRSFoundation.Initially,the‘InternationalFinancialReportingStandards’(IFRS)werepublishedbythisboardunderthename‘InternationalAccountingStandards’(IAS).
The standard IAS 16 regulates the accounting treatment of fixed assets (property, plant andequipment).Fixedassetsmustbecapitalisedifitisprobablethatfutureeconomicbenefitswillflowtotheorganisationandthecostscanbedetermined.So,analogoustoHGBinGermany,IAS16requirestheeconomicownertocapitalisethefixedasset,measuredatfairvalue.
With regard to the differentFinancingMethods, comparable treatmentmethodswere thereforeappliedforthesetwoaccountingstandardsatthetimeofIAS16.WithregardtoLeaseFinancing,IAS17distinguishedbetweenfinanceandoperatingleases–alsoinanalogytoHGB–andprovidesforcorrespondingaccountingfortheseleases.
WiththestandardIFRS16,theIFRSFoundationhasintroducedanewstandardonleasesthatistobeappliedfrom01/01/2019atthelatest.
Adistinctionbetweenoperatingandfinanceleasescontinuestobemadewithinthisstandard,butthisaloneaffectsthebalancesheetitemwithinwhichboththelessorandthelesseearerequiredtoreport.Thisstandardno longerpermitsanoff-balancesolutionfor the lessee,as the lesseehastoaccount for either a fixed asset or a right of use and also a liability as an obligation to pay leasepayments.Thisistobeappliedforallleaseswithatermofmorethan12monthsunlesstheunderlyingassetisoflimitedvalue.Existingleasesituationsatthetimeofintroductionarealsoaffectedandmustbetreatedaccordingly.
According to thenew standard IFRS16, lease contracts canno longer bedesigned as off-balancesolutionsfortheCustomerandtheESCO,sothatthetreatmentofleasecontractsaccordingtoHGBandIFRSisclearlydifferent.
17
Chapter1: Introduction
Theworld'senergydemandhasbeenrisingcontinuouslyfordecades(Abdelazizetal.,2011,p.152).A
correlatedincreaseinenergyproductionbasedonfossilenergyresources(SuganthiandSamuel,2012,
p.1224)ledandisstillleadingtoanincreasingreleaseofthegreenhousegascarbondioxide(CO2),to
whichglobalwarmingisattributed(Ürge-VorsatzandMetz,2009,p.87).TheorganisationoftheUnited
Nations(UN)attachedextraordinaryimportancetothisissueforhumankind,hencetheKyotoProtocol
signedon11/12/1997(UNFCCC,1998),asanadditionalprotocol to theUnitedNationsFramework
ConventiononClimateChange(UNFCCC),setbindingtargetsunderinternationallawforthereduction
of CO2 emissions in industrialised countries. For many of these countries, a reduction in energy
consumptionhasthereforebeenonthepoliticalagendaeversince,topursuethesetargetstheEuropean
Union(EU)subsequentlygeneratedpapersandplansforthememberstates.
On05/04/2006,theEuropeanParliamentandtheCounciloftheEuropeanUnionimposedthedirective
2006/32/EC (European Parliament, 2006) on energy efficiency and energy services (the ‘Energy
EfficiencyDirective’,EED).ThetargetoftheEEDwasanimprovementinenergyefficiency(EE)within
theEU.TheEUmemberstatescommittedthemselvestoareductionofenergyconsumptionof9%by
2016inrelationtotheaverageprimaryenergyconsumptionofthebaseperiodof2001to2005.This
proposedreductioninenergyconsumptionwastobeachievedthroughcorporateenergyservices(ES)
andothermeasuresonthedemandside.ThroughthestimulationoftheESmarketandanincreasein
EEinallconsumersectorswithintheEUmemberstates,theefficientuseofenergyandsoareduction
ofprimaryenergyconsumptionshouldbeobtained.EachoftheEUmemberstateswasfreeinthedesign
ofitsindividualmeasuresandinstruments.From2007,circaeverythreeyears(2007,2011and2014),
everyEUmemberstatehashad toevaluate itsownrealisationof theEED in the formofaNational
EnergyEfficiencyActionPlan(NEEAP),andtoreporttotheEuropeanCommission(EC).
On04/12/2012–afteradoptionbytheEuropeanParliamentandtheCounciloftheEU–thedirective
2012/27/EU (European Parliament, 2012) came into effect replacing the directive 2006/32/EC. It
incorporated many measures of the preceding EED with the aim of reducing the primary energy
consumption of the EUmember states until 2020 by 20% in comparisonwith projections without
measures.The focuswas setonenergyefficiency improvement (EEI)obligationsof theEUmember
states.Eachhadtoensurethereductionofannualenergyconsumptionbetween2014and2020by1.5%
oftheaverageannualenergyconsumptionofthebaseperiodof2010to2012.Again,eachoftheEU
member stateswas free in thedesignof its individualmeasures and instruments.Theobligation to
documenttheachievementoftargetsviaNEEAPscontinued.
RecommendationsoftheEUCommissionfrom2014forfurtherEEDshavescheduledareductionofCO2
emissionsby40%incomparisonwiththesituationof1990–tobereachedthroughfurtherreductions
of primary energy consumption, as well as the extension of energy generation from renewable
resources.
WithDirective(EU)2018/2002(EuropeanParliament,2018)oftheEuropeanParliamentandofthe
Councilof11/12/2018,thepreviousEEDfrom2012wasamendedandsupplemented.Amongother
Chapter1:Introduction
18
things, the EU laid down new rules on EE for its member states. The previously existing target of
reducing overall primary energy consumption by 20% in comparison with projections without
measureswasextendedto2030,andthereductionsinprimaryenergyconsumptiontobeachievedwere
fixedat32.5%.
ThesubstantiationofthesetargetsbyappropriatemeasuresagainwasthetasktotheEUmemberstates,
tobedocumentedintheirNEEAPs.
After2007withthefirst(FirstNationalEnergyEfficiencyActionPlan(NEEAP)oftheFederalRepublic
ofGermany,2007)and2011withthesecond(SecondNationalEnergyEfficiencyActionPlan(NEEAP)
oftheFederalRepublicofGermany,2011),in2014,thegovernmentoftheFederalRepublicofGermany
published the third NEEAP (Third National Energy Efficiency Action Plan (NEEAP) for the Federal
Republic of Germany, 2014). In the firstNEEAP, the overall strategy and importantmeasureswere
outlined.Inadditiontogovernmentalmeasures,italsoincludedcontributionsthroughactionsofother
actors.WiththesecondNEEAP,thedegreeofachievementofreductionofenergyconsumptiontargets
and provided information about the conditions, the status and the success of EE measures and
instruments, and their respective reduction of energy consumption for the EU Commission was
documented.
CommontoallpreviousNEEAPswastheassignmentofakeyroletoenergyservicecompanies(ESCOs,
for definitions and details of key terms regarding the stakeholder system of EEI projects refer to
glossary, p. 9 and following) for achieving the consumption reduction targets by means of the
disseminationandincreaseofEE.ThemarketforESwasexplicitlyidentifiedasagrowthmarketinthe
industrial, real estate and in the public/municipal sector. The requirement for these organisations’
successwasthecreationofanappropriateenvironment.ThethirdNEEAPin2014addedanoverview
ofthecurrentandexpectedfuturedevelopmentofthemarketforESinGermany.
ThegovernmentoftheFederalRepublicofGermanyhasnotyetsubmittedanupdateoftheNEEAPbased
ontherevisedEEDfrom2018.Thedefinitionoffurthermeasuresappearsnecessaryinordertoachieve
theobjectivesset.
1.1 BackgroundoftheResearchandRationale
ItcancurrentlybeassumedthatthesavingstargetssetbytheEEDsfortheFederalRepublicofGermany
for2020willnotbeachieved.
Duetothecomplexityoftheissue,thecausesaremanifold,butitcanbeexpectedthatdevelopmentsin
theareaofEEandESwerealsobelowthetargetedmagnitude,theforecastsandtheexistingpotential.
Thisresearchwillfocusonthebackgroundtothissituation.
From October 2010 to February 2017, the researcher was himself employed in a commercial
managementfunctionatanESCOandthushaddirectinsightsintothismarketandalreadyhadin-depth
knowledge of the interrelationships and essential factors of this branch of business.Working with
colleagues,CustomersandTPForganisations, theresearchergainedan immediate impressionof the
existenceofbarriersthataffectedtheimplementationofEEImeasures.
Chapter1:Introduction
19
Notleastwiththispracticalbackgroundofexperience,theresearcherwasconvincedthat...
• ...climate protection and the achievement of the above-mentioned UN aswell as the EU targets
derivedfromthemhadtobeaccordedthehighestpriority,
• ...existingresourcesweretobesecuredinthebestpossiblewayforfuturegenerationsandtherefore
hadtobehandledresponsibly–thisappliedinparticulartotheuseoffossilenergyresources,
• ...EEanditsdisseminationwasofgreatimportanceinthiscontext,
• ...ESandESCOs,thatpursuedEEthroughESasabusinesspurposehadausefultooltoachievethese
targets–althoughtheyhadnotyetachievedthesuccesstheycould.
DuetotheexistingaccesstopotentialresearchparticipantsandtheknowledgeaboutthelocalNEEAP
aswellastherelatedlegislation,thisresearchconcentratedontheindustrialsectorinadditiontothe
regional focus on Germany due to the comparatively large potential in connection with significant
investmentvolumefromrespectivemeasures.Consideringthethematicbreadthofthevariousbarrier
aspectsandtheneedtoenableawell-foundedinvestigationofaclearlydefinedsubject,thisresearch
waslimitedtotheareaofeconomicbarriers.Forthispurpose,aresearchapproachwaschosenthathas
notpreviouslybeenapplied,atleastforESintheindustrialsectorinGermany.
Theresearcherwasparticularlyinterestedindevelopingrecommendationsforstakeholdersandpolicy-
makers,therebymakinganimportantcontributiontoovercomingtheseeconomicbarriers.
1.2 ResearchObjectives
Theaimofthisresearchwastogaindeeperunderstandingofthe...
• ...significanceofeconomicbarriersforESandEEIprojectsforCustomersfromindustrialsectorin
Germany,aswellas
• ...influencingfactorsfromspecificstakeholdersituations(e.g.withregardtotheirrequirementsand
prerequisitesforfinancing,capitalisationoffixedassetsandcollateralisation)andcorresponding
stakeholderconstellationswithregardtoeconomicbarriers,
inordertodevelop...
• ...recommendationsforpolicyandpracticetoovercomethesebarriersandthustoreducetheso-
calledenergyefficiencygapandtopromotethedevelopmentofESCO'sGermanbusiness,andwhere
appropriate,
• ...furthertheexistingconceptualframeworksintheareaofeconomicbarriersonthebasisofthe
datacollected,providedthatgapsinliteratureareidentified.
1.3 ResearchQuestions
Basedontheobjectivesabove,thefollowingthreeresearchquestionswereformed:
WhicheconomicbarriersforESandEEIprojectsforCustomersfromindustrialsectorinGermanycan
beidentifiedassignificant?
Chapter1:Introduction
20
Howdospecific stakeholder situationsandstakeholderconstellations influence theemergenceand
significanceofeconomicbarriers?
WhatpreventsESCOsfromavoidingorremovingtheseeconomicbarriersthatinhibittherealisation
anddevelopmentoftheirbusinessandwhichmeasures(e.g.policy,businesspractice)couldhelpto
overcomethesebarriers?
Thisresearchaimedtoattainsoundanswersforthequestions.Thesewereformedviaempiricalstudy,
thatwascarriedoutasamultiple-casestudy.
1.4 StructureoftheResearch
Thisresearchisstructuredlinear-analytically.Itisbuiltuponsixchapters(includingthisintroductory
part).
AfterthisintroductioninChapter1,itisorganisedintwomainpartsasfollowed:
Inthefirstpart,consistingofChapter2andChapter3,thetheoreticalbackgroundoftheresearchis
introduced:
• InChapter2,therelevantliteratureinthisareaisreviewedtoexaminetheenvironmentoftheobject
ofinvestigationandidentifygapsforthisresearch,andtheselectionofanappropriatetheoretical
frameworkispresented.
• InChapter3,thetheoreticalandmethodologicalfoundationsofthisresearcharedescribed,howits
qualityistobeguaranteedisexplained.
Thesecondpart,composedofChapter4toChapter6,consistsoftheempiricalcontentofthisresearch:
• Chapter4dealswithdatacollectionandanalysis.Followingadescriptionoftheunderlyingprocess
anddiscussionofethicalissues,thespecificCasesofthemultiple-casestudyanddifferingsituations
ofthestakeholdersinvolvedarecontrasted.
• InChapter5,analysesandfindingsderivedarepresented.
• Chapter6summarisesandconcludes.Theresultsarediscussed,referencetotheresearchobjectives
and questions is made and contributions to knowledge, limitations as well as emerging
opportunitiesforfutureresearcharepointedout.
DefinitionsofimportanttermsofthisresearchareprovidedintheGlossary(refertop.7andfollowing).
Detailsonthetheoreticalframeworksfromwhichtherelevantoneappliedforthisresearchisselected
inChapter2canbefoundinAnnexA.1–A.9.
21
Chapter2: LiteratureReview
ThecoreelementofthischapterisacriticaloverviewoftheliteratureonEEI,theESandESCOmarket,
barrierissuesandtheirempiricalevidence.
Gaps in the literature not yet covered are identified and form the starting point for this research.
Furthermore,abarrierframeworkasthetheoreticalbasisisselectedfromliterature.
Withinthecontextofthisresearch,theliteratureonthespecificsituationofthemarketinGermanyis
particularlytakenintoaccount.
2.1 EnergyEfficiencyImprovementMeasuresandEnergyServices
Todayenergyisusedinallareasofhumanlife,onthelevelofenergyconsumerseverysingleentityisa
potentialtargetofEEI,wheremeasurestoreduceenergyconsumptioncanbeimplemented.Estimates
oftheeffectsfeasiblethroughEEIvaryintheliteraturebutdoshowsignificantpotentialingeneral.
Theshareofglobalpublicandbuildingslightingisassumedtoreachabout20%ofthetotal(final)energy
consumption.Inthisarea,anefficiencypotentialofatleast50%isestimated(SarkarandSingh,2010,
p.5561).Inthecaseofmunicipalstreetlighting,asavingspotentialofupto90%,throughtheuseof
efficient light-emitting diodes (LED – as best available technology (BAT) in this area) instead of
conventionaltechnologyseemstobefeasible(Polzinetal.,2016a,p.133).
Representing amajor source of cost for the public/municipal sector, energy use can be seen as an
importantpoint forEEImeasures.Furthermore,EEImeasures inpublic facilitiescanalsoserveasa
stimulus to the ESmarket, as it fosters the awareness of EE programs and policies in general and
provides benchmarking data for the development of new programs and policies as well as a
comprehensivedatarecordofEEImeasuresasacalculationbaseforfuturemeasures(Hopperetal.,
2005,p.83).
More important, however, is the industrial sector: The share of global (final) energy consumption
ascribedtoitrangesfromalmostonethird(ChaiandYeo,2012,p.460;Fleiteretal.,2011,p.3100)to
50%(Cagnoetal.,2013,p.291;Catarinoetal.,2015,p.995;Triannietal.,2013,p.444).Estimatesshow
anefficiencypotentialof30-40%onthisconsumptionacrossmanyindustrialsectors,usingBAT(Sarkar
andSingh,2010,p.5561).So,theindustrialsectorcanbeseenasanevenmoreimportantpointforEEI
measures with significant potential to reduce energy consumption in comparison to the
public/municipalsectorandbuildingslightingarea.
Pricelevelsofenergy(primaryaswellasfinal)playacrucialroleintheevaluation,implementationand
profitabilityofanEEImeasure(BertoldiandBoza-Kiss,2017,p.352):Rationalactorsmakedecisions
underaneconomicperspectivetomaximisetheirutility.Ameasureinwhichtheutilityexceedsthecost
isadvantageous.Theutility(i.e. thereturnon investment)ofanEEImeasure is thesavings thatare
generatedbyreducingenergyconsumptionandhencecorrespondingenergycosts.ThedemandforEE
thereforedependson thepriceofprimaryand final energy in relation to thepriceof a specificEEI
Chapter2:LiteratureReview
22
measure.Highpricesofprimaryand finalenergyenablehigheconomicsavings fromEEI.Hence,an
increaseinthesepricesraisesthedemandforEEI.
So,onacorporateleveltheimplementationofEEImeasurescanpositivelyaffectfinancialperformance
(Fan et al., 2017). By reducing the use of energy and without changing the user behaviour a cost
reduction,andbythisanimprovedcorporatecompetitivenesscanberealised(ChaiandYeo,2012,p.
460). To reach significant effects, investments in BAT focus on replacing major energy using
technologies.
ESCOsaretheprovidersofESwithinwhichEEImeasuresarerealised.Asignificantinfluenceonthe
reduction of energy consumption through the activities of ESCOswas already demonstrated from a
comprehensiveperspectiveinthepaperofFangetal.(2012).Inaquantitativeempiricalmodelbased
onpaneldatafromtheperiod1981to2007fromatotalof94countries(includingGermany),short-
termreductionsofenergyconsumptionof3.8%andlong-termreductionsof39.7%wereshown.
SeveralpaperstriedtogainanoverviewoftheESmarket,itshithertodevelopmentandactualstatusin
differentcountriesorregions.TheESmarketsinEurope(BertoldiandRezessy,2005;Bertoldietal.,
2006;Bertoldietal.,2007;Marinoetal.,2010;Bertoldietal.,2014)andinatotalof38countriesoutside
theUSA(Vine,2005)werecovered.InthepaperofOkayandAkman(2010),selectedcountryindicators
wereincludedtoassessESdevelopmentincomparisonwithmacroeconomicdevelopment.
Amongothers,theESmarketinGermanywascoveredbyalloftheseinvestigations.AccordingtoVine
(2005,p.693), the firstESCOswereestablished inGermanybetween1990and1995– later than in
several other European countries (e.g. Hungary, Italy, Sweden and the UK, where first participants
enteredthemarketintheearly1980s).However,afterastrongdevelopment,thecurrentGermanES
marketisratedasthelargestandmostadvancedinEurope(Marinoetal.,2010,p.8).
Concerningitsrevenues,publishedvaluesforGermanmarketareinconsistentbutdoseemtoindicate
anincreasingvolumeoverthelast15years:BertoldiandRezessy(2005,p.45),aswellasBertoldietal.
(2006,p.1825)statedanannualturnoverofevenEUR3,000Million(Mio.)in2003,whileanassessment
ofMarinoetal.(2010,p.26)for2008amountedtoanannualturnoverofonlybetweenEUR1,700and
EUR2,400Mio.Latestassumptionson2013marketsizebyBertoldietal.(2014,p.78)amountedtoa
spanbetweenEUR3,500and5,000Mio.Retrospectively,theannualturnoverin2013wasvaluedatEUR
3,000to4,000Mio.(BertoldiandBoza-Kiss,2017,p.350).
Obviously,accuratefigurescannotbederivedforthisspecificmarketsector,neverthelessagrowthover
thelast15yearsseemstoberecognisableandistobeassumed.
It is also unclear towhat extent the above-mentioned turnover figures include revenues of energy
passedthrough(ifprimaryandfinalenergyispurchasedbytheESCOandthensoldtotheCustomer
directlyoreveninarefinedform)aswellasinvestmentsinBATsoldbytheESCOtotheCustomerora
TPFafterimplementation.
OkayandAkman(2010)statisticallyevaluatedperspectivesonESmarketgrowthindifferentcountries
inrelationtoeachcountries’sophistication.Thisresultedincomparativelyloweropportunitiesinthe
Germanmarket(asanalreadyoverdevelopedmarket)thanineconomicallyandsociallylessdeveloped
countriessuchasTurkey.Nevertheless,fromthelatestestimates,since2010themarketpotential in
Chapter2:LiteratureReview
23
GermanyconstantlyamountedtoEUR20,000to30,000Mio.(Bertoldietal.,2014,p.79;Bertoldiand
Boza-Kiss,2017,p.350).Thesefiguressuggestedthatsustainedstablegrowthwaspossible.Atthesame
time,theyshowedthatonlyasmallportionoftheGermanmarketpotentialhasbeentappedtodate.
All of these reports in common had the evaluation of EPC as the subordinate contracting type (for
definitionsanddetailsofkeytermsregardingEScontractsandtheirscoperefertoglossary,p.14and
following).InGermany,too,whereEPCwascomparativelypopular,EPCaccountedforonly8-10%of
totalEScontractvolumein2013(BertoldiandBoza-Kiss,2017,p.349).InmattersofEPC,mostwidely
usedwassharedsavingscontracting,wherefinancingofinvestmentsisprovidedbytheESCOoraTPF
organisation(Bertoldietal.,2014,p.83).
ExistingCustomersofES inGermanyoriginated fromall sectors,mostbroadly representedwas the
public/municipalsector(withheatingasthemostfrequentlycontractedservice).Commonlyrequested
ESintheindustrialsectorwereheating,hotwatersupplyandcombinedheatandpower(CHP)(Bertoldi
etal.,2014,p.86).
ThesituationofESCOsinGermanywasseenasmatured,derivedfromthelargenumberoforganisations
offeringESwithatotalofatleast500alreadyactiveforseveralyears(Vine,2005,p.693;Bertoldiand
Boza-Kiss,2017,p.350).
Ontheotherhand,thenumberofESCOsprovidingEPC–withmorethanoneprojectintheirtrackrecord
inGermany– seemed tobevery small, for2010only10 to15organisationsoutof the totalof500
organisationswereidentified(BunseandIrrek,2010,p.11).
Besidesthissmallgroupof‘advanced’ESCOs,offeringcomprehensiveESnationwideandnon-sector-
specific,otherserviceprovidergroupsweredistinct,namelyenergyagencies,retailenergyandenergy
distribution companies, energy consultants,manufacturers of EE technology (BAT) and (handcraft)
installers.
In general, the other service providers only offered ES with a selected scope – mainly in the real
estate/residentialareaorforprivatehouseholds,somewerespecialisedinnon-residentialbuildingsor
offeredspecialEEconsultancyformunicipalitiesorcertainindustrialCustomers–oftenataregional
level(BunseandIrrek,2010,p.12).Duetotheirspecialisation,theseproviderswereabletocompetein
theirnichewithestablishedESCOs.
Although financing by TPF organisationswas increasingly used in EEI projects, only one out of 10
projectsinEuropewasexternallyfunded.Inallothercases,ESCOsinparticularand,tosomeextent,the
Customers,providedthenecessaryfundstofinancetheinvestment(Bertoldietal.,2014,p.267).
Since the beginning of this century, forfeiting (for definitions and details of key terms regarding
financing methods refer to glossary, p. 11 and following) became increasingly important for EPC
projects,especiallyinpublic/municipalsectorprojects.Off-balancefinancingsolutions–forexampleto
beachievedthroughoperatelease–weresought,whereapplicable(Marinoetal.,2010,p.27).
Financing in the form of TPF was mainly provided by private banks (Bertoldi et al., 2014, p. 83),
preferential loanswerenotoffered inGermany(BertoldiandBoza-Kiss,2017,p.351). Inmattersof
subsidies,theentirefinancingoftheGermanFederalGovernmentwasmanagedbytheKreditanstaltfür
Chapter2:LiteratureReview
24
Wiederaufbau(KfW),anon-profitbankinggroupownedbytheGermanFederalGovernment(80%)and
theFederalStates(20%)thatwastheworld's largestnationaldevelopmentbank.KfWBankdidnot
grantloansorotherfinancialproductsdirectlytotheinvestor,buttootherbanks(generallythehouse
bankofthesubsidyrecipient).Tothisend,itraisedfundsfromthefinancialmarketsandtransferred
this capitalvia commercialbanks toapplicants in the formof low-interest loansor similar formsof
subsidies.KfWBankpromotedresidentialconstructionandthemodernisationandreductionofenergy
consumptionof private organisations andmunicipalities (Marino et al., 2010, pp. 27-28), aswell as
privatehouseholds.
2.2 The‘EnergyEfficiencyGap’
Although theuseof theexistingEEpotentialwasnecessary toachieve the targetvaluesonprimary
energyconsumptionandCO2reduction–agreeduponEuropeanlevelanddefinedbyEED–inpractice,
itwasapparentthatthispotentialwasnotusedtotheappropriateextent.Thereasonsforevenlagging
behindforecastedgrowthratesorthenon-introductionofappropriatemeasures,obtainedtheirown
term–theso-called‘Energyefficiencygap’.ThistermwasalreadycreatedbyJaffeandStavins(1994)
toexplainwhyorganisationsfailtoimplementexplicitlyprofitableEEImeasures(intheirtermsthis
meant capital spendingwith relatively shortpaybackperiods through cost reduction resulting from
lowerenergyuse).Intheirpaper,JaffeandStavins(1994)essentiallyfocusedonneoclassicaleconomic
theory,basedonrationalactors.
Inotherwords,measuresimplementeddidnotincludeallpotentialmeasures.Thisparadoxwasmainly
explained by the presence of barriers. Backlund and Thollander (2011) aggravated this situation
explicitly as ‘Energy Service gap’ due to high transaction costs overcompensating effects from EE.
Accordingly, in certain situations or constellations, the activity of ESCOs could even be seen as
counterproductive, in addition to a basically supportive effect on the way to reducing energy
consumption.
In this context, a barrier was seen as a determining factor that prevents or inhibits investment in
technologiesthatareenergyefficientaswellascost-effectiveforthosewhoinvestinthesetechnologies
(O’Malleyetal.,2003,p.4).
TheexistenceofthesebarrierswasseenasthereasonfortheincompleteexploitationofexistingEEI
potentialsontheonehandandforthedelayeddevelopmentoftheESCObusinessontheother.
2.3 PreviousResearchonBarrierstoEnergyEfficiency
NumerousacademicpapersdealtwithEE,manyofthesepapersrelatedtothesituationof(potential)
usersofsuchtechnologies(BAT),asignificantpartofthesepapershadtodowithbarriersanddrivers
–notleastbecauseoftheobviouslyonlyslowlyprogressinguseofEEIpotentials.
BarriersthatarosewithinanEEIprojectfromEEasaserviceandaprojectwithdifferentstakeholders
have so far only been investigated in very few papers. The perspective of the ESCO or the TPF
organisationas(potential)stakeholdersofEEIprojectshasrarelybeenaddressedsofar.
Chapter2:LiteratureReview
25
Papersdealingwithbarriers from theCustomer'sperspectiveexclusivelywerenot relevant for this
research.WiththefocusonES,onlypapersthatexplicitlycapturedatleastthecentralperspectiveof
ESCOsastheproviderofESand,ifthecasearose,includedtheperspectiveoftheCustomerandofaTPF
organisationasfurtherstakeholdersfromEEIprojectswereconsideredasrelevant.
SomeofthepaperscorrespondingtotheaboveconditionsdealtwithuntappedESCOmarkets,e.g.in
developingcountries(Köhn(2012),LimayeandLimaye(2011),Yang(2016)).TheIndianandChinese
marketshadanimportantroleinthis(Da-li(2009),Lietal.(2014),Liuetal.(2017),Painuly(2009),Xu
etal. (2011)).Someof thepapers focusedonmarkets inregionswith fundamentaldifferences from
European countries in general and Germany in particular regarding climatic conditions or user
behaviour and energy consumption (Canada:Ribeiro (2011);HongKong/Taiwan: Lee et al. (2014);
Singapore: Chai and Yeo (2012); Russia: Garbuzova and Madlener (2012), Garbuzova-Schlifter and
Madlener (2013), Roshchanka and Evans (2016); USA:Manoukian et al. (2015), Nandivada (2014),
Shonder(2010),Smith(2010),Stuartetal.(2018)).
Theresultsandfindingsobtainedinthesepaperswerethereforenotfundamentallyapplicabletothe
contextof thisresearch.Duetothespecificsituation inEuropewithregardtothepolicy framework
createdbytheEEDin2006andtheNEEAPsintheEUmemberstates,ofwhichESandESCOwerean
important component, this research therefore focused on literature from 2006 onwards on the
conditionsintheseEuropeancountries.
Muchoftherelevantresearchwasdoneintheformofgreyliterature.SincethelaunchoftheEEDin
2006, several projects initiated, funded and monitored by the EU were carried out to support the
disseminationandimpactoftheEEDacrossEurope.Inadditiontotheirsupportivecharacterforthe
EED, three of these projects together had a comprehensive empirical part inwhich they examined,
amongotherthings,thebarrierstoESbusiness.Asaresult,nationalreportshavebeenpublished.Of
particular importance for this research were those papers dealing with the Germanmarket in the
industrialsector(‘ChangeBest’(BunseandIrrek,2010),‘Transparense’(Busch,2013)and‘EESI2020’
(BuschandLagunesDiaz,2013)).
FurthergreyliteratureonEuropeanEEsituationandESCObusinessregularlywaspublishedbytheJoint
ResearchCentre, Institute forEnergyandTransport–aDirectorateGeneralof theEC.Eachof these
reportsdescribedthesituationintheEUmemberstatesandfromanoverarchingperspective.These
papersalsocomprisedanempiricalpartinwhichtheyexamined,amongotherthings,thebarrierstoES
business.Thesecomprehensivesurveyswerepublishedinreportsin2007(Bertoldietal.,2007),2010
(Marinoetal.,2010)andthemostrecentin2013(Bertoldietal.,2014).
TherelevantacademicpapersinturncoveredspecificmarketsituationsintheEuropeancountries–so
alsoGermanyamongothers.Thesubjectmatterwas theeconomicsituationof thestakeholders, the
respectiveservicesagainstthebackgroundoftheclimaticsituation,thesizeofthebusinessesandthe
durationoftheirprojects.InanefforttofindeffectivedriversforovercomingbarrierstoES,thesepapers
triedtobetterunderstandthesebarriersandderivedarankingofthesignificanceofthoseidentified.
Thefollowingtablegivesanoverviewoftheresultsandmainbarriers(inorderofsignificance,economic
barriersarehighlightedincapitalletters)identifiedbothinthelatestrelevant...
Chapter2:LiteratureReview
26
...greyliterature,aswellas
...academicliterature,
toEEIandES(forbarriercategorisationsrefertosection2.4,p.34andfollowing).Regionalfocusaswell
asthemarketsectorsconsideredarealsoincluded:
Table2-6–OverviewofgreyandacademicLiteratureconcerningBarrierstoESCOBusiness
SourceRegion//
MarketSector
Top3aswellasallEconomicBarriersidentified
(especiallyforGermanMarket,ifapplicable)
a)GreyLiterature
Bertoldietal.(2007)JRCScienceandPolicyReport
Europe(here:specificallyGERMANY)//Comprehensive
• UNWILLINGNESSOFCLIENTSTOENGAGEINCONTRACTSWITH
PAY-BACKTIMESLONGERTHANAFEWYEARS
• ReluctancetouseESCOswhenthecoreproductionprocessisaffected
• LackoftrustbetweenESCOandCustomer• LackofCustomer’swillingnesstoco-operatewiththeESCO(noevaluationofrankingorder)
Bertoldietal.(2014)JRCScienceandPolicyReport
Europe(here:specificallyGERMANY)//Comprehensive
1. NOESCOLEGISLATION(complexityofprocurementregulations,RenewableEnergyAct,Tenderspecificationsforpublic/municipalsectorprojects)
2. Competitionwithin-housesolutions(onCustomerside)3. SPLITINCENTIVES
…7. PROBLEMSWITHFINANCING
BunseandIrrek(2010)
Project‘ChangeBest’
GERMANY//
Comprehensive
• FINANCIALSUPPORTFORCLIMATEPROTECTIONACTIVITIES
• Lackofinformation• User/investordilemma• LOWIMPORTANCEOFENERGYCOSTS
• RISKAVERSION(I.E.REQUIREMENTOFSHORTPAYBACK
RATES)
(noevaluationofrankingorder)
Busch(2013)Project‘Transparense–IncreasingTransparencyofEnergyServiceMarkets’
GERMANY//
Comprehensive
1. Complexityofconcept2. LackoftrustintheESCOindustry3. Lackofstandardisedmeasurementandverificationpractices…10. RAISINGAFFORDABLEFINANCE…13.COMPLEXACCOUNTING/BOOKKEEPING
BuschandLagunesDiaz(2013)
Project‘EuropeanEnergyServiceInitiative2020(EESI)’
GERMANY//
Comprehensive
• LEGISLATIVEANDREGULATORY
• Awarenessandknowledge• FINANCIAL
(noevaluationofrankingorder)
Marinoetal.(2011)JRCScienceandPolicyReport
Europe(here:specificallyGERMANY)//Comprehensive
1. MistrustfromCustomers,scepticismandPERCEPTIONOF(technicalandBUSINESS)RISK
2. Lowawareness3. Lackofinformation…5. HIGHTRANSACTIONCOSTS
b)AcademicResearch
Hannonetal.(2015)UK//Comprehensive
1. LackofawarenessoftheESCOmodel(external)2. LACKOFPRIVATESECTORFINANCEANDINVESTMENTINESCO
PROJECTS(internal)3. LackofLocalAuthoritywillingnesstoengagewithandsupportESCO
projects(external)…7. ACCESSTOCAPITAL(DUETOTHEDECLINEOFCAPITALGRANT
SCHEMESFORSTART-UPS)
Kamendersetal.(2018)
15EuropeanCountries(Austria,Belgium,Bulgaria,CzechRepublic,France,GERMANY,Greece,Italy,Latvia,The
1. SUBSIDY/POLICYUNCERTAINTY
2. Lackofsupportfromthegovernment3. LOWENERGYPRICES
4. RAISINGAFFORDABLEFINANCE
…
Chapter2:LiteratureReview
27
SourceRegion//
MarketSector
Top3aswellasallEconomicBarriersidentified
(especiallyforGermanMarket,ifapplicable)
Netherlands,Portugal,Slovakia,Slovenia,Spain,UK)//Realestate/residential
6.HIGHCOSTSOFPROJECTDEVELOPMENTANDPROCUREMENT
….9.STAFFCOSTS
…11.COMPLEXACCOUNTING/BOOK-KEEPINGRULES
11.SPLITINCENTIVES
11.PRESSURETOREDUCECOSTS
Kangasetal.(2018)Finland//Realestate/residential
1. RegulatoryProblems2. ImperfectInformation3. Inertia…• PRINCIPAL-AGENTRELATIONSHIPS
• RISK
• UNPRICEDEXTERNALITIES
• ADVERSESELECTION
• SPLITINCENTIVES
• HETEROGENEITY
• ACCESSTOCAPITAL
Kindströmetal.(2016)
Sweden//INDUSTRIAL
1. Lackofclearstrategicdirectionfromtopmanagement(internal)2. Lackofaninternalwilltochange(internal)3. Lackofknowledgeregardingenergyefficiency(external)4. LACKOFFINANCIALRESOURCES(external)…10.LACKOFFINANCIALRESOURCES(internal)
NoldenandSorrell(2016)
UK//Public/municipal
• Information• SPLITINCENTIVES
• RISK
• TRANSACTIONCOSTSRELATIVETOENERGYCOSTSAVINGS
(noevaluationofrankingorder)
PätäriandSinkkonen(2014)
Finland//Comprehensive
1. RAISINGFUNDINGFORESCOPROJECTSISNOT
STRAIGHTFORWARD
2. CustomersregardwithsuspicioncalculationsandestimatespresentedbyESCOs
3. Companiesarenotwillingenoughtomakeenergy-efficiencyinvestments
4. Notenoughtechnicalandbusinessknowledgetomarket,designandimplementESCOprojectssuccessfullyinFinland
5.…
Pätärietal.(2016)Finland//Comprehensive
• LackofawarenessofopportunitiesandbenefitsthatarerelatedtotheESCOprojects(external)
• CURRENTFINANCIALSITUATIONSETTINGBACKALLKINDSOF
INVESTMENTS(external)• HIGHTRANSACTIONCOSTSINRELATIONTOPOTENTIAL
SAVINGS(external)(noevaluationofrankingorder)
Polzinetal.(2016a)GERMANY//Public/municipal
• Technologicalbarriers• Institutionalbarriers• ECONOMICANDFINANCIALBARRIERS
• VOLATILEENERGYPRICES
• ADVERSEINCENTIVES
• HIGHFINANCINGCOSTS(noevaluationofrankingorder)
Polzinetal.(2016b)GERMANY//Public/municipal
1. Existinglegalpartnerships2. LackofpersonnelforthemanagementofanEPC3. Perceivedunfairbalanceofinterests
Stede(2017)Italy//INDUSTRIAL
1. REGULATORYUNCERTAINTY
2. LACKOFACCESSTOFINANCE
3. OTHERINVESTMENTPRIORITIES
…
SoroyeandNilsson(2010)
Sweden//Realestate/residential
• Lackofknowledge• Timescaleofprojectsand‘trust’issues• RequirementsforpublicmarketEPC,procurementlaws(noevaluationofrankingorder)
Virtanenetal.(2014)Italy,Belgium,Finland//Comprehensive
1. Reluctanceofthepresentplayersinenergybusinesstochangeconventionalbusinessmodels
2. Lackofexperienceandknowledgeofsmartsystems3. Politicalawareness…
Chapter2:LiteratureReview
28
SourceRegion//
MarketSector
Top3aswellasallEconomicBarriersidentified
(especiallyforGermanMarket,ifapplicable)
5. LACKOFAFFORDABLECAPITAL
WintherandGurigard(2017)
Norway//Realestate/residential
Customerperspective
1. Lackofinterestinenergysavings2. Lackofwillingnesstochangepracticesandreduceuserflexibility3. Mainfocusoncomfortandconvenience…5. HIGHTRANSACTIONCOSTS
…8. LACKOFFINANCINGCAPITAL
ESCOperspective
1. Individualneedsandbehavioursvaryandaredifficulttocontrol2. Highfragmentationofmarket3. HIGHTRANSACTIONCOSTS,LIMITEDENERGYCOSTS
…9. LACKOFPUBLICSUBSIDIESANDFINANCINGCAPITAL
Fromtheprecedingtableitcanbeseenthat...
• ...specificmarketsectorsonlywerecoveredbyacademicliterature;
• ...the main barriers identified in literature varied widely between regions and market sectors
studied,mainlyresultingfromdifferentprojectorstakeholderconstellationsinthedifferentpapers;
• ...key barriers explicitly identified for German market varied between the papers, also in the
longitudinal perspective taken from grey literature, mainly resulting from different project or
stakeholderconstellationsinthedifferentpapers;
• ...thepossibleinfluenceofaccountingstandardswasnotinvestigatedandmentionedasabarrierin
anyoftherelevantpapers,mainlyresultingfrombarrierframeworksthatdidnotcoveraccounting-
relatedbarriers.
Inthefollowingsubsections,greyandacademicliteratureisreviewedseparatelyanddiscussedindepth.
2.3.1 GreyLiterature
Greyliteraturefrom‘ChangeBest’,‘Transparense’and‘EESI2020’projectswerecarriedoutbynational
organisationsthatwereinvolvedinthefieldofES.InGermany,thisincludedthe‘WuppertalInstitute
für Klima, Umwelt, Energie gGmbH’ (engaged in the ‘ChangeBest’ project), a non-profit research
institution,andthe‘BerlinerEnergieagenturGmbH’(engagedin‘Transparense’aswellas‘EESI2020’
project), an independent operator of renewable energy power plants and also provider of ES
(contracting and energy consulting). Shareholders of the Berliner Energieagentur GmbH were the
FederalStateofBerlin,twoprivateenergysupplygroupsandKfWBankinequalshares.
The objective pursued in the project ‘ChangeBest’ was “Promoting the development of an energy
efficiency service (EES) market – good practice examples of changes in energy service business,
strategies, and supportive policies and measures in the course of the implementation of Directive
2006/32/EConEnergyEnd-UseEfficiencyandEnergyServices”,withtheprojectgoaltocontributeto
themarket,assiststakeholdersanddevelopbestpractices(BunseandIrrek,2010).
Chapter2:LiteratureReview
29
The project ‘Transparense’ aimed "Increasing Transparency of Energy Services Markets”, with the
projectgoaltopromotetrustworthinessofESandincreasetransparencyofthismarket(Busch,2013).
ThemainfocuswassetonEPC.
Theproject‘EESI2020’wascreatedas"EuropeanEnergyServiceInitiativetowardstheEU2020energy
saving targets” with the project goal to foster EPC as specific ES in selected European cities and
metropolitanregions(BuschandLagunesDiaz,2013).
PrimarydatawerecollectedinallofthesethreeGermansub-projects.Thedatasamplewasdocumented
for‘ChangeBest’and‘Transparense’(inthefirstcase,therewereatotaloffiveparticipantsinterviewed,
includingtwoESCOrepresentatives,onerepresentativeofanESCOassociation,onerepresentativeof
BerlinerEnergieagenturGmbHandoneCustomerrepresentative;inthesecondcasetherewerenine
surveyparticipants,sevenofthemESCOrepresentativesandtwoTPFrepresentatives,therespective
organisationswerenotmentioned.
Theauthorofthe‘Transparense’projectoriginallyintendedtocarryoutaquantitativeanalysisofthe
datacollected,butitwasnotpossibletocreatearepresentativedatabase.Thebasisfortheanalysesof
the‘EESI2020’projectwasnotdocumentedatall.Overall,thedatabasefortherespectivecountryreport
onEU-wideprojectswasverysmall.At least for theprojects ‘ChangeBest’and ‘Transparense’ itwas
documented that besides ESCO also the perspective of another stakeholder in an EEI project was
examined – in one case the perspective of a Customer, in a second case the perspective of a TPF
organisation.WhethertheywereinvolvedinanEEIprojectjointlywiththeESCOsparticipatingisnot
documented.
ThecomprehensivepapersoftheJointResearchCentre,InstituteforEnergyandTransportwerealso
basedonprimarydata. In thesepapers, the twoauthororganisationsof theaforementionedpapers,
Berliner Energieagentur GmbH and Wuppertal Institute für Klima, Umwelt, Energie gGmbH were
involved as participants in 2007 (Bertoldi et al., 2007) and 2013 (Bertoldi et al., 2014), Berliner
EnergieagenturGmbHalsoin2010(Marinoetal.,2010).ThreeESCOswerealsoinvolvedinthestudy
in 2007, only one ESCO in 2010 and four ESCOs in 2013, each of which was listed by name. The
perspectiveofCustomersorTPForganisationswasnotrepresentedatallinthesepapers.
Whilethepapersoftheyears2007and2010obtainedtheirfindingsregardingthebarriersfromprimary
data,thestudyof2013referredsolelytotheprevious‘ChangeBest’and‘EESI2020’projects.
Insummary,onlyasmallamountofevidencecanbetestedforgreyliteraturewithregardtothefindings
onbarriers.Manypaperswerenotbasedonprimarybutonlysecondarydataregardingthecontentof
barriers–inprinciple,evenforEuropeanESCOmarketsonlyasmallamountofdatawasavailablein
somecases,accesstofurtherdatawasseenasdifficult,thiswasalsodocumentedintheacademicas
wellasgreyliterature(SoroyeandNilsson(2010),Bertoldietal.(2014)).
Instead,thepapersrelatedtoeachother.TheBerlinerEnergieagenturGmbHplayedanimportantrole
in the investigations of theGermanmarket. It acted alternately as a researchorganisation and as a
research participant – a biased attitude can therefore be assumed. With regard to barriers, the
perspectives of other stakeholders from EEI projects (Customer and TPF organisation) played a
completelysubordinateroleintherelevantgreyliterature.
Chapter2:LiteratureReview
30
Allselectedpapersofgreyliteratureusedsurveysasaresearchstrategyforobtainingresearchdata.
Mostofthereviewedpaperspursuedtheirsurveystrategyintheformofquestionnaireswithfollow-up
interviews.
Withregardtothebarriercategories(refertosection2.4,p.34andfollowing),therewasnofocusatall.
The semi-structured data collection provided a comprehensive picture of the existing or perceived
barriersfromtheperspectiveofeachparticipantand,thoughthesignificanceofthebarriercategories
andthebarriersvaried.
ThepaperofBertoldietal.(2014)hadthelargestpopulationwithatotalof217participants–from43
countries,whichmeantanaverageofsolelyalmostfiveparticipantspercountry.Atotalof13experts
wereinterviewedontheGermanmarket.
Duetotheresearchstrategyused,thesepaperscouldnotprovideinformationaboutthesituationand
thecorrespondingbarriersfordifferentstakeholdersinaconcreteEEIproject,butmerelyacompilation
ofthebarriersoftherespectivestakeholders.
2.3.2 AcademicLiterature
TheacademicliteraturecoveringbarrierstoESCOs,ESandEEeachfocusedononeEuropeancountry–
in the following labelled as ‘Single focus’, or in the case of Virtanen et al. (2014) six, in the case of
Kamendersetal.(2018)15countrieswithaspecialfocusonLatvia–inthefollowinglabelledas‘Multi
focus’.
Concerningmarketsectors,theacademicliteraturecoveredone–alsolabelled‘Singlefocus’,orinthe
caseofVirtanenetal.(2014)threesectors(includingprivatehouseholds)–alsolabelledas‘Multifocus’.
Thefollowingtableshowstheregionalaswellasmarketsectorcoverageofeachoftheacademicpapers:
Chapter2:LiteratureReview
31
Table2-7–CoverageofEuropeanCountriesbyacademicLiterature
Region
covered
MarketSector
covered
Source
Singlefocus Multifocus
Austria Realestate/residential Kamendersetal.(2018)
Belgium
Realestate/residential Kamendersetal.(2018)
Public/municipalRealestate/residential
(Privatehouseholds) Virtanenetal.(2014)
Bulgaria Realestate/residential Kamendersetal.(2018)
CzechRepublic Realestate/residential Kamendersetal.(2018)
Finland
Realestate/residential Kangasetal.(2018)
(nosector) PätäriandSinkkonen(2014)
(nosector) Pätärietal.(2016)
Public/municipalRealestate/residential
(Privatehouseholds) Virtanenetal.(2014)
France Realestate/residential Kamendersetal.(2018)
GERMANY
Public/municipal Polzinetal.(2016a)
Public/municipal Polzinetal.(2016b)
Realestate/residential Kamendersetal.(2018)
Greece Realestate/residential Kamendersetal.(2018)
Italy
INDUSTRIAL Stede(2017)
Realestate/residential Kamendersetal.(2018)
Public/municipalRealestate/residential
(Privatehouseholds) Virtanenetal.(2014)
Latvia Realestate/residential Kamendersetal.(2018)
TheNetherlands
Realestate/residential Kamendersetal.(2018)
Public/municipalRealestate/residential
(Privatehouseholds) Virtanenetal.(2014)
Norway Realestate/residential WintherandGurigard(2017)
Poland
Public/municipalRealestate/residential
(Privatehouseholds) Virtanenetal.(2014)
Portugal Realestate/residential Kamendersetal.(2018)
Slovakia Realestate/residential Kamendersetal.(2018)
Slovenia Realestate/residential Kamendersetal.(2018)
Spain
Realestate/residential Kamendersetal.(2018)
Public/municipalRealestate/residential
(Privatehouseholds) Virtanenetal.(2014)
SwedenRealestate/residential SoroyeandNilsson(2010)
INDUSTRIAL Kindströmetal.(2016)
UK
(nosector) Hannonetal.(2015)
Public/municipal NoldenandSorrell(2016)
Realestate/residential Kamendersetal.(2018)
Chapter2:LiteratureReview
32
Inthetwopaperslabelledas'Multifocus'(Kamendersetal.(2018),Virtanenetal.(2014)),noseparate
evaluationofthedatacollectedwascarriedoutwithregardtoindividualcountriesorindividualsectors.
Togainacondensedoverviewwithaclearerfocusonspecificsofsinglecountriesandmarketsectors,
the‘Multifocus’literaturewasleftoutinthefollowing:
Table2-8–CoverageofEuropeanCountriesbyMarketSectors
Countrycovered
MarketSector
INDUSTRIALRealEstate/
Residential
Public/
Municipal
(NoSector)
Finland x x
GERMANY X
Italy X
Norway x
Sweden X x
UK x x
Fromtheprecedingtablesitcanbeseenthat...
• ...althoughitwasconsideredthemostdevelopedESmarketinEurope,barrierstoESinGermany
wasthesubjectexplicitlyofthepapersonlyofPolzinetal.(2016a),andPolzinetal.(2016b).In
thesecases,thepublic/municipalsectorwasexamined.Inaddition,thesetwopapersonlydealtwith
asmallareaofES,asthesubjectwastheretrofittingofmunicipalstreetlightingandtheintroduction
ofLEDasBAT;
• ...theindustrialsectorthroughouttheEuropeancountriesisexaminedexplicitlyonlybythepapers
ofKindströmetal.(2016)andStede(2017);
• ...academic researchonbarriers toESCOs in the industrial sector inGermanyhavenotyetbeen
carriedout–atleastnotsincethepublicationoftheEEDin2006.
AsoutlinedinTable2-6above,allpaperswerebasedonbarrierframeworks,whichincludedeconomic
barriers.However,economicbarrierswerenotrecognisedassignificantinthesepapersatall.Inpapers
inwhicharankingorderwasdetermined,theeconomicbarriershadquitedifferingsignificance:Inthe
paperofPätäriandSinkkonen(2014),forexample,theywereidentifiedasessentialbarriers,inthecase
of Stede (2017) they were within the first three ranks; they were of medium significance in the
investigationsofHannonetal.(2015)andWintherandGurigard(2017),ofsubordinatesignificancein
thecaseofKindströmetal.(2016)andVirtanenetal.(2014)andinsignificantinthecaseofPolzinetal.
(2016b).
Inthepaperswithoutevaluationofarankingorder,economicbarrierswerenotrelevantexceptinthe
paperofSoroyeandNilsson(2010).
The papers also showed completely different resultswith regard to the significance of the barriers
within the area of economic barriers: Frequently identified barrier were ‘Low capital availability’
Chapter2:LiteratureReview
33
(alternatively ‘Access to capital’, ‘Lack of financial resources’, ‘Lack of affordable capital’ or ‘Raising
affordablefinance’)and‘Hiddencosts’.
Thesignificanceattached inthevariouspaperstoeconomicbarriers toESandESCOswastherefore
completelyinconsistent.Onereasonforthismaylieintheconstellationofthestakeholdersinvolved.
Thefollowingtableprovidesanoverviewofwhichstakeholderswereinvolvedintherelevantacademic
literature:
Table2-9–OverviewoftheStakeholdersinvolvedintheLiteraturereviewed
Author
Stakeholdersinvolved
ESCO Customer TPF (Further)
Hannonetal.(2015) X X • Academics• Authorities• EnergyExperts
Kamendersetal.(2018) X X X -,-
Kangasetal.(2018) X -,-
Kindströmetal.(2016) X X • EnergyConsultants
NoldenandSorrell(2016) X X X • EnergyExperts
PätäriandSinkkonen(2014) X • Academics• EnergyConsultants• EnergyExperts
Pätärietal.(2016) X • Academics• EnergyConsultants• EnergyExperts
Polzinetal.(2016a) X X X • ManufacturerofBAT• Facilitators
Polzinetal.(2016b) X X -,-
SoroyeandNilsson(2010) X X • Authorities• EnergyAgencies
Stede(2017) X (X) • Academics• Authorities
Virtanenetal.(2014) X X • Authorities• EnergyExperts
WintherandGurigard(2017) X X -,-
Fromtheprecedingtableitcanbeseenthat...
• ...inthemajorityoftheacademicliterature,onlytheperspectiveoftheESCOandtheCustomeror
evenonlytheESCOweresubject.Ontheotherhand,theperspectivesoffurtherstakeholderssuch
as academics, (governmental) authorities, energy consultants and further energy experts and
energyagencies(thatinsomecasesmayactasfacilitators)aswellasmanufacturersofBATwere
included;
• ...onlyinthepapersofKamendersetal.(2018),NoldenandSorrell(2016)andPolzinetal.(2016a)
theperspectivesofallthreestakeholdersrelevantforthisresearchwereconsidered.Theextentto
which theparticipantswererepresentativesofcommercialor technical fields in theirrespective
organisationswasnotapparent,butatechnicalcharacterinconnectionwithtechnicalequipment
wastobeassumedinprinciple.
Chapter2:LiteratureReview
34
ThepaperofVirtanenetal.(2014)wastheonlyoneinwhichapurelyquantitativeresearchmethod
cametouse.Itwasthereforetheonlyoneinwhichprimarydatawerecollectedsolelybymeansofan
online survey, with a total of 933 participants. However, these participants mainly were private
households.
MixedmethodswereusedinthepaperofPolzinetal.(2016b).Inthequantitativepart,primarydata
werecollectedbyasurveywith1,298participants.
Thequalitativedatacollectionofprimarydataintheotherpaperswasdonethroughinterviews–usually
inasemi-structuredform.PätäriandSinkkonen(2014)andPätärietal.(2016)usedaDelphistudy(for
specificsofthisresearchstrategyrefertosubsection3.4.2,p.58)tocollectprimarydata.
Thepapersthussystematicallydidnotrefertoacommonproject,buttodifferentprojects.Whatthese
paperswereunabletoconsiderweretheinfluencingfactorsfromparticularstakeholderconstellations
fortherespectiveprojects–acomprehensivepictureoftheexistingorperceivedbarrierswascollected,
informationaboutthesituationandthecorrespondingbarriersrelatedtothestakeholdersinaconcrete
EEIprojectcouldnotbeprovided.
AnexceptionwasmadebythepaperofWintherandGurigard(2017).Hereasingle-casestudywasused,
therespectiveperspectivesofthestakeholdersinvolvedwereexaminedindepth.
Withregardtobarriercategories(seealsothefollowingsection),therehasbeennoparticularfocusin
previousresearch(i.e.economicbarrierswerenotaddressedexplicitly).Rather,allbarriercategories
wererecordedandexaminedinthevariouspapers.
Finally,itistobesummarisedandemphasisedonceagainthattheGermanESmarkethasnotyetbeen
examinedbytheacademicliteratureinthesenseofthisresearchwithregardtoeconomicbarriersfor
theindustrialsector,takingintoaccounttheperspectivesoftherespectivestakeholdersinvolved.
2.4 PreviousResearchonBarrierFrameworks
AsCagnoetal.(2013)explained,acategorisationofbarriersinframeworks(alsocalled‘Taxonomies’)
iscrucial toobtainacomprehensivepictureofacomplexproblem,which incorporatesbarriers into
energymodelsfacilitatingtheformulationofeffectivepolicyresponsestoreducetheimpactofthese
barriers.
Someofthebarriersandcorrespondingframeworkswereidentifiedandarrangedfromtheperspective
oftheuser(inthecontextofthisresearchtheCustomerofES)ofanEEImeasure.Nevertheless,theyare
alsoapplicable–albeitnotexhaustively–fromtheperspectiveoftheotherstakeholdersofEEIprojects
(i.e.theESCOasproviderofESaswellastheTPForganisationasfinancier)andwerethereforealsoused
inthiswayincorrespondingacademicaswellasgreyliterature.
FollowingWeber(1997),themethodologicalquestionofhowtodetermineabarriermodelis:‘Whatis
abarriertowhominreachingwhat?’So,abarrierframeworkspecifiesthreefeatures:
Chapter2:LiteratureReview
35
• The objective barrier: 'What is a barrier...': economic interests, financial incentives, regulations,
technical standards, organisations, people, patterns of behaviour, attitudes, needs, preferences,
socialnorms,habits,culturalpatterns,etc.
• The subject hindered: '...is a barrier to whom...': organisations, managers, workers, consumers,
tenants,clerks,voters,politicians, localadministrations,parties, tradeunions,households,NGOs,
etc.
• The action hindered: '...reachingwhat': buyingmore efficient equipment, retrofitting, improving
operatingpractices,decreeinganenergytax,establishingapublictrafficnetwork,etc.
Inthefollowingsubsectionsninebarrierframeworksidentifiedfromliteraturearedescribedindetail
inchronologicalorder,withafocusontheapproachchosen,theresultsachievedandtherelevance–
especiallyinthecontextofthisresearch.Atabularillustrationofeachoftheseframeworkscanbefound
intheAnnex,partA,A.1–A.9.
2.4.1 BarrierFramework1HirstandBrown(1990)
TheearlypaperofHirstandBrown(1990)wasoneofthefirstwhichqualitativelyexaminedpossible
systematisationsofbarriersrelatedtoEE–evenbeforetheconceptoftheenergyefficiencygap(refer
tosection2.2,p.24andfollowing)wasestablishedbyJaffeandStavins(1994).
• Approach:ThepaperwasbasedonaliteratureoverviewoftheEEsituationintheUSA,whereby
onlybarriers(e.g.social,institutional,behavioural,market-related)wereexaminedintherespective
sources.
• Results: A compilation and systematisation of a total of 10 barrierswas provided. The barriers
identifiedhavebeencondensedintotwogroups(‘Structural’,‘Behavioural’).Theywerelabelledas
‘Types’.
• Relevance: Several of the barriers identified fell into the economic area and were therefore
fundamentallyrelevant to thisresearch.However, fromtoday'sperspectiveandalmost30years
later,someofthesebarriershavesincebecomeobsoleteorhaveinfactbeeneliminated(e.g.‘Supply
infrastructure limitations’)orwerenotsufficientlyprecise in the ‘Actionhindered’asoneof the
requiredfeaturesofabarrier,astheyfocusedonenergysavingandnotonEE(e.g.‘Attitudestowards
EE’)oraddressedthespecificandnotgeneralisablesituationintheUSA(e.g.‘Codesandstandards’).
Someofthebarriersidentifiedinthispaperweresubsumedinsubsequentframeworksonother
barriers.
2.4.2 BarrierFramework2Weber(1997)
The paper of Weber (1997) qualitatively examined the methodological background of barrier
frameworksaswellasabreakdownforthestructureofbarriers.Neithercertainbarrierswereanalysed,
noracomprehensivetheoryofbarrierswasgiven.Rather,thebasicsofbarrierframeworksingeneral
wereshown.
Chapter2:LiteratureReview
36
• Approach:Thepaperwasbasedonaliteraturereviewpaperandaseparateliteratureoverview.
• Results:Fourbarriercategories(‘Institutional’;‘Market’;‘Organisational’;‘Behavioural’),labelledas
‘Types’,werecontrasted.Inaddition,thethreefeaturesasrequirementsforabarrierframeworkas
alreadydescribedintheintroductionwereworkedout.
• Relevance: In his paper, Weber (1997) provided a methodological background of barrier
frameworksthatwasusedanddeepenedinfollowingresearchprojects.Someofthedefinedtypes
wereusedasstructuralelementsinproceedingframeworks.
2.4.3 BarrierFramework3Sorrelletal.(2000)
The fundamental paper of Sorrell et al. (2000) qualitatively examined the nature, functioning and
determinantsofbarrierstotheuseofEEtechnologiesinindustrialsectorwiththeaimofdevelopinga
comprehensiveframework.
• Approach:Thepaperwasbasedonavastliteraturereviewandwasempiricallyreassuredbycase
studieson46organisationsfromthemechanicalengineering,brewingandhighereducationareas
intheUK,GermanyandIreland.
• Results:Acompilationandsystematisationofoverall15barrierswasprovided.Thebarrierswere
condensed into three categories (‘Economic’; ‘Behavioural’; ‘Organisational’), labelled as
‘Perspectives’. These perspectives differed according to the underlying theories (neo-classical
economicstheory;transactioncosteconomicstheory;decisiontheory;organisationtheory).
• Relevance:TheframeworkofSorrelletal.(2000)wascertainlythemostinfluentialandwidespread
onwhichmostofthefollowingbarrierframeworksandbarrierpapersonEEIandESCOswerebased
– or at least they included specific excerpts from this framework. The framework comprised
economicbarriers,which,however,wereassignedtodifferenttheorybuildingsandthustoarange
ofcategories.
Thiscomprehensiveandground-breakingframeworkservedasareferencefortheclassificationof
theframeworksthatfollowedchronologicallyandarethuspresentedbelow.
2.4.4 BarrierFramework4DeGrootetal.(2001)
ThepaperofDeGrootetal.(2001)quantitativelyexaminedthedifferencesininvestmentbehaviour,
attitudesandresponsivenesstoeconomicpolicyandthebarrierstotheintroductionofEEI.
• Approach: The paper was based on a survey of 135 companies from nine industries in the
NetherlandsinMay1998.Companieswereaskedabouttheirinvestmentbehaviourandthefactors
thatpreventedthemfrominvestinginenergy-savingtechnologies.Alistof15barrierswasprovided
toberatedwithascorebetween‘1’(=totallyunimportant)and‘5’(=veryimportant).Theoriginor
selectionaswellasthecategorisationprocedureofthebarrierssurveyedwasnotdocumented.
Chapter2:LiteratureReview
37
• Results:Arankinguponacompilationandsystematisationofoverall15barrierswasprovided.The
barrierswerecondensedintothree‘Categories’(‘General’;‘Financial’;‘Uncertainty’).Thebarriers
qualifiedasthemostimportantbythesurveyparticipantscamefromthearea‘General’.
• Relevance:According to theapproach, itwasactuallymoreanempiricalexaminationofa listof
barriers than a barrier framework. The majority of these barriers could be seen as economic
barriers.Someofthebarriersfromthe‘General’category(‘Technologycanonlybeimplemented
after existing technology has been replaced’, ‘Current Installations are sufficiently efficient’ and
‘CurrentlyintroducinganewTechnology’)mentionedinthesurveyandclassifiedbytheparticipants
asrelativelysignificantcannotbequalifiedasbarrierswithregardtotheframeworkspecificsof
Weber(1997),sinceno‘Actionhindered’canbedetermined.Overall,thepaperofDeGrootetal.
(2001)didnotmakeasignificantcontributionintermsoftheoreticalbarrierframeworks;rather,it
wasanempiricalstudyofthesignificanceofbarriersinspecificsectors.
2.4.5 BarrierFramework5Thollanderetal.(2010)
ThepaperofThollanderetal.(2010)qualitativelyexaminedsocialpracticesincompaniesandexisting
routinesindecision-makingandindustrialprocessestodevelopacategorisationforbarriersthattook
thisperspective.
• Approach:Thepaperwasbasedonthetheoreticalmodelofsocio-technicalchangefromthework
on science and technology, in which technological and social change are interrelated and the
dynamicsofchangeprocessesareonfocus.Insocio-technicalregimes,theactorsareembeddedin
structuresthatshapetheirpreferences,goalsandstrategies.Dependingonthesystemcomplexity
threehierarchylevelsweredefined:
Micro–Technicalsystem,developmentoftechnologicalinnovationsinniches
Meso–Technologicalregime,routines,knowledgeandproblemdefinitions
Macro – Socio-technical regime, superstructure, which guides technical design and shapes
marketdevelopment.
FollowingThollanderetal.(2010),newtechnologiescanhardlybreakthroughestablishedregimes.
Tosuccessfullyestablishanewtechnology–e.g.BATintheareaofEE–allthreelevelsmustbe
interconnected.
• Results:Anewsystematisationofthe15barrierscompiledbySorrelletal.(2000)wasprovidedby
rearrangementintothreeareasaccordingtotheirassignmenttooneofthethreelevels.Thefirst
area(connectedtothe‘Micro’level)focusedonbarrierstotechnologyandrelatedcosts.Thesecond
area(connectedtothe‘Meso’level)identifiedbarriersthat,coupledtotechnology,wereinfluenced
by human factors. The third area (connected to ‘Macro’ level) concerned barriers that were
influencedbyhumanfactorsandhardlybytechnology.
• Relevance:ComparedtotheframeworkofSorrelletal.(2000),thestructureofbarriersfromasocio-
technicalperspectivemeantasolution-orientedapproachtobarriersfortheimplementationofEEI
measures, asdifferentapproacheswere requireddependingon thearea fromwhich thebarrier
Chapter2:LiteratureReview
38
originated.Aspectssuchascorporatecultureandestablishedinternalvalueswereproblematised
andemphasised.Byapplyingthiscategorisation,astrongerfocusonsocialpracticesincompanies
andexistingroutinesinindustrialprocesseswasset.Thesocio-technicalperspectiveofThollander
et al. (2010)was only of secondary importance in this research, as neither social nor technical
aspectsweretobeexaminedindetail.
2.4.6 BarrierFramework6Cagnoetal.(2013)
The paper of Cagno et al. (2013) qualitatively examined the impact of barriers on decision-making
processesandtheinteractionsbetweenthem.
• Approach:Thepaperwasbasedonareviewofliterature.Cagnoetal.(2013)deducedtheneedfor
anadvancedframeworkandpursuedtheenhancementoftheframeworkofSorrelletal.(2000):In
additiontomissingelements(i.e.technical),linksbetweenbarriersweretakenintoaccount,inorder
toavoidoverlapsandimplicitinteractions.Thefeaturesoftheirframeworkwereempiricallytested
throughapreliminaryinvestigationbyasetoforganisationsinItaly.
• Results:Anewsystematisationofthe15barrierscompiledbySorrelletal.(2000)wasprovidedby
rearrangingintosevenareas,accordingtotheoriginofthebarrier(‘Technologic’;‘Informational’;
‘Economic’;‘Behavioural’;‘Organisational’;‘Competences’;‘Awareness’),labelledas‘Areas’.
Thecompilationofbarrierswasenlargedbyaddingtechnology-relatedbarriers,barriersrelatedto
competencesandtoawareness,sothattheframeworkfinallycomprised27barriers.Ofthenominal
12additionalbarriers incomparison toSorrelletal. (2000),only fivedidnotcorrespondto the
original 15 barriers, the others were further differentiations of already defined barriers. The
frameworktookaCustomerperspectivetoexaminehowbarriersaffectdecisionsandinvestments.
IncontrasttotheunderlyingframeworkofSorrelletal.(2000),adistinctionwasmadebetweenthe
internalandexternaloriginofbarriers fromtheperspectiveof theCustomerorganisationanda
connectiontoitsdecision-makingprocesswasestablished.
• Relevance:Inthisframework,anareawasestablishedinwhicheconomicbarrierswerebundled.
Thecompilationandrefinementofbarriersinthisareaisofparticularimportanceinthecontextof
thisresearch.
2.4.7 BarrierFramework7Reddy(2013)
ThepaperofReddy(2013)qualitativelyexaminedbarrier(andalsothedriver)structuresthataffect
investmentsinEEfromanactor-orientedconcept.
• Approach:Thepaperwasbasedonareviewofliterature.Reddy(2013)firsttriedtoidentifythe
driversandbarriersthatinfluencedthesuccessorfailureofEEI,andthentodeterminetheentities
that were responsible for the establishment of these drivers and barriers. So, not the barriers
themselves,buttheircategorisationandtheirhierarchicalstructuredependingontheactorwere
thefocusofthispaper.
Chapter2:LiteratureReview
39
• Results: A new systematisation of barrier areas was provided by establishing seven areas
(‘Technological’; ‘Financial’; ‘Legal’; ‘Market-related’; ‘Institutional/Organisational’; ‘Informative’;
‘Behavioural’)–similartoCagnoetal.(2013).Dependingontheareaofinfluencethreehierarchy
levels–similartoThollanderetal.(2010)–weredefined:
Micro–Customer
Meso – ESCO, TPF organisation, equipment manufacturer, industrial and commercial
organisationsandutilities.
Macro–EEagencies,andgovernmentalaswellasinternationalorganisations.
Thedecisivecriterionfortheassignmentofabarriertooneoftheselevelswastheactor,according
totheframeworkofWeber(1997),the‘Subjecthindered’–orthesubjectinapositiontoremove
thebarrier.SimilartoThollanderetal.(2010),thisbarrierframeworkusedahierarchicalstructure
ofthebarriersystem,inthiscasefromtheperspectiveoftheactors.Thissystemalsofolloweda
solution-orientedapproach for the implementationofEEImeasures,aseachbarrieraddressesa
differentactor.
• Relevance:Thepapercomplementedahierarchicalstructuretothecategorisationofbarriers.
2.4.8 BarrierFramework8Vogeletal.(2015)
ThepaperofVogeletal.(2015)qualitativelyexaminedbarrierstoEEImeasuresinthebuildingindustry
andtheiroriginsinthecontextoftheSwedishbuildingarea,whichwasinvestigatedasasocio-technical
system–similartothepaperofThollanderetal.(2010).
• Approach:Thepaperwasbasedonacatalogueof38barriersdevelopedinaprevious interview
studycarriedoutbytheauthorsontheSwedishbuildingindustry.Therewasnofurtherinformation
available about the approach or the empirical basis of this prior paper, no details could be
researched.
• Results:Thepaperdevelopedaframeworkforcategorisingbarriersaccordingtotheirstructural
origin.Thebarriersweredividedintothreeanalyticaldecisionlevels:
Project–Buildingprojects
Sector–Organisationsandinstitutionsinvolvedinbuildingprojects
Context–Institutionalframeworkforpreviouslevels;containedrulesandregulations
Mostbarriershadtheiroriginatthecontextuallevel.ThepaperofVogeletal.(2015)followedthe
sametheoreticalapproachasthepaperofThollanderetal.(2010)onsocio-technicalsystems.While
thelatterwasbasedonthebarriersoftheframeworkofSorrelletal.(2000),thebarriercatalogue
oftheframeworkofVogeletal.(2015)originatedfromaseparateempiricalstudy.Thepaperof
Thollanderetal.(2010)thusremainedgenerallyapplicableinitsresults,whereasthepaperofVogel
etal.(2015)wasonlypartiallyapplicabletotheindustrialsegment.
• Relevance:Fromtheperspectiveofthisresearch,theframeworkofVogeletal.(2015)wasnotof
great importance due to the focus on the building industry and the specific barrier catalogue
empiricallycollectedforthisfield.
Chapter2:LiteratureReview
40
2.4.9 BarrierFramework9Stede(2017)
ThepaperofStede(2017)qualitativelyexaminedtheelementsofthewhitecertificatesysteminItaly
andevaluatedpossibilitiestoovercomevariousbarrierstoindustrialEE.
The white certificate system was a tool developed under the Italian NEEAP to bridge the energy
efficiencygap.CommitmentsobligedmarketparticipantstosatisfybindingEEItargetsoveracertain
period of time. The reductions in energy consumption achievedwere then credited via certificates,
whichinturncouldbetradedonanofficialmarketoruseddirectlybilaterally.Non-complianceoftargets
wassanctioned.
• Approach: The paper was based on a survey of 16 participants from different organisations
(academicsandexpertsfromESCOs,authoritiesandindustryassociations)inItalyin2015.Drivers
incentivisingindustrialEEIwithinthewhitecertificatescheme,aswellasanyremainingbarriers
wereinvestigated.Alistofsixbarriers(theso-called‘Taxonomy’)wasprovidedtotheparticipating
experts.Respondentswereasked to identify the threemainbarriers.Foraranking, thebarriers
wereratedwithafallingscorefrom‘3’to‘1’.Anaveragescorewasthencalculatedforeachbarrier.
• Results:Acompilationandrankingoffinally10barrierswasderived,threeareaswerecontrasted
(‘Financial’,‘Informational/Behavioural/Institutional’,‘External’).Theoriginorselectionprocedure
ofthebarrierswasnotdocumented,norwastheclassificationorsubdivisionofthebarriersinto
areas.Themostsignificantbarriersempiricallyidentifiedwere:‘Regulatoryuncertainty’,‘Accessto
finance’and‘Otherinvestmentpriorities’.
• Relevance:According to the approach, itwasnot actually abarrier frameworkbut an empirical
examinationofa listofbarriers.Manyof thesebarrierscouldbeseenaseconomicbarriers.The
paperofStede(2017)didnotmakeasignificantcontributionintermsofbarrierframeworks;rather,
itwasanempiricalstudyofthesignificanceofbarriersinthecontextofaspecificmeasure–the
whitecertificates–toovercometheenergyefficiencygapinItaly.Someofthebarriersidentifiedin
thispaperweresubsumedinpreviousframeworksintootherbarrierareas.
2.4.10 Comparison,EvaluationandSelectionofappropriateBarrierFramework
Inthefollowing,thebarrierframeworksdiscussedabovearecomparedandevaluatedinordertoselect
asuitablebarrierframeworktobeusedforguidingthesystematicandstructureddataanalysisprocess
ofthisresearch.Thefocusisthereforeonbarriersrelatedtotheeconomicarea.
Itisclearthatthenineframeworksdescribedabovehavebothsimilaritiesanddifferences,thefollowing
mainaspectsoftheframeworkscanbecontrasted:
• WhileWeber (1997, refer to Framework 2, subsection 2.4.2 above) laid important foundations,
Sorrelletal.(2000,refertoFramework3,subsection2.4.3above)madeasignificantcontribution
tothedevelopmentofbarrierframeworks.ManypapersonbarrierstoEEusedthisframeworkor
excerpts from it, many of the subsequently developed frameworks were based on these
fundamentals.Oneofthem,Cagnoetal.(2013,refertoFramework6,subsection2.4.6above)has
further developed the framework of Sorrell et al. (2000) with valuable additions for further
Chapter2:LiteratureReview
41
empiricaluse.Thollanderetal. (2010, refer toFramework5, subsection2.4.5above)proceeded
similarlybut theirpaper focusedmainlyon thedevelopmentofa frameworkstructure fromthe
socio-technicalperspective.
• Thollanderetal.(2010),Cagnoetal.(2013),Reddy(2013,refertoFramework7,subsection2.4.7
above)andVogeletal.(2015,refertoFramework8,subsection2.4.8above)addedahierarchical
componenttothebarriersystems.WhiletheframeworkofVogeletal.(2015)consideredbuilding
projectsveryspecifically, the frameworksofThollanderetal. (2010)andReddy (2013)wereof
generalapplicability.
• The frameworksofVogel et al. (2015) andStede (2017, refer toFramework9, subsection2.4.9
above)havebeendevelopedforaspecificmarketsector(realestate/residentialsectorintheprior,
whitecertificatesintheindustrialsectorinthelatter).Singlebarriersfromtheirpaperrepresented
ameaningfulextensionofthealreadyestablishedcatalogue,whichhassofarbeenmainlyinfluenced
bySorrelletal.(2000).
• TheframeworksofDeGrootetal.(2001,refertoFramework4,subsection2.4.4above)andStede
(2017)werelessconcernedwiththetheoretical(further)developmentofbarriersystemsthanwith
anempiricalinvestigationwiththeaimofderivingrankingsconcerningthesignificanceofbarriers.
Themaindevelopmentsandcontributionsofthesenineframeworksaresummarisedinthefollowing
table.Adistinctionismadebetweenacontributiontotheidentificationanddefinitionofbarriers,the
categorisationofbarriersandthestructuringofbarrierswithintheframework,forexampleinthesense
ofestablishingdifferentlevelsdependingontheareaofinfluenceordecision:
Table2-10–OverviewofBarrierFrameworksfromLiterature
Framework
Developmentof…
Comment
…Barriers…Barrier
areas
…Framework
structure
HirstandBrown(1990)–BarrierFramework1
YES YES N/AProvidedadefinitionofaseriesofbarriersandaninitialcategorisationoftheseintoareas
Weber(1997)–BarrierFramework2
no YES N/ADevelopedmethodologicalbackgroundforframeworksanddefinedbarrierareas
Sorrelletal.(2000)–BarrierFramework3
YES YES N/A Systematisedbarriersaswellasbarrierareas
DeGrootetal.(2001)–BarrierFramework4
Basedon
Framework3YES N/A
Providedempiricalrelevanceof(economic)barriers,dividedintonewareasystem
Thollanderetal.(2010)–BarrierFramework5
(IdenticaltoFramework3) YES YES
Establishedhierarchicalstructureofbarriers,takenfromasocio-technicalperspective
Cagnoetal.(2013)–BarrierFramework6
Basedon
Framework3YES YES
Establishedtheareaofeconomicbarriers,furtherdetailingofseveralbarriers
Reddy(2013)–BarrierFramework7
no no YES
Establishedhierarchicalstructureofbarriers,takenfromanactor-relatedperspective
Vogeletal.(2015)–BarrierFramework8
YES no YESSpecifictobuildingarea,addedseveralbarriersrelevanttoeconomicarea
Stede(2017)–BarrierFramework9
YES YES N/ASpecifictowhitecertificatesinindustry,addedseveralbarriersrelevanttoeconomicarea
Chapter2:LiteratureReview
42
Fromtheprecedingtableitcanbeseenthat...
• ...the barriers arranged in the framework of Sorrell et al. (2000) were used in several of the
succeedingframeworks,
• ...mostoftheframeworksprovidedcontributionstothecategorisationofbarriersintoareas.
Inordertoselectthemostsuitablebarrierframeworkforthepurposeofthisresearch,anevaluationof
theframeworksdiscussedaboveiscarriedoutinthefollowing.Atotaloffiveevaluationcriteriawere
definedonthebasisofwhichtheselectionwastobemade.Theframeworkswereevaluatedbasedon
followingcriteria,consideredrelevantbytheresearcher:
a) Detailedness–Thebarrierframeworkshouldconsistofacatalogueofseveraldifferentbarriers.
b) Structure–Thebarrierframeworkshouldclearlydistinguishoneareaofeconomicbarriersfrom
otherbarrierareas.
c) Empiricism–ThebarrierFrameworkshouldbeasystemofempiricallydeterminedbarriers.
d) Applicability–Thebarrierframeworkshouldnotbesector-specificoratleastdirectlyapplicable
totheindustrysector.
e) Differentiability – The barrier framework should enable a level formation, hierarchisation or
evaluationaccordingtostakeholdersengaged.
Thefulfilmentofthecriteriaisassessedforeachoftheframeworksasfollows:
• ‘Fullymet’ = ü
• ‘Partiallymet’ = ---
• ‘Notmet’,N/A = X
Table2-11–BarrierFrameworkEvaluationbasedonaCriteriaSystem
Framework
EvaluationCriteria
a)
Detailedness
b)
Structure
c)
Empiricism
d)
Applicability
e)
Differentiability
HirstandBrown(1990)–BarrierFramework1 --- --- Weber(1997)–BarrierFramework2 Sorrelletal.(2000)–BarrierFramework3
Thisframeworkisnotpartoftheevaluationprocess,asitformsthebasisforother
frameworksevaluated.
DeGrootetal.(2001)–BarrierFramework4 --- Thollanderetal.(2010)–BarrierFramework5 --- --- ---CAGNOETAL.(2013)–BarrierFramework6 --- Reddy(2013)–BarrierFramework7 Vogeletal.(2015)–BarrierFramework8 --- unknown --- Stede(2017)–BarrierFramework9 --- ---
Chapter2:LiteratureReview
43
Fromtheprecedingtableitcanbeseenthat...
• ...theframeworkofCagnoetal.(2013)hadthelowestdeficitscomparedtotheevaluationcriteria
andisthusaheadoftheframeworkofStede(2017).
• ...theframeworkofStede(2017)wasnotratedonanyofthecriteriaasbeingbetterthanthatof
Cagnoetal.(2013).
• ...theonlycriterionthatwasnotfullymetbytheframeworkofCagnoetal.(2013)('a)Detailedness')
wasalsonotmetbyanyotherframework.
Forthisreason,thebarrierframeworkofCagnoetal.(2013)wasselected.Thetablebelowshowsthe
barriers assigned to the economic area, and theirmore detailed specifics of this framework,which
henceforthwasusedinthisresearch:
Table2-12–SelectedBarrierFramework6–ExcerptofeconomicBarrierAreaBasedonCagnoetal.(2013)
Area Barrier OriginThisbarrierimplies,thatanEEImeasurecanbeinhibitedor
prevented…
ECONOMIC
1.ExternalRisks External
...byhighlyvolatileenergyprices,whichcreateahighdegreeofuncertaintyinthe estimation of future or long-term operating costs; this may lead to BATinvestmentsbeingavoidedcomparedtoconventionaltechnologiesduetohigherinvestmentneeds–anduncertaintyabout thepriceofenergyproduced fromfossil fuels, which does not reflect all the environmental and social costsassociatedwithproduction,conversion,transportanduse;thismeansthatEEImeasuresare lessprofitablethanwouldbesociallyoptimal,andpricesignalsarethereforeanbarriertoinvestmentinthepurchaseofEEtechnology.
2.LowCapital
AvailabilityInternal
…by insufficient capital from own resources and difficulties in borrowing orraising equity, or internal investment planning procedures and investmentevaluation related to higher investment needs for BAT systems compared toconventionaltechnology;inmanufacturing,EEImeasuresarehinderedbythepreferenceofinvestmentsthatincreaseproductionoverEEIinvestmentsthatreduce operating costs; often a two-tier systemof investment criteria is alsoused,whereproduct-independentinvestments,suchasenergycostreductionsor savings, must achieve a significantly higher return than product-relatedinvestments; the resulting very high discount rates then lead to a situationknownasthe‘Paybackgap’;oftenatwo-tiersystemofinvestmentcriteriaisalsoused,where product-independent investments, such as energy savings,mustachieveasignificantlyhigherrateofreturnthanproduct-relatedinvestments;theresultinghigherdiscountinterestratesthenleadtoasituationknownasthe‘Paybackgap’.
3.Intervention
notsufficiently
profitable
Internal/External
…bysolutionsthatareinprinciple,butnotnecessarilycost-effectiveinallcasesandorganisations.
4.HiddenCostsInternal/External
...bycosts,whicharenotincludedintheoriginalestimateoftheinvestmentplanning(e.g.transactioncostsforthecollection,analysisandapplicationofthemeasures,inaddition,costsoftheinformationprocurementandanalysisaswellasthepersonneltraining)andeliminatetherebytheoriginallycalculatedcostefficiency.
5.Investment
(Transaction)
Costs
External…byinitiallyhighdesignandmanufacturingcostsforprovidinganenergyefficienttechnology.
6.Intervention-
relatedRisks
Internal/External
...byuncertaintiesininvestmentsinEEImeasures,whichalwaysentailrisksofoperationalfailure;uncertaintiesalsoexistwithregardtothedurationandavailabilityofEEtechnologiesandthelong-termavailabilityofcalculatedenergycostsavings,especiallyifthediscountratesforfuturecostsandbenefitsareeitherlowerthantheavailablereturnoninvestmentswithcomparableriskorhigherthanthefinancingrateofthemeasure.
Part of this frameworkwas also the origin of the barrier, i.e. the distinction between external and
internalwithrespecttotheCustomerorganisation.Theoriginofsomebarrierswasseeneitherclearly
Chapter2:LiteratureReview
44
internalorexternal,however,insomecasesbothoptionswerepossible.Externalsourcesincludedthe
stakeholdersESCOandTPForganisation,butalsofurtheractorssuchas(governmental)authorities.
Furthermore, the frameworkcontainedanassignmentof thebarriers tostagesofadecision-making
processtoanEEIproject.Thefollowingfigureshowsthisprocess(withdecisionlevels‘A’–‘C’)aswell
astheintegrationofthesixeconomicbarriersintoit:
Figure2-7–SelectedBarrierFramework6:Decision-makingProcess–economicBarrierspotentiallypreventingorinhibitingtheProgressBasedonCagnoetal.(2013,p.302)
Fromtheprecedingfigureitcanbeseenthat...
• ...theappearanceorexistenceofeconomicbarrierscould leadto inhibitionorterminationof the
decision-makingprocessonCustomersideduringitsdifferentstages;
• ...the first two economic barriers of the framework (‘1. External Risks’ and ‘2. Low Capital
Availability’)wereoffundamentalsignificanceforEEIprojectsirrespectiveoftheconcreteintended
measure,whiletheotherbarriersweredirectlyrelatedtothe(technicalandorganisational)content
ofthemeasure.
AfurtherresultofthepaperofCagnoetal.(2013,p.304)wastheidentificationofrelationshipsbetween
singlebarriers.Theseareshowninthefigurebellow:
Outset(EquipmentusedisnotyetBAT)
Willtoinvest(RecognitionofEEIPotential)
ProjectDesign(DeterminationonOpportunitiesandInefficiencies)
Implementation/OperationsofEEIMeasure
2.LowCapitalAvailability
A
B
C
3.Interventionnotsufficientlyprofitable
4.HiddenCosts
5.Investment(Transaction)Costs
6.Intervention-relatedRisks
1.ExternalRisks
Decision-makingProcessinEEIProjects EconomicBarrier
X
X
X
Chapter2:LiteratureReview
45
Figure2-8–SelectedBarrierFramework6:ConnectionsbetweeneconomicBarriersandBarriersfromotherAreasBasedonCagnoetal.(2013,p.304)
Fromtheprecedingfigureitcanbeseenthat...
• ...especiallytheeconomicbarriers‘5.Investment(Transaction)Costs’and‘6.Intervention-related
Risks’couldhaveanegativeimpactonthebarrier‘3.Interventionnotsufficientlyprofitable’through
a possible accumulation of corresponding effects, even if the performance of the EEI measure
appearedtobefundamentallypositive.
2.5 ConclusionsfromLiteratureReview
AfteranintroductorydescriptionoftheimportanceattachedtopolicyintheEUtoachievingtheclimate
targetsandthecontributionESandESCOswereintendedtoprovide,thischaptercontinuedwithan
overviewoftheESmarketingeneralandinGermanyinparticular.
The existence of potentials for reducing energy consumption on the consumer side through EEI
measureshasbeendemonstratedintheliterature.ThepositiveinfluenceofESCOsontheuseofthese
potentialshasalsoalreadybeenshown.Anexisting,approximatemarketvolumefortheiractivitywas
quantifiedforGermany.TheincompleteuseofthisavailablemarketvolumebyESCOwasexplainedby
thepresenceofbarriers.
Comparatively little academic research dealingwith this complex of issues, the causes and possible
solutions was identified. The existing academic literature covered only certain regions andmarket
sectors,thecomprehensivegreyliteraturewithcross-sectionalandlongitudinaldataobviouslysuffered
from very small data bases and generalmethodologicalweaknesses for the situations (regions and
marketsectors)understudy.
The focusof thesepaperswasonEEI– fromtheCustomer'sperspectiveas theuserofBATandthe
barriersonitssituation.PapersconcerningESfromtheperspectiveofESCOsfocusedprimarilyonthe
Customer sectors real estate/residential (mainly outsideGermany) and public/municipal (including
EconomicBarrier
1.External Risks
2.LowCapitalAvailability
3.Interventionnotsufficiently profitable
4.HiddenCosts
5.Investment(Transaction)Costs
6.Intervention-related Risks
Barriers from other Barrier Areas
Chapter2:LiteratureReview
46
Germany).Theindustrialsectorasanotherimportantenergyconsumersegmenthassofaronlybeen
coveredbyafewpapers,thesituationinGermanynotyetatall.
AlthoughthebarrierstoESprojectswereexaminedfromtheperspectiveofthestakeholdersCustomer
aswellasESCO,influencingfactorsfromconstellationsofstakeholderscouldnotbetakenintoaccount
– the research strategies applied in the corresponding papers (mainly the survey strategy)
systematicallycouldnotcapturethesedifferentperspectivesinajointEEIproject.Theresearchstrategy
ofthecasestudy,withwhichthiscouldbeachieved,hassofaronlybeenusedinapapercoveringthe
realestate/residentialsectorinNorway.
Furthermore,economicbarriersaspartofacomprehensivebarrierframeworkwerenotthesubjectof
explicitqualitativeresearchinthesepapers.ThiswasparticularlyapplicabletotheGermanESCOand
ESmarket.Barriersthatcouldarisefromaccountingstandards(i.e.InternationalFinancialReporting
Standards)havealsonotyetbeeninvestigated.
Withreferencetotheresearchquestionsposedintheintroductorychapter,thisresearchaimstoclose
thesegapsidentifiedintheexistingliterature.
Theselectionofaconceptual frameworkonwhichanalysescouldbebasedhasalsobeenpresented
above.TheoneofCagnoetal.(2013)wasselectedasthemostsuitablesystem.Thisframeworkalsodid
notfullymeetalltheevaluationcriteria–withregardtothecriterion‘a)Detailedness’.Itwasoneofthe
objectivesofthisresearchtofurtherdeveloptheexistingconceptualframeworksintheareaofeconomic
barriers.
Theresearchmethodologyappliedaswellastheapproachesandconceptsforensuringthequalityof
thisresearchwillbedescribedinthenextchapter.
47
Chapter3: Methodology
This chapter dealswith the philosophical foundations onwhich this researchwas based, following
Saundersetal.(2016,pp.127-202).
Thechoiceof the theoretical structure is introducedby theapproach to theorydevelopment,which
resultsfromthenatureandthesubjectoftheresearchquestionsposedinChapter1.Thisinturnisthe
basisfortheassociatedresearchphilosophy,whichalsoincludesthecorrespondingresearchmethods.
Accordingly,variousresearchstrategiesareavailablewhich–dependingonthechosentimehorizon–
requiretheirownproceduresofdatacollectionandanalyses.
Following Saunders et al. (2016, p. 124), the different elements of the research methodology are
structuredinlayersoftheso-called‘Researchonion’:
Figure3-9–‘ResearchOnion’:LayersofResearchMethodologyBasedonSaundersetal.(2016,p.124)
Inthesectionsbelow,theelementsofthelayersofthe‘Researchonion’arebrieflydescribedandthe
appropriatephilosophicalfoundationforthisresearchisselected–elementbyelementfromeachof
theselayers.Subsequently,thecriteriaforassessingthequalityofthisresearchwillbeconsidered.
3.1 ApproachtoTheoryDevelopment–FirstLayerofthe‘ResearchOnion’
Inthefirstlayerofthe‘Researchonion’ofSaundersetal.(2016,pp.146-149),themethodofreasoning
istobedefined.Threedifferentapproachesaredistinct:
• Deduction,
• Induction,and
• Abduction.
1 2 3 4 5 Archivalresearch
Actionresearch
GroundedtheoryNarrativeinquiry
Monomethodquantitative
Monomethodqualitative
Multimethodquantitative
Multimethodqualitative
Mixedmethodsimple
Mixedmethodcomplex
Deduction
Induction
Abduction
Positivism
Criticalrealism
Interpretivism
Post-modernism
Pragmatism
Cross-sectional
Longitudinal
3.1ApproachtoTheoryDevelopment
3.2ResearchPHILOSOPHY
3.3ResearchMETHOD
3.4ResearchSTRATEGY
3.5TimeHorizon
Casestudy
Experiment Survey
Ethnography
Datacollectionanddataanalysis
Chapter3:Methodology
48
3.1.1 Deduction
The deductive approach is the development of a theory, which is then subjected to a rigorous
examinationthroughaseriesofpropositions.Lawsformthebasisofexplanationsthatmakeitpossible
toanticipatephenomena,predicttheiroccurrenceandthusenablethemtobecontrolled.Thismakesit
thedominantresearchapproachinthenaturalsciences.
Starting from a hypothesis, its argumentative logic is tested, and the hypothesis is compared with
existing theories. The hypothesis is tested by collecting appropriate data to measure and analyse
variables.Iftheresultsoftheanalysesmatchthehypothesis,thetheoryisconfirmed.
The deductive approach includes several important features by which the quality of quantitative
researchcanbeassessed:
• Reliability–ahighlystructuredapproachisfollowedtoenablereplicationbysearchingforcausal
relationshipsbetweenconceptsandvariables;
• Validity/generalisability–acarefulselectionandsufficientlylargedimensioningofthesampleisa
prerequisite;
• Operationalisation – the principle of reductionism is followed, i.e. problems are reduced to the
simplestelementssothatfactscanbemeasuredquantitatively.
Inshort,theaimofthedeductiveapproachis‘explain’(GillandJohnson,2002,p.10).
3.1.2 Induction
Theinductiveapproachaimstobetterunderstandthenatureofaproblem.Theresultoftheanalysisof
the collected researchdata is the formulationof a theory,which isoftenexpressed in the formofa
conceptualframework.
Inthisapproach–andcontrarytothedeductiveapproach–theoryfollowsdata.Asexplainedinthe
previous subsection, thedeductiveapproachhas itsorigin in scientific research.The social sciences
criticisedeductionforhavinganargumentativeapproachthatmakesitpossibletoestablishacause-
and-effectrelationshipbetweencertainvariableswithoutunderstandingpeople'sinterpretationofthe
socialworld.Thedevelopmentofsuchanunderstandingistheobjectoftheinductiveapproach.
Inaninductiveapproach,peoplearetreatednotas‘mechanically’reactingresearchobjectsbutaspeople
whose behaviour is a consequence of the way they perceive the social world. Researchers in the
inductiveapproachalsocriticisethedeductiveapproachforitstendencytofollowarigidmethodology
thatdoesnotallowforalternativeexplanationsofasituation.Ontheotherhand,researcherscriticise
theuseofsmallsamplesintheinductiveapproachandquestionitsabilitytoprovidegeneralisableund
reliablecontributionstoknowledge.
Therefore,alternativeconceptstoassessthequalityof inductiveresearchwereestablished(referto
section3.7,p.63andfollowing).
Researchwithaninductiveapproachtoreasoningisparticularlyconcernedwiththecontextinwhich
suchsituationstakeplace.Therefore,theexaminationofasmallsampleofsubjectsismoresuitablethan
Chapter3:Methodology
49
thatofalargenumberofsubjects,asinthedeductiveapproach.Researchersinthisapproachtendto
workwithqualitativedataanduseavarietyofmethodstocollectthisdatatogaindifferentviewsof
phenomena.
Inshort,theaimoftheinductiveprocessis‘understand’(GillandJohnson,2002,p.43).
3.1.3 Abduction
Theabductiveapproachmovesbackand forth,combining thedeductiveandthe inductiveapproach
insteadofswitchingfromtheorytodata(asinthedeductiveapproach)orfromdatatotheory(asinthe
inductiveapproach).Theabductiveapproachbeginswiththeobservationofa‘surprisingfact’andthen
developsaplausibletheoryofhowthiscouldhappen.Someplausibletheoriescanexplainbetterthan
otherswhatisobserved,andthesetheorieshelptouncoverfurther‘surprisingfacts’.These‘surprises’
can occur at any stage of the research process. Sufficiently detailed data are used to explore the
phenomenonandtoidentifyandexplaintopicsandpatterns.
Thedeductiveandtheinductiveapproachthuscomplementtheabductiveapproachasamethodfor
testingplausibletheories.
3.1.4 SelectionofappropriateApproachtoTheoryDevelopment
The objectives of this research are described in section 1.2 (refer to p. 19). The central aim is to
understand in depth the significance of economic barriers for ES and EEI projects. The objective is
thereforenottheexaminationofexistingtheoriesbutabetterunderstandingofthenatureofaproblem.
This corresponds to the inductive approach. Hence, as explained above, this is selected as the
appropriateapproachtotheorydevelopmentinthefirstlayerofthe‘Researchonion’.
3.2 ResearchPhilosophy–SecondLayerofthe‘ResearchOnion’
In the second layer of the ‘Research onion’ of Saunders et al. (2016, p. 124), research philosophies
relevant for social science research are considered in the following subsections. Fivemain research
philosophiescanbedistinguished(Saundersetal.,2016,pp.135-144):
• Positivism,
• CriticalRealism,
• Interpretivism,
• Postmodernism,and
• Pragmatism.
AsSaundersetal.(2016,pp.127-128)explain,thedifferentresearchphilosophicalperspectivesinthe
areaofsocialsciencesdifferinthreedimensions:Ontology,epistemologyandaxiology.
• Ontology:Asthefirstofthethreedimensionsintheresearchphilosophyframework,ontologycan
bedescribedastheessenceofphenomenaandtheirexistence,followingthequestion‘Whatisthe
natureofreality’(Creswell,2012,p.21).
Chapter3:Methodology
50
• Epistemology: As the second of the three dimensions in the research philosophy framework,
epistemologycanbesummarisedasasetofassumptionsaboutwaysofenquiringintothenatureof
theworld,followingthequestions‘Whatcountsasknowledge’and‘Howthisknowledgeisknown’
(Creswell,2012,pp.20-21).
• Axiology:Asthethirdofthethreedimensionsintheresearchphilosophyframework,axiologyrefers
tovaluesandethics in the researchprocess, following thequestion ‘Whatarevalues’ (Creswell,
2012,p.21),distinguishinghowresearchersdealwiththeirownvaluesandthoseoftheresearch
participants.Thechoiceofresearchtopic,philosophyanddataacquisitiontechniquesareseenasan
expressionofthevaluesoftheresearcher.
An overview of the most important philosophical perspectives is necessary to justify the research
method and research strategy to be chosen in the following steps and to highlight the underlying
assumptionsoftheresearcher.
3.2.1 Positivism
Positivismreferstothephilosophicalattitudethatrealityisobservable,observationsaretakenfroman
independent, value freeposition toprovidingpuredata and facts that arenot influencedbyhuman
interpretationorprejudice.
Fromapositivistposition,organisationsandothersocialunitsareregardedasrealobjectsandnatural
phenomena. The complexity of the social world is reduced to the simplest terms to uncover the
structuresofsocialrelations(Easterby-Smithetal.,2015,p.52).
Causal relationships in the data generate law-like generalisations to explain and predict human
behaviour.Basedonatheory,inasystemofcauseandeffect,factscanbederivedfromhypothesesasa
resultofresearch.Thesehypothesesaretestedandthenfullyorpartiallyconfirmed–orrefused,leading
toafurtherdevelopmentofatheory,whichcanthenbetestedbyfurtherresearch.
In thepositivist researchphilosophy, theworld is seen as concrete from theontological dimension.
Thereisasinglerealityasaconcretestructureandasingle,uniquetruth.Factsexistandcanbedisclosed
directly.
From the epistemological dimension, positivist research follows the scientific method. Facts are
observableandmeasurable.Generalisationsaremadeintheformoflaws,researchisbasedonnumbers.
Thecontributionofpositivistresearchtoknowledgeiscausalexplanationsandpredictions.
From the axiological dimension, positivist research is value-free. The researcher is neutral and
independentofwhatheisresearching.Positivistresearchstrivesforaneutralapproach,inordertonot
influence the results.Against thisbackground,positivist research is strongly linked to the inductive
approachtotheorydevelopment.
3.2.2 CriticalRealism
Thephilosophyofcriticalrealismfocusesonexplainingwhatweseeandexperience in termsof the
underlyingstructuresofrealitythatshapeobservableevents.Criticalrealismclaimsthattherearetwo
Chapter3:Methodology
51
stepstounderstandingtheworld.Firsttherearesensationsandeventsthatoneexperiences.Second,
thereisthementalprocessingthattakesplacesometimeaftertheexperience.
Forcriticalrealism,observations(the‘Empirical’)areonlyasmallpartofeverything–afractionofthe
sumofthe‘actual’eventsthatoccuratagiventime.Onecanonlyunderstandwhatishappeninginthe
socialworldifoneunderstandsthesocialstructuresthatledtothephenomena.The‘real’domain,on
theotherhand,compriseseventsandactionsthattakeplaceindependentlyofobservation(Easterby-
Smithetal.,2015,p.59).Theresearchintothephilosophyofcriticalrealismfocusesontheexplanation
ofobservableorganisationaleventsthroughthesearchfortheunderlyingcausesandmechanismsby
whichdeepsocialstructuresshapeeverydayorganisationallife.
Intheontologicaldimensionofcriticalrealism,realityisthusexternalandindependent,butnotdirectly
accessiblethroughobservationandknowledge.
Theepistemologicaldimensionofcriticalrealismrecognisesthatknowledgeisaproductofitstimeand
specific to it, and that social facts are social constructions that people agree on rather than exist
independently.Thismeansthatthenotionsofcausalitycannotbereducedtostatisticalrelationships
andquantitativemethods.
Theaxiologicaldimensionofcriticalrealismarisesfromtherealisationthatknowledgeofrealityisa
resultofsocialconditioningandcannotbeunderstoodindependentlyofthesocialactorsinvolved.This
meansthatresearchaccordingtocriticalrealismtriestobeawarethatthesocio-culturalbackground
and experience of the researcher can influence the research, and therefore aims to minimise such
distortions.Theroleoftheresearcherisasobjectiveaspossible.
Due to the historically founded analysis of already existing structures and emerging effects, critical
realisticresearchislinkedtothedeductiveapproach.Researchinthesocialsciencesisoftenbasedon
thispositionandtendstouncoverunderlyingstructuresofsocialrelations.
3.2.3 Interpretivism
Whatinterpretivismhasincommonwithcriticalrealismiscriticismofpositivism,butfromapurely
subjectivist perspective. Interpretivism emphasises that people differ from physical phenomena
becausetheycreatemeanings.Humansandtheirsocialworldcannotbestudied inthesamewayas
physicalphenomena,sosocialscienceresearchmustdifferfromscientificresearchinsteadoftryingto
imitateit.
Since different people with different cultural backgrounds, under different circumstances and at
differenttimescreateandexperiencedifferentsocialrealities,interpretivismcriticisestheaspirationof
positivismtodiscoveruniversal‘laws’byreducingcomplexitytoaseriesofgeneralisations.Theaimof
interpretivistresearchistocreatenew,richerinsightsandinterpretationsofsocialworldsandcontexts.
Asthesocialworldiscomplex,thesetuptobestudiedembracesthewholecomplexity,andnoreduction
cantakeplacetopreservetherichnessoftheinsights.Theinterpretationsofwhatlooksthesameonthe
surfacecandifferfromthecontext.
Inthefieldofinterpretivismthesocialworldisseenasindividuallyconstructedbysocialactors,andis
thereforenotobservableindependentlyandvaluefree,astheresearcherispartofthesocialworldand
Chapter3:Methodology
52
bringshisownbackground.Actionsofothersleadtoadjustmentsoftheresearcher’sownactionsand
meanings.Atheoryisnotthestartingpoint,buttheresultofinterpretivistresearch.
Withitsfocusoncomplexity,rich,multipleinterpretationsandtheformationofmeaning,interpretivism
isexplicitlysubjectivist.
Fromtheperspectiveofinterpretivismontheontologicaldimension,realityiscomplex,richandsocially
constructedthroughcultureandlanguage.Meaningsaremanifoldandinterpretable.
Fromtheepistemologicaldimensionofinterpretivism,theoriesandconceptsareconsideredtoosimple.
Knowledgecontributionsofinterpretiveresearcharenewinsightsandworldviews.
Theconsequencefortheaxiologicaldimensionofinterpretivismisthatthevaluesandconvictionsofthe
researcher play an important role in the research process. The decisive factor for the interpretivist
researchphilosophyisthattheresearchermustadoptasensitiveattitude.Thechallengeistoenterthe
socialworldofresearchparticipantsandunderstanditfromtheirperspective.Theresearcher'sroleis
reflexive.
Researchfrominterpretationalphilosophyistypicallyinductive.Itisbasedonsmallsamplesizes,the
dataofwhichareexaminedindetail.Qualitativeanalysismethodsareusedtointerpretseriesofdata.
3.2.4 Postmodernism
Postmodernismemphasises theroleof languageandpowerrelationsand tries toquestionaccepted
waysofthinkingandgivevoicetoalternative,marginalisedviews.Postmodernismgoesevenfurther
thaninterpretivisminitscriticismofpositivismandobjectivismandattachesgreatestimportancetothe
roleoflanguage.Theobjectivistontologyofaconcreteworldisrejected.
Order is considered provisional and unfounded, as it is only achieved through language with its
categoriesandclassifications.Languageisconsideredinadequatebecauseitmarginalises,suppresses
andexcludesaspectsofwhatitclaimstodescribe,whileitprivilegesandemphasisesotheraspects.This
expressespowerrelationsandideologiesthatdominatethecontext.Postmodernismtriestouncover
andquestion thesepower relations.This is done in the formof ‘deconstructing’what is considered
reality.
From the ontological dimension, reality is considered nominally complex and rich. It is socially
constructed by power relations, certain meanings, interpretations and realities are dominated and
suppressedbyothers.
Withregard to theepistemologicaldimension,dominant ideologiesdecidewhatcountsas truthand
knowledge.Therefore,thefocusofpostmodernistresearchisontheabsent,silencedandsuppressed
meaningsandinterpretations.
From the axiological dimension, postmodernist research is value-oriented. The postmodernist
researcherandhisresearchareembeddedinpowerrelations,thebalanceofpowerbetweenresearcher
and research object shapes the knowledge created by research. At the expenses of others, certain
researchnarrativesaresuppressedandsilenced.Theseareinvestigatedindetail.
Chapter3:Methodology
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Ingeneral,qualitativeanalysismethodsareusedforthisinductivepurpose.Theresearcher'sviewofhis
roleisradicallyreflective.
3.2.5 Pragmatism
Two opposing main fields of the ontological dimension can be distinguished: Objectivism and
subjectivism.Theresearchphilosophyofpragmatismcanbeseenasacompromisebetweenthesetwo
extremes(Easterby-Smithetal.,2015,p.60).
Inpragmatism,conceptsofresearchphilosophyareonlyrelevantwheretheysupport theapproach.
Sincepragmaticresearchismoreinterestedinpracticalresultsthaninabstractdifferences,itcancover
theentirespectrumbetweenobjectivistandsubjectivistresearch.
Inthefieldofpragmatism,researchdoesnotfaceconceptsliketruthandrealityandattemptsatthese
conceptsareseenaspointless.
Themost importantdeterminantofpragmatism is the researchproblemand the researchquestion,
whichincludesthepragmaticemphasisonpracticalresults.Pragmatismisoftheopinionthatthereare
manydifferentwaysof interpretingandexploringtheworldandthatnosingleperspectivecanever
conveythewholepicture.Pragmaticresearchdoesnotuseseveralmethods,buttheonethatenables
credible,sound,reliableandrelevantdatatobecollectedinordertoadvanceresearch.
According to theontologicaldimensionofpragmatism, reality is seenascomplex, richandexternal.
Realityisthepracticalconsequenceofideas,therecanbeseveralrealities.
From the epistemological dimension of pragmatism, knowledge gains practical meaning in specific
contexts.Thosewhomakesuccessfulactionpossibleareregardedastruetheories.Pragmaticresearch
beginswithaproblemandaimstofindpracticalsolutionsthatimprovefuturepractice.
Fromtheperspectiveoftheaxiologicaldimensionofpragmatism,researchisvalue-oriented.Research
is initiatedandsupportedbydoubtsandconvictionsof theresearcher.Thevaluesof theresearcher
drivethereflexiveprocessofinvestigation.Theresearcher'sviewofhisroleingeneralisreflective.
Pragmatic research follows research problems and research questions in its methods. The wide
spectrumrangesfrommixed,multipleandqualitativetoquantitativemethods.Thefocusisalwayson
achievingpracticalsolutionsandresults.
3.2.6 SelectionofappropriateResearchPhilosophy
Inthefollowingselectionoftheresearchphilosophy,inafirststepcertainresearchphilosophieswere
excludedinanegativeselectiononthebasisoftheirspecificcharacteristics:
• Positivism:Basedontheapproachtotheorydevelopmentchosenintheprevioussubsection–the
inductiveapproach–itcanbeexcludeddirectlyonthebasisofitsinherentdeductiveapproach.
• Criticalrealism:Thesameexclusioncriterionappliestothisresearchphilosophy.
• Postmodernism: Due to the focus on power relations and the underlying approach from the
ontologicalperspectiveofuncoveringrealitythrough‘deconstruction’,thisresearchphilosophyis
excluded.
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Inasecondstep,apositiveselectionoftheremainingtwoofthefiveresearchphilosophiesidentifiedas
relevantforsocialscienceresearch(i.e.interpretivismandpragmatism)willbeusedtoselectthemost
suitableinthecontextoftheresearchquestions,emergingfromthethreedimensions:
Concerning ontology, the research questions assume a complex, rich reality, resulting from the
perspectivesofthestakeholdersoftheEEIprojectsandtheirrespectiveconstellations.
Inepistemology,theresearchquestionsaimtogainnewinsightsandtherebycontributetoadeeper
understandingofESandtheESCOmarketaswellasbarrierissues.
Regardingaxiology,itcanbeassumedthattheresearchercontributestointerpretationsofthecollected
data;theresearcherispartofwhatisbeinginvestigated.Theroleoftheresearcherisexpectedtobe
reflexive.
Boththeresearchphilosophyofinterpretivismandthatofpragmatismcorrespondinprincipletothe
researchapproachresultingfromtheresearchquestionsregardingthesethreedimensions.Withthe
researchobjectiveofdevelopingfurthertheexistingconceptual frameworksintheareaofeconomic
barriers,thiscorrespondstotheinterpretivistresearchphilosophy.
The research objectives of this research thus go beyond the pragmatic philosophy, since pragmatic
researchmeansthepragmaticorientationtowardspracticalorpractice-relevantresults.
So,interpretivismisselectedastheappropriateresearchphilosophyinthesecondlayerofthe‘Research
onion’.
3.3 ResearchMethod–ThirdLayerofthe‘ResearchOnion’
In the third layer of the ‘Research onion’ of Saunders et al. (2016, pp. 165-173), the term research
methodisusedtodistinguishbetweenquantitativeandqualitativeapproachesandcombinations(so
calledmixedmethods)thereof.Thereafter,therelatedresearchpurposeistobedetermined.
3.3.1 Quantitativevs.Qualitativevs.MixedMethods
Quantitative and qualitative methods can be interpreted through their association to philosophical
assumptions and also to research approaches and strategies, each with the aim of answering the
researchquestion.Quantitativeandqualitativeresearchcanbeseenastwoendsofacontinuum,butin
practicetheyareoftenmixed.Thiscanbedoneindifferentways.Byselectinginterpretivismasrelevant
researchphilosophy,purelyquantitativeaswellasmixedmethodsaredirectlyexcludedfromaselection
inthislayerofthe‘Researchonion’.Inordertoemphasisethespecificsoftheremainingmethodsmore
clearly,thedistinctfeaturesoftheresearchmethodsareneverthelesslistedbrieflybelow.
• Quantitativeresearchdealswithquantification,reproducibility,objectivityandcausality.Theuseof
largeamountsofdata inquantitative researchmakes sense for theuseof statisticalmethods to
analyseresearchresults.Quantitativeresearch…
o …isusually associatedwithadeductiveapproach that focuseson theuseofdata toverifya
theory; it is thereforegenerally linkedtotheresearchphilosophyofpositivism,especially in
Chapter3:Methodology
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connectionwithhighlystructureddataacquisitiontechniquesinaccordancewiththeresearch
strategy,butmayalsobeusedincriticalrealismandpragmatism;
o …investigates relationships between variables that are measured numerically and analysed
usingvariousstatisticalandgraphicalmethods;thedataarecollecteduniformly,andprobability
samplingproceduresareoftenusedtoensuregeneralisability;
o …mayuseasingledatacollectiontechniqueandanappropriatequantitativeanalysismethod
accordingtotheresearchstrategy;aquantitativeresearchdesigncanalsousemorethanone
quantitativedatacollectiontechniqueandoneappropriateanalysismethod;
o …isprimarilyconnectedwithexperimentalandsurveystrategies; inquantitativeresearch,a
survey is usually conducted with the help of questionnaires or structured interviews or
structuredobservations.
• Qualitative research attaches importance to seeing the socialworld from the perspective of the
actors,incontrasttoquantitativeresearch,thatfocusesonfactsandnotonjudgements.Qualitative
researchthereforeaimstodevelopacomprehensiveunderstandingoftheproblemunderstudyby
collectingdatainanaturalenvironment–theplacewheretheactorsexperiencetheproblemunder
study.Qualitativeresearch…
o …beginswithaninductiveapproachtobuildatheoryordeveloparichertheoreticalperspective
thanalreadyexistentinliterature;often,strategiesbeginwithadeductiveapproachtotesta
theorywithqualitativemethods;
o …isoftenlinkedtotheinterpretativeresearchphilosophy;thisaimstounderstandsubjective
meaningsofthephenomenonunderstudy;justlikequantitativeresearch,qualitativeresearch
canalsobeusedinresearchphilosophiesofcriticalrealismandpragmatism;
o …examinesthemeaningofresearchparticipantsandtherelationshipsbetweenthem,usinga
varietyofdatacollectiontechniquesandanalyticalmethodstodevelopaconceptualframework
astheoreticalcontribution;
o …does not have a standardised data collection procedure, a previous selectionmay change
duringtheresearchprocess;
o …is connected with a variety of research strategies; these share the ontological and
epistemologicalbasis,buteachhavespecificpriorities,scopeandprocedures;
o …mayusea singledata collection techniqueandanappropriatequalitativeanalysismethod
according to theresearchstrategy;aqualitativeresearchdesigncanalsousemore thanone
qualitativedatacollectiontechniquesandanalysismethods.
• Mixedmethodsresearch…
o …canuseadeductive,inductiveorabductiveapproach;
o …combinestheuseofquantitativeandqualitativedataacquisitiontechniquesandanalytical
methods;
o …isusedinconnectionwiththeresearchphilosophyofcriticalrealism,sinceitassumesthat
thereisanexternal,objectivereality,butthewayinwhichthisisinterpretedandunderstoodis
influencedbysocialconditioning;furtherqualitativeresearchmethodscanbeusedbasedon
Chapter3:Methodology
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quantitative data analysis in order to take this realistic ontology and interpretative
epistemologyintoaccount;
o …isalsousedinconnectionwiththeresearchphilosophyofpragmatism,asitdoesnotconsider
theexclusiveassumptionofaphilosophicalpositiontobehelpfulandinstead,dependingonthe
researchquestionandthecontext,themostsuitableresearchmethodisdetermined.
3.3.2 ResearchPurpose
Therespectivepurposeisderivedfromthetypeandcontentoftheresearchquestions.Researchmaybe
designedtoserveoneofthefourresearchpurposes:
• Exploratory,
• Descriptive,
• Explanatory,
• Evaluative,
oracombinationthereof.
• ExploratoryPurpose…
o ...ispursuedtogaininsightsandtounderstandatopic,orifaphenomenonorproblemistobe
clarified;researchquestionsthatpursueanexploratorypurposeusuallybeginwith‘what’or
‘how’;
o ...can be followed in various ways, e.g. by interviewing ‘experts’ on the topic, conducting
interviewsorfocusgroupinterviews,whichduetotheirexplorativecharacterareunstructured
anddependonthequalityofthecontributionsoftheresearchparticipants;
o ...hastheattributeofbeingflexibleandadaptable;itcanstartwithabroadfocusandbecome
narrowerasresearchprogresses.
• DescriptivePurpose…
o ...ispursuedtoobtainanaccurateprofileofevents,personsorsituations;researchquestions
thatpursueadescriptivepurposeusuallybeginwith‘who’,‘what’,‘where’,‘when’or‘how’;
o ...maybeextensionforanexploratorypurposeorprecursorforanexplanatorypurpose.
• ExplanatoryPurpose…
o ...is pursued to establish the causal relationshipsbetweenvariables; researchquestions that
pursueanexplanatorypurposeusuallybeginwith‘why’or‘how’;
o ...istrackedtoinvestigateasituationorproblembyexplainingtherelationshipsbetweenthe
variables.
• EvaluativePurpose…
o ...is pursued to investigate the effectiveness ofmeasures; research questions that pursue an
evaluativepurposeusuallybeginwith‘how’or‘what’intheformof‘towhatextent’’;
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o ...can provide a theoretical contribution in which the emphasis is not only placed on ‘how
effective’somethingis,butalso‘why’,andthenthisexplanationiscomparedwiththeexisting
theory.
3.3.3 SelectionofappropriateResearchMethod
Thequalitativeresearchmethodbelongstotheinductiveapproachtotheorydevelopment(selectedin
section3.1,p.47andfollowing).Accordingly,theinterpretivistresearchphilosophy(selectedinsection
3.2,p.49andfollowing)islinkedtothequalitativeresearchmethod.Asalreadymentioned,boththe
quantitativeandthemixedmethodapproachcanthereforebeexcludedasapplicableresearchmethods
forthisresearch.
Withregardtothedeterminationofamonoormultimethodapproach,referenceismadetothenext
elementofthe‘Researchonion’–theresearchstrategy–insection3.4(p.57andfollowing).
Withregardtothedeterminationoftheresearchpurpose,apositiveselectionistobemadeonceagain:
Basedontheresearchobjectives(i.e.togainadeeperunderstandingofthetopic),accordancecanbe
foundwiththespecificsoftheexploratorypurposethatisappliedwhenanunderstandingofatopicis
tobecreatedoraphenomenonorproblemis tobeclarified.Thisselection isalsosupportedbythe
researchquestions–inanexploratorypurpose,openquestionsbeginningwith‘what’or‘how’areasked
tofindoutwhatishappeningandtogaininsightsintoatopic.
So, the qualitative researchmethod is already determined by the interpretive research philosophy,
carriedoutinanexploratorypurposeinthethirdlayerofthe‘Researchonion’.
Research strategies in connectionwith the explorative purpose are primarily literature research or
(unstructuredorsemi-structured) interviewswith ‘experts’.Theseandotherresearchstrategiesare
discussedfurtherinthenextsection.
3.4 ResearchStrategy–FourthLayerofthe‘ResearchOnion’
AccordingtoSaundersetal.(2016,p.177),astrategyingeneralcanbeseenasanactionplantoachieve
anobjective.Aresearchstrategycanthereforebedescribedastheplantofindananswertotheresearch
question.Itisthemethodicallinkbetweentheresearchphilosophyandtheoperationalproceduresfor
datacollectionandanalysis.
Inthefourthlayerofthe ‘Researchonion’ofSaundersetal.(2016,pp.177-200),thefollowingeight
researchstrategiesaredistinct:
• Experiment,
• Survey,
• ArchivalandDocumentaryResearch,
• CaseStudy,
• Ethnography,
• ActionResearch,
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• GroundedTheory,and
• NarrativeInquiry.
Theselectionof theappropriate researchstrategyagaindependson theresearchquestionsand the
researchobjectivesandisthereforeaconsequenceofthecoherencewithwhichtheyareconnectedwith
theresearchphilosophyandtheresearchmethodalreadyselectedintheprevioussections.
Certain researchstrategies canbe connectedwithanyof the researchphilosophiesandwithbotha
deductiveandaninductiveapproach.Boundariesbetweenresearchphilosophies,researchapproaches
andresearchstrategiesarepermeable:Thefirsttwooftheresearchstrategiesdescribedindetailbelow
(experimentandsurvey)aregenerallyorexclusivelylinkedtoaquantitativeresearchdesign–andso
already can be excluded from selection. The two following research strategies (archival and
documentaryresearchandcasestudy)canbeusedinquantitativeorqualitativeresearchorinamixed
design.Thelastfourresearchstrategies(ethnography,actionresearch,groundedtheoryandnarrative
inquiry)aregenerallylinkedtoaqualitativeresearchdesign.
3.4.1 Experiment
Thepurposeofanexperimentistoinvestigatethelikelihoodthatachangeinoneindependentvariable
willcauseachangeinadependentvariable.Anexperimentusespredictions(hypotheses)–ratherthan
researchquestions.
Inanexperimentingeneraltwotypesof(opposing)hypothesesareformulated:thenullhypothesisand
the alternatehypothesis. Thenull hypothesis predicts that therewill beno significant differenceor
relationshipbetweenthevariables,thealternatehypothesisassumestheopposite.Inanexperimentthis
nullhypothesisisthenstatisticallytestedand–dependingontheresultacceptedorrejected.
Theexperimentisconnectedexclusivelywithadeductiveresearchapproachandcanthereforedirectly
beexcludedasstrategyforthisresearch.
3.4.2 Survey
Asurveystrategyusingaquestionnairemakesitpossibletocollectandcomparestandardiseddatafrom
a large population in an economic way and to collect quantitative data that can be quantitatively
analysed.Thedatacollectedtendnottobeasfar-reachingasthosefromotherresearchstrategies,as
thenumberofquestionsthatcanbeexpectedtobeansweredbytheparticipantsislimited.
According to Easterby-Smith et al. (2015, p. 75), the dominant epistemology underlying the survey
strategy is positivism. It is assumed that there are regular, verifiable patterns in human and
organisationalbehaviour,buttheseareoftendifficulttoidentifyandtoexplainduetothenumberof
factorsandvariablesthatcouldleadtotheobservedresult.
AspecialcaseofthisstrategyistheDelphistudy,inwhichcarefullyselectedexpertsareconsultedat
least twice on the same topic according to their expertise and receive feedback between these two
rounds.Thiscanrefinestatementsanddeepencertaintopics.Thenumberofresponsesislimitedinthis
process, but the quality is usually better than in a simple survey. The survey is usually linked to a
deductiveresearchapproachandisexcludedasarelevantresearchstrategyforthisresearch.
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3.4.3 ArchivalandDocumentaryResearch
Thearchivalanddocumentaryresearchstrategyisanapproachthatusestext,imageandsoundsources
from archives. This data can be used for quantitative, qualitative ormixedmethods. Typically, this
strategyisnotusedalonebutassupportofotherstrategiesinamulti-methodapproach.
3.4.4 CaseStudy
AccordingtoYin(2014),acasestudyisanin-depthinvestigationofatopicorphenomenoninitsreal
environment.Bythisthecasestudyresearchstrategyisdistinctfromothers.Casestudyresearchisoften
usedwhentheboundariesbetweenthephenomenonbeingstudiedandthecontextinwhichitisbeing
studiedarenotalwaysobvious.Acasestudystrategyhastheabilitytogaininsightsfromintensiveand
in-depth research into the study of a phenomenon in its real context, leading to rich empirical
descriptions.
Yin(2014)distinguishesbetweenfourcasestudystrategiesbasedonthefollowingtwodimensions:
• Singlecaseversusmultiplecases;
• Holisticcaseversusembeddedcase.
Forthefirstdimension,asinglecaseisusedif it isacritical,extremeoruniquecaseorbecauseit is
typical.Amultiple-casestudyincludesseveralcases.Therationaleforusingmultiplecasesfocuseson
‘replicability’acrosscases(inthesenseof transferabilityof thefindingsderivedfromanalyses).The
casesare carefully selected for thispurpose.Due to this comparability, themultiple-case strategy is
preferredtothesingle-casestrategy.
Theseconddimensionofcasestudystrategiesreferstotheunitofanalysis.Iftheresearchrelatestoan
objectsuchasanorganisationasawhole, then it isaholisticcasestudy.Forexample, inrelationto
logicalsubunitswithinanorganisation,acasestudyisreferredtoasanembeddedcasestudy.
Casestudiesareusedbybothdeductiveandinductive,andforexplorative,descriptiveorexplanatory
purposes.
3.4.5 Ethnography
Theresearchstrategyofethnographyisusedtostudythecultureandsocialworldofaspecificgroup.
Ethnographyliterallymeansawrittenrepresentationofapeopleoranethnicgroup.Itexaminesthe
interactionofthoseinvolved.
According toEasterby-Smithetal. (2015,p.86), thekeyprincipleofethnography is to immerse the
researcherintheenvironmentandbecomepartofthegroupunderstudytounderstandthemeanings
thatpeoplegivetotheirbehaviourandthatofothersandthatarenotunderstandabletooutsiders.The
breakdownofthesemeaningsopensuppossibilitiesforexploringthemeaningsystemsofgroups.
Ethnographysolelyisusedwithaninductiveresearchapproach.
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3.4.6 ActionResearch
Theaimoftheactionresearchstrategyistopromoteorganisationallearningtodevelopsolutionstoreal
organisational problems and to achieve practical results by identifying topics, planning, taking and
evaluatingmeasures.
The strategy of action research begins in a certain context andwith research questions. As it goes
throughseveraliterations,thefocusofthequestionsmaychangewiththedevelopmentofresearch.
Inthisway,actionresearchdiffersfromotherresearchstrategiesinthatitexplicitlyfocusesonmulti-
stagemeasurestoresearchandevaluatesolutionsfororganisationalquestionsandtopromotechanges
withintheorganisation.Theresearcherworksinasocialprocesswiththemembersofanorganisation
asmoderatorandteachertoimprovethesituationfortheseparticipantsandtheirorganisation.
AccordingtoEasterby-Smithetal.(2015,p.85),actionresearchassumesthatsocialphenomenaarenot
staticbutconstantlychanging.Actionresearchsolelyisusedwithaninductiveresearchapproach.
3.4.7 GroundedTheory
ThestrategyofGroundedTheoryreferstothedatacollectiontechniquesandanalysismethodsused.
Theseareincorporatedintoatheorydevelopedinductivelytoanalyse,interpretandexplainmeanings
constructedbysocialactorsinordertomakemeaningfuluseoftheireverydayexperiencesinspecific
situations.
GroundedTheoryisusedtodeveloptheoreticalexplanationsofsocialinteractionsandprocessesina
widerangeofcontexts.Itoffersasystematicapproachtothecollectionandanalysisofqualitativedata.
Theanalysesarebasedoncodes,developedinaprocessofcontinuouscomparisonofthecollecteddata
withalreadycollecteddata,aswellaswiththecodesthathavesofarbeenusedtocategorisethisdata.
Ifnecessary,newcodesarecreatedandexistingcodesareanalysedagain.GroundedTheoryisgenerally
regarded as an inductive approach. Due to the constant change between induction and deduction,
GroundedTheorycanalsobeclassifiedasanabductiveapproach.
3.4.8 NarrativeInquiry
TheresearchstrategyofNarrativeInquiryisusedincertainresearchcontextsinwhichtheexperiences
oftheresearchparticipant(s)arebestaccessiblebycollectingandanalysingthemascompletestories
insteadofgainingthemthroughinterviewquestions.Theparticipantactsasnarrator,theresearcheras
listener,whofacilitatestheprocessofnarration.
Thepurposeofnarrativeinquiryistoderivetheoreticalexplanationsfromnarrativeswhilemaintaining
theirintegrity.Theaimistopreservechronologicalrelationshipsandthesequenceofeventsastoldby
theresearchparticipantinordertoenrichunderstandingandanalysis.
Throughthenarration,theresearchparticipantalsoprovideshisinterpretationoftheevents.
Narrativeinquiryismainlyusedwhenresearchquestionsandgoalssuggesttheuseofaninterpretative
andqualitativestrategyinaninductiveresearchapproach.
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3.4.9 SelectionofappropriateResearchStrategy
Based on the qualitative research method (selected in section 3.3, p. 54 and following) and its
corresponding basis, the fourth layer of the ‘Research onion’ is to determine the research strategy
appropriatetotheresearchobjectivesandquestionsofthisresearch.Thecentralaimistounderstand
in depth the significance of economic barriers for ES andEEI projects, hence a qualitative research
methodistobeused.
Duetotheirconnectiontothequantitativeresearchmethod,thetworesearchstrategiesexperimentand
surveycanbeexcludeddirectlyinanegativeselection.
Ethnographyisusedtostudythecultureandsocialworldofaparticulargroup.Theaimofnarrative
inquiryistoobtainchronologicalcontextsandtheorderofeventsgivenbytheresearchparticipantin
order to enrich understanding and analysis. Action Research strategy, in turn, aims to promote
organisationallearninganddevelopsolutionstorealorganisationalproblemsthroughthedevelopment
ofmeasures.Grounded theory is used todevelop theoretical explanationsof social interactions and
processes.Archivalanddocumentaryresearchwasclassifiedasastrategywithinamixed-ormulti-
methodapproachandthusasacomplementtoanotherresearchstrategy.Finally,thecasestudystrategy
allowsanin-depthinvestigationofatopicorphenomenoninitsrealenvironmentorcontext,leadingto
richempiricaldescriptionsandthedevelopmentofatheory.
Thissetupasexploratorycasestudycorrespondsmostcloselytotherequirements.Sinceduetothe
rathercomplicatedstructureofEEIprojectsneitheracritical,extremenoruniqueortypicalcasecanbe
identified, themultiple-case study setup is the approach to select for this research. In this context,
attemptsaremadetoachievetransferablefindingsacrosscases.
AstheresearchdealswiththeCustomer,ESCOandTPForganisationsasawhole(evenasitrelatesto
economicaspects),aholisticmultiplecasestudyresearchstrategyisselected.
Withreferencetotheselectionoftheappropriateresearchmethodfromthepreviouslayer,themono
methodresearchmethod,whichonlypursuesoneresearchstrategy,isconsideredtobeeffectiveinthis
context.
3.5 TimeHorizon–FifthLayerofthe‘ResearchOnion’
Whendesigningaresearchproject,itisimportanttoaskwhetheritisasnapshotatacertainpointin
timeorwhetheritisarepresentationofeventsoveraperiodoftime.Thedecisivefactoronceagainare
theresearchquestions.
Inthefifthlayerofthe‘Researchonion’ofSaundersetal.(2016,pp.200-201),twotimehorizonsare
distinct:
• Cross-Sectional,and
• Longitudinal.
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3.5.1 Cross-SectionalTimeHorizon
In general, research is carried out in a cross-sectional horizon, in which a certain phenomenon is
examined at a certain point in time. The subject can be the description of the frequency of the
phenomenon or the explanation of the interrelationships of the factors in different situations. Case
studies are usually based on interviews conducted over a short period of time in a cross-sectional
horizon.
3.5.2 LongitudinalTimeHorizon
Thegreateststrengthoflongitudinalresearchisitsabilitytoinvestigatechangesanddevelopmentsand
tounderstandchangeprocessesovertime.Hence,followingEasterby-Smithetal.(2015,p.70),quasi-
experimentalmethodsaremainlyusedinthelongitudinalhorizon,asrepeatedmeasurementshaveto
becarriedoutovertime.
3.5.3 SelectionofappropriateTimeHorizon
Thecross-sectionaltimehorizonisusedinconjunctionwiththeresearchstrategyofthemultiple-case
studyselectedforthisresearchprojectintheprevioussection.
3.6 ConclusionfromSelectionofMethodology
Theelementsselectedineachofthelayersofthe‘Researchonion’areshowninthefollowingfigure;the
elementsexcludedintherespectivelayersaremarkedaccordingtothereasonforexclusion:
Figure3-10–‘ResearchOnion’:SelectedElementsinLayersofResearchMethodologyBasedonSaundersetal.(2016,p.124)
1 2 3 4 5
CASESTUDY
MONOMETHODQUALITATIVE
INDUCTIONINTERPRETI-
VISM
CROSS-SECTIONAL
Datacollectionanddataanalysis
3.1ApproachtoTheoryDevelopment
3.2ResearchPHILOSOPHY
3.3ResearchMETHOD
3.4ResearchSTRATEGY
3.5TimeHorizon
Legend:• SELECTED• Excluded due to previous selection• Excluded due to specifics
Experiment Survey
Archivalresearch
Ethnography
Actionresearch
GroundedtheoryNarrativeinquiry
Monomethodquantitative
Multimethodquantitative
Multimethodqualitative
Mixedmethodsimple
Mixedmethodcomplex
Deduction
Abduction
Positivism
Criticalrealism
Post-modernism
Pragmatism
Longitudinal
Chapter3:Methodology
63
Theresearchmethodologychosencanthereforebesummarisedasfollows:
Thisresearchpursuesaninterpretiveresearchphilosophywithanexploratorypurposeinaninductive
approachtotheorydevelopment.Itisconductedasmonomethodqualitativeresearchwiththestrategy
ofaholisticmultiple-casestudyinacross-sectionaltimehorizon.Bydoingso,theresearcherpursuesa
reflexiveroleinordertoenterthesocialworldoftheresearchparticipantstounderstanditfromtheir
perspective.
Theelement in the centreof the ‘Researchonion’ (the researchdesign for ‘Data collectionanddata
analysis’)issubjectofsection4.1,p.66andfollowinginthenextchapter.
3.7 QualityofResearch
Reliabilityandvalidityarecentralelementstoassessingthequalityofdeductive,quantitativeresearch
(refer to subsection 3.1.1, p. 48 and following). Alternative criteria have become established for
assessingthequalityofqualitativeresearch.AccordingtoSaundersetal.(2016,pp.206and398-401)
thesecriteriaare...
• ...‘dependability’ instead of ‘reliability’: The assumption behind interpretivist research based on
qualitative, semi-structured interviews is that the phenomena under study are complex and
dynamic.Thevalueofusingthismethodologyderivesfromtheflexibilitywithwhichthiscomplexity
canbeexplored.Theattempttoensurethatsuchnon-standardisedresearchcanbereplicatedis
thereforeexcluded inordernot toundermine thestrengthof this typeofresearch.Tomakethe
researchprocessandtheresultsunderstandableandcomprehensible,theresearcher'sreasonsfor
choosingthestrategyandmethodsandthewayinwhichthedatawasobtainedshouldbeexplained.
Adetaileddescriptionoftheresearchdesignandthedatacollectionprocessmustdemonstratethat
accurateresultswerederived.
This requirement was responded to in this research with the very detailed description of the
selectionofmethodology(refertosections3.1to3.5,p.47andfollowing,concludedinsection3.6,
p.62andfollowing)aswellasthedescriptionoftheresearchdesignappliedfortheempiricalwork
(refertosection4.1,p.66andfollowing).
• ...’transferability’ insteadofexternalvalidity/generalisability:Thetransferabilityof theresultsof
qualitativeresearchwiththeresearchstrategyofthemultiple-casestudyismadepossible,e.g.in
comparison to a single-case study, by the comparison of the findings between the cases –
nevertheless,replicationinthesenseofstatisticalgeneralisabilityisnotgiven.Thetransferability
furthermoreismadepossiblebyacompletedescriptionoftheresearchquestions,thecontext,the
resultsandtheconclusionsoftheresearch,sothatasimilarprojectcanbeconceivedinthecontext
offutureresearchandusedinasuitableenvironment.
Thisrequirementwasrespondedtointhisresearchwiththeverydetaileddescriptionof‘Empirical
Work’(refertoChapter4,p.66andfollowing)aswellasof‘AnalysesandFindings’(refertoChapter
5,p.92andfollowing).Findingswereexaminedwithregardtotheirtransferabilitybetweenthe
Casesofthemultiple-casestudy.
Chapter3:Methodology
64
• ...’credibility’ instead of ‘internal validity’: The accurate demonstration of causal relationships
betweentwovariablestoreachinternalvalidityissystematicallynotgiveninqualitativeresearch.
In comparison, credibility from this approach can be gained through carefully conducted, semi-
structured interviewswith clarifying questions, investigatingmeanings and examining answers
fromdifferentperspectives.
This requirementwas responded to in this research in the context of a corresponding, accurate
conductingofsemi-structuredinterviews(refertosubsection4.1.3,p.69andfollowing).
Theresearcherwasawareoftheparticularimportanceofmaintainingobjectivityinthephasesofdata
collection,analysisandreportinginordertoensurethecredibilityoftheresearch.Theserequirements
havebeenmetbyconsciousactionintheconstantefforttocollectdatacorrectlyandcompletelyandto
avoidanyformofbias,erroraswellasselectivity:
• Participant error (negative influencing of the participant's performance) and participant bias
(invoking incorrect answers from the participant) was attempted to be prevented by careful
preparationandhandlingoftheinterviews(refertosubsection4.1.1,p.66andfollowing).
• Researchererror(negativeinfluencingoftheresearcher'sdispositionontheinterpretationofthe
answers) and researcher bias (misinterpretation of the answers by subjective views of the
researcher)wereattemptedtobepreventedbytheresearcherhimselfbecomingsensitiveofthese
factorsinthepreliminarystagesofconductingtheinterviews.
Atthesametime,theresearcherwasawareofhisreflexiveroleaccordingtotheaxiologyoftheresearch
philosophyofinterpretivism(refertosubsection3.2.3,p.51andfollowing),accordingtowhichresearch
is value bound and the researcher, as part of what is being researched, makes his contribution to
knowledgethroughhissubjectiveinterpretations.
Anotherfactortoconsiderwastheroleasan'Internalresearcher'(Saundersetal.,2016,pp.207-209)
duetotheaffiliation(atleastatthetimeofdatacollection)totheESCOasthecentralorganisationofthe
multiple-case study. On the one hand, this role already provided knowledge of the organisations
involved,thecomplexityoftheproblemandthecontext,furthermoreunrestrictedaccesstotheresearch
objectwasmadepossible.Ontheotherhand,this'Closeness'requiredaspecialawarenessofthealready
existingassumptionsandprejudicesinthepersonoftheresearcher(suchclosenessmaypreventthe
investigationofcertaintopicsthatwouldenrichtheresearch).
Theresearcherwasconsciousatalltimesofthepossibleeffectsontheresearchandthereforetriedto
identifyandpreventpossiblenegativeinfluencesonresearchatanearlystagebyreflectingonhisrole
asaninternalresearcher.
3.8 SummaryofChapter3
Methodologyisanessentialpartofanyresearch.Onthisbasis,itenablestheresearchertojustifythe
choice of the concrete approach on the way to achieving the stated research objectives. How the
researcherintendedtoachievethisinthisresearchhasbeenshowninthischapter.
Chapter3:Methodology
65
Theresearcherjustifiedtheuseofthechosenmethodology,i.e.researchphilosophyofinterpretivism,
thatwasessentialinordertoprovidetheresearcherwithaholisticviewoftheparticipants'viewsinthe
contextofEEIprojects,aswellastheresearchstrategyintheformofthemultiple-casestudymethodas
ameansofcollectingmeaningfuldatatoanswertheresearchquestions.
Theapproachesandconceptsforensuringthequalityofthisresearchwereexplained.
Inthenextchapterdatacollectionandanalysisprocessaredescribed,ethicalissuesarediscussed.Then,
thespecificCasesofthemultiple-casestudyanddifferingsituationsofthestakeholdersinvolvedare
contrasted.
66
Chapter4: EmpiricalWork
In thepreceding chapters theempirical conditionsof earlier researchaswell as the theoretical and
methodologicalconditionsofthisresearchwerepresented,thischapternowdealswithitsempirical
dimension.
Theproceduresfordatacollectionandanalysisaredescribedbelow.Thentheorganisationsandthe
associated interview participants (each in anonymised form) are presented, finally the five Case
constellationsofthismultiple-casestudy,inwhichtheindividualstakeholdersmetwithinthecontextof
EEIprojectsareexplainedinrichdetail.
4.1 DataCollectionandAnalysis–ResearchDesign
AccordingtoSaundersetal.(2016,p.163),researchdesigncanbeunderstoodasthegeneralplanof
howtheresearchquestionsshouldbeanswered.Itincludesethicalissues,thesourcesfromwhichand
alsothewayhowdataiscollectedandanalysed.
4.1.1 EthicalIssues
DatacollectionphasebeganwithaninitialapplicationtotheUniversityResearchEthicsCommitteefor
ethicsclearance.Thiswasgrantedwithoutanyrestrictionsorconditions.
Intheareaofethicalissues,anumberofaspectshadtobetakenintoaccount–bothonthepartofand
withregardtothepersonoftheresearcher,thenatureandmanneroftheresearchaswellasindealing
with those involved. In the following, these aspects and their consideration in this research are
described:
• Integrity and objectivity: The researcher conducted the research independently. The superiors
(during the timeofhisemploymentat theESCO)were informedby theresearcher ingood time
beforethestartoftheresearch.TheESCOasformeremployerdidnotexertanyinfluenceatany
time–neitherinthedeterminationofthetopic,theselectionoftheCasesnorthatoftheparticipants
tobeinterviewed.Noremunerationfortheresearcherinconnectionwiththisresearchwasgranted
orpromised;allinterviewswereconductedintheresearcher'sfreetimeorduringbreaks.There
was no obligation to disclose the research results to the ESCO. The subsequent (and current)
employeroftheresearcherwasalsonotaffectedbytheresearcher'songoingresearchactivities;all
work was carried out in the researcher's free time and there was no dependency either. The
participantswerealsoneverpromisedanyremunerationorotheradvantage–neitherpersonally
norfortheirrespectiveorganisation.TheparticipantsfromCustomersidewereexplicitlypromised
nottopassonresultstotheESCOinaformattributabletothespecificprojects.
• Voluntaryparticipationandinformedconsent:Thepotentialparticipantswerefirstcontactedby
telephoneandinformedabouttheplannedresearch.Ifoneinitiallywasinterestedinparticipating,
theresearchersentaninformationandconsentformviae-mail.Thisformcontainedthefollowing
details: the type of research, the requirements and impact of participation, the rights of the
Chapter4:EmpiricalWork
67
participant,thewaythedatawastobestored,analysedandreported,andtowhomonecouldturn
incaseofconcern.Afterreturningthesignedform,anappointmentforaninterviewwasmade.
TheconsentformcanbefoundintheAnnex,partC.
• Privacy,respectandavoidanceofharm:Noneoftherespondentsneverwasinanywaydependent
ontheresearcher;thisalsoappliedtoESCOrespondents;therewasnohierarchicalallocationof
respondents to the researcher. However, one respondent was the researcher's manager (the
CommercialDirectoroftheESCO).Allrespondentsvoluntarilydeclaredtheirparticipation,there
wasnopressuretoparticipateatanytime,arefusaltoparticipatewassympatheticallyacceptedand
notquestioned.Thefirstcontactwasmadebytheresearcherduringnormalworkinghours,asfar
as possible via a business mobile phone number to the potential participant. In the case of
unavailability, a corresponding message was left. The private context of the interview and the
exclusiveuseof thecollecteddata foracademicpurposes inconnectionwith this researchwere
explicitly emphasised.An attemptwasmade in the face-to-face interviews to avoid any formof
stress (e.g. through overzealous questioning for those involved). The participants knew that
answeringaquestioncouldberejectedatany time.Privateaspectsof theparticipantswerenot
relevant,thecontextonlyreferredtoprofessionalcontentsinmattersoftheCases.
• Righttowithdraw:Allparticipantsintheresearchweregiventheopportunitytowithdrawtheir
participation.Intheinformationandconsentformtheexplicitreferencetothispossibilitywasgiven.
Noneoftheparticipantsmadeuseofthispossibility.
• Confidentialityandanonymity:Animportantpointfortheparticipantswasthebasicassuranceof
anonymityandconfidentiality,concerningboththeidentityoftheorganisationsinvolvedandthat
oftheirrepresentatives,participatingasinterviewees.Itwasassuredthattheresearcherwasnot
allowedtopassthemoninanypublishedwork,dissertationortothirdparties.Aftertheconsentof
theparticipants,theinterviewswereaudiorecordedusingtheresearcher'sprivateequipment.The
intendedhandlingofthedigitaldatawasexplainedtotheparticipants.Beforethestartoftheaudio
recordingofeachoftheinterviews,thefollowingcodewasagreedwiththeparticipantsregarding
the involved stakeholders: Names of organisations were not mentioned, instead the terms
‘Customer’,‘ESCO’and‘TPF’wereused.Nofurtherinstructionsweregiventotheparticipants.They
wereaddressedby theresearcherwith their realname.Oneparticipantasked toanonymisehis
personinallsubsequentsteps,thiswishwasgranted,butinfactnopersonwasnamedinthewritten
reportof this research. Insubsection4.1.3 (p.69and following)codes (so-called ‘Designations’)
wereassignedtotheparticipants,whichinturnwerenamedwiththeirrespectivefunctionintheir
organisation.Personaldatawerenotrelevantforthisresearch,suchinformationwasnotcollected
andthereforenocorrespondingprocedureshadtobetaken.Itcanbeassumedthatthemeasures
takentoanonymisetheidentitiesofthoseinvolvedprecludeoftheirretroactiveidentification.
• Safety:Ethicalaspectshavealsobeentakenintoaccountwithregardtothepersonoftheresearcher.
Risksrelatedtosafetyhavebeenidentified,inparticularwithregardtotraveltotheinterviewsand
theplaceswheretheinterviewswereconducted,andattemptshavebeenmadetominimisethese
risksbymeansofanticipatoryplanningandappropriatedesign.
Chapter4:EmpiricalWork
68
AsshownaboveandaccordingtoSaundersetal.(2016,p.141)inaninterpretivistresearcharesearcher
ispartofwhatisresearched,thesubjectiveinterpretationsarekeytothecontributionoftheresearch
andtheroleofaresearcherisreflexive.
AsaformeremployeeoftheESCO,theresearcherhadin-depthknowledgeofESmarketsingeneralas
wellasontheESCOunderstudyandoftheprojectsselectedforthecasestudiesinparticular.
TheresearcherpersonallywasconvincedoftheusefulnessofEEImeasuresforthegeneralreductionof
CO2emissionsandwasalsooftheopinionthatESCOsingeneralbasicallyofferatarget-orientedconcept
forthesuccessfulimplementationofthesemeasures.Alreadyfromhisownprofessionalpracticeasan
employeeoftheESCOunderstudy,theresearcherhadtheperceptionofcertainexistingbarrierstothe
implementationofEEImeasures.Forprofessionalreasons, theresearcherhadalreadydiscussedthe
issueofbarriersinthepastwithhiscolleagues–someofthemlaterparticipatedinthisresearch.
4.1.2 SelectionofStakeholdersandCases,AccesstotheInterviewParticipants
ThesetoffiveCasesforthisresearchwascarefullyselectedbytheresearcher.Thedecisiveselection
criteriawerescope,contentandfundingstructureoftherespectiveEEIproject(withtheintentionof
coveringabroadrangethroughtargetedselection),aswellasthesizeoftheclientandtheavailability
ofasuitablecontactperson.ThefiveCaseswerereferredtoasCases‘A’–‘E’.
ThecentralelementofeachCaseof themultiple-case studywas theESCO,whichwas involvedasa
correspondingstakeholderineachoftheEEIprojectsexamined.
At the time of data collection, the ESCO was organised regionally. Each regional unit had all the
competencesandcapacitiestocovertheentirecycleofanEEIproject.Thecommercialissueswereeach
handledbyacommercialmanagerforeachregionalunit.
Atthattime,thisfunctionwasperformedbytheresearcherhimselfinoneoftheseregionalunits.This
circumstance was also the main reason for the selection of the ESCO in question as the object of
investigation.Inthisway,theresearcheralreadyhadadeeperinsightintoallprojectsoftheregional
unit prior to this research, and personal contact with the representatives within the stakeholder
organisationsinvolvedintheCases.
Due to theeconomicorientationof theresearchobjectives, thecommercialmanagerorpersonwith
similarresponsibilityontheCustomersidewasidentifiedasthepreferredcontactperson.OntheTPF
side,theinterviewwiththeheadoftherelevantdepartmentwassought.AttheESCO,inadditiontothe
CommercialDirector,theHeadofCorporateControllingandFinance,theSeniorSalesManagerandthe
Head of Project Development (in his role of former Project Manager in a certain Case) were also
contactedaspotentialparticipants.
A total of 12 potential participants was addressed – as one contacted potential participant from
Customersiderefusedtoparticipateafteraperiodofreflectionandconsultationwiththeresearcherfor
personal reasons, ina furtherstephismanager(andat thesametime themanagingdirectorof this
Customer)was addressed,who then assumed the role of the participant. So, an aspired total of 11
participants(allofmalegender,thereforeonlymaleformsareusedinthefollowing,whenapplicable)
Chapter4:EmpiricalWork
69
consented.TheinterviewsthenwereconductedonthefivedefinedCases,withfourparticipantsfrom
Customers,fourfromtheESCOandthreefromTPForganisation.
Withtheexceptionofone(theparticipantofCustomerD),theresearcherwaspersonallyacquainted
withalloftheparticipantspriortotheenquiry.Thecontactwiththepriorwasestablishedviaacolleague
oftheresearcherfrompartoftheESCO.
4.1.3 InterviewPractice
Datacollectionintheformofnon-standardised,semi-structuredface-to-faceinterviewswascarriedout
betweenJune2016andFebruary2017.Theresearcherattachedgreat importancetousingdifferent
questiontypesinthediscussionwiththeparticipants,bothopenandprobingquestionswereused.All
interviewswerecarriedoutinGerman,thefirstlanguageofallparticipants.
Theinterviewsingeneraltookplaceateachofthepremisesoftheparticipants.Exceptionswerethree
interviewswithESCOparticipants,onetookplaceinameetingroomatanotherlocationoftheESCO,
twointheresearcher'spersonaloffice.
Thecommonmotiveofallparticipantswastotakepartinanacademicresearchprojectonatopicthat
also stemmed from their professional practice aswell as to support the researcher in hiswork. All
participantswerewillingtoprovidesufficienttimefortherespectiveinterview,andthequestionswere
answeredwillinglyandinfulldetail.
Theresearcherhaddevelopedaninterviewscheduleforthispurpose,whichwasusedforallinterviews.
Anessentialpartoftheschedulewasaquestioncatalogue.BasedonthebarrierframeworkbyCagnoet
al. (2013, refer to subsection 2.4.6, p. 38 and following) as well as on the researcher's personal
knowledge,thecataloguewasdevelopedbytheresearcherhimself.Thecataloguewasdividedintothe
followingsubjectareas:
• Participant and organisation – details about the role of the person and the organisation he
represented;
• EEandprojectsspecifics–contentofEEImeasureandEScontracted,aswellaspotentialprojects;
• Specificsandbarriers–barriersperceived,alignedtotheframeworkofCagnoetal.(2013)
TheinterviewschedulecanbefoundintheAnnex,partB.
Thefirstinterviewtookplaceon21/06/2016andwasaformofpilot,astheparticipantwastheESCO
CommercialDirectorandanexpertonallEEIprojectsselected.Withtheexperiencesfromthisinterview
thecatalogueofquestionswassupplementedandfinalised.
Adjustmentsweremadetothestructureandscopeofthecatalogueaccordingtothestakeholderrole
played by the organisation of the participant in the EEI project concerned. In order to ensure
unambiguousidentification,theinterviewswereassignedadesignationwhosesyntaxiscomposedofa
consecutive numbering in the first place (‘01’ – ‘11’) and the stakeholder with its designation – if
applicable(‘C’=Customerand‘A’–‘D’;‘T’=TPForganisationand‘1’–‘3’;‘E’=ESCO)inthesecondplace.
Thefollowingtableprovidesanoverviewofthedetailsoftheinterviewscarriedout:
Chapter4:EmpiricalWork
70
Table4-13–OverviewofInterviewDetails
Interview
Date
Participant
(Job/RoleinOrganisation)
Company
Affiliation
(Years)
Stakeholder DesignationDuration
(Minutes)
21/06/2016 CommercialDirector 11 ESCO 01_E 40
06/07/2016 HeadofCorporateControllingandFinance 7 ESCO 02_E 36
13/07/2016 HeadofEnergyFinancing 9 TPF1 03_T1 80
13/07/2016 DirectorofStructuredFinancing 3 TPF2 04_T2 39
20/07/2016 HeadofCorporateControllingandFinance 15 CustomerC 05_CC 23
19/08/2016 DirectorofEnergyEfficiencyFunds 2 TPF3 06_T3 49
25/08/2016 CommercialHeadofSite 18 CustomerA 07_CA 33
16/09/2016 SeniorSalesManager 5 ESCO 08_E 81
23/11/2016 HeadofStrategicBusinessDevelopment 11 CustomerD 09_CD 37
06/12/2016 (Former)ProjectManager 10 ESCO 10_E 35
08/02/2017 ManagingDirector 13 CustomerB 11_CB 35
TOTAL//AVERAGE: 488//44
Fromtheprecedingoverviewitcanbeseenthat...
• ...onaverage,theinterviewslastedalmost45minutes,withtheconversationswiththeCustomer
participants lasting the shortest on average (about 32minutes) and the conversationswith the
participantsoftheTPForganisationsthelongestonaverage(about56minutes),
• theinterviewswiththeparticipantsoftheTPForganisationsandthoseoftheESCOshowedalarge
variance, someof the interviewswerevery long, somerelativelyshort. In total, interviewswere
conductedoveraperiodofmorethansixhours.
4.1.4 DataAnalysisandWrite-up
Theresearcherfollowedtheprocessofatemplateanalysis,whichoffersasystematic,structuredand
holisticapproachtotheanalysesofqualitativedata.AccordingtoSaundersetal.(2016),theprocedure
includesthefollowingfivesteps:
Becomingfamiliarwiththedata,
Codinginitialtranscript,
Developingafirstlistofcodesandtopics(the‘Codingtemplate’),
Searchingforkeyissuesandrecogniserelationships,
Evaluating.
Theaudiorecordingoftheinterviewswastranscribedbyacommercialserviceprovider.Theapplication
of strict rules was agreed. Since the transcription was not carried out by himself, the researcher
familiarisedhimself intensivelywith the interviewdataby listening to the audio recordings several
Chapter4:EmpiricalWork
71
timesandreadingthetranscribedtextdocuments.Forthesubsequentanalyses,theresearcherimported
the transcribed text data into the NVivo 12 software tool, which enabled coding, hierarchisation,
groupingandstructuredinterpretationofthedata.
Afirsttranscriptwascoded,fromwhichalistofinitialcodeswasdeveloped.Thecodingcategorised
datainthedataelements(theinterviewtextfiles)withsimilarmeanings,linksdataunitsthatreferred
tothesameaspectormeaning,andlinkedaspectsormeaningstocompareandcontrastthem.Twocode
sourceswereused:
• ‘Apriori’(=theory-driven)codesderivedfromtermsofexistingtheoryandliterature(withregard
tobarriers,referencewasmadetothebarrierframeworkofCagnoetal.(2013),whichwasselected
accordinglyinsubsection2.4.10,p.40andfollowing);
• ‘Invivo’(=data-driven)codesbasedontheactualconditionsoftheinterviews.
Thesecodeswerearrangedandrearrangeduntilafirsttemplatewasderived.Subsequenttranscripts
werethencodedwiththecodesofthefirsttemplate,whichwassuccessivelyrevisedifnewdatarevealed
deficienciesinthecodesused,resultinginthedevelopmentofafinalcodingtemplate.Thesewerethen
used to represent relationshipsbetween topicshierarchicallyandsideways.Thisanalytical toolwas
usedtodevelopaninitialconceptualframework,whichwaslaterrevisedandfinalisedtopresentand
examineimportanttopicsandrelationshipsinthedata.Theoriginaldatawerethusgroupedtogether
forfinalanalyses.
4.2 OverviewofStakeholderOrganisationsinvolved
Atotalofnineorganisationswasinvolvedinthisresearch(wherebytheparticipantsbelongedtoonly
eightoftheseorganisations,i.e.noparticipantwasinvolvedfromtheorganisationofCustomerE).These
nineorganisationsandtheparticipantscanbeassignedtothethreestakeholdergroupsasfollows:
Table4-14–OverviewofStakeholders,OrganisationsandParticipantsinvolved
Stakeholder Organisation(Designation) Participant(Job/RoleinOrganisation)
EnergyServiceCompany ESCO
01_E CommercialDirector
02_E HeadofCorporateControllingandFinance
08_E SeniorSalesManager
10_E (Former)ProjectManager
Customer
CustomerA 07_CA CommercialHeadofSite
CustomerB 11_CB ManagingDirector
CustomerC 05_CC HeadofCorporateControllingandFinance
CustomerD 09_CD HeadofStrategicBusinessDevelopment
CustomerE N/A
ThirdPartyFinancier
TPF1 03_T1 HeadofEnergyFinancing
TPF2 04_T2 DirectorofStructuredFinancing
TPF3 06_T3 DirectorofEnergyEfficiencyFunds
Chapter4:EmpiricalWork
72
Facts and details on these organisations are portrayed in the subsections bellow grouped by
stakeholders,overviewsintheformof‘Companyprofiles’areattached.
4.2.1 EnergyServiceCompany
AtthetimeofdatacollectiontheESCOwasanationwideorganisationwhich,throughaGermanparent
company, belonged to a French group of companies with international operations specialising in
technicalservices.
TheorganisationhadbeenactiveintheESmarketformorethan20yearsthroughseveralpredecessor
organisations and after inorganic growth in Germany. The organisation's origins lied both in utility
organisationsandinanorganisationfromtheconstructionandfacilitymanagementsector.
TheESCOwentthroughseveralphasesofcorporatedevelopment:
• Inphase1ofcorporatedevelopmentintheinternationalgroupofcompanieswithoneofthelargest
European utility organisations at the beginning of the business activity of the ESCO, sufficient
liquidity was generally available to finance EEI projects with the group's own funds. The
capitalisationoffixedassetsinvestedplayednoroleinreferencetothealreadyveryasset-heavy
balancesheetsofthesegroup,assomeoftheaffiliateswereenergygenerationplants.
• Inphase2,thisfocuschangedfollowingthetakeoverandmergerofthispredecessororganisation
withanaffiliateofaGermangroupof companieswithoneof the largestEuropeanconstruction
organisationsactiveinthefieldoffacilitymanagement.LiquiditytofinanceEEIinvestmentswasno
longeravailablefromgroupfundsandhadtobeprocuredexternally–althoughloanfinancingwas
notpermitted.Thecapitalisationoffixedassetswastobeavoidedasfaraspossible.
• Inphase3,atthetimeofdatacollectionforthisresearch,followingthetakeoveroftheESCObyan
internationalgroupofcompanieswithitsfocusontechnicalservices–thelastparadigmshifttodate
tookplace. Liquidity generated from theoperatingbusinesswas tobeused solely for inorganic
growth and not for investments in technical equipment; in addition, the capitalisation of
correspondingfixedassetswasgenerallyexcluded.
Itcanbeassumedthat,duetotheiraffiliationtointernationalgroups,InternationalFinancialReporting
Standards (IFRS, for definitions and details of key terms regarding accounting standards refer to
glossary,p.16andfollowing),werealsoappliedattheleveloftheconsolidatedfinancialstatementsin
additiontothelocalaccountingstandardoftheGermanCommercialCode(HGB).
During the phases of corporate development, different corporate policies came into effect and also
influencedtheprojectdesignofEEIprojects–whichregularlyhaveverylongcontractterms–sothat
projectsconsistingofearlierphaseseachhadspecialfeatureswhichcouldnothavebeenrealisedinthis
wayatthetimeofdatacollection.
However,regardlessofthephaseofthecorporatedevelopment,businesspurposeoftheESCOwasto
providethefullrangeofES(bothintheformofESCandEPC):
Chapter4:EmpiricalWork
73
• Energyanalysis,auditandmanagement,
• Projectdesign,
• Implementationofenergyconversion,distributionandcontrolequipment,
• Operationandmaintenanceofequipment,facilitymanagement,
• Primaryenergy(and/orfinalenergy)purchase,
• Supplyofusefulenergystreams(suchasheat,cold,indoorclimate,electricity,compressedair,light,
waterandwastewater),
• Monitoringandevaluationofsavings,aswellas
• FinancingofEEIinvestments(firstwithownresources,laterviaTPForganisations).
TheESCOsawitselfasoneofthemarketleadersinGermanyinthefieldofES.Customerscamefromthe
industrial,realestate/residentialandpublic/municipalsectors,however,werenotprivatehouseholds.
Thefollowingtableintheformofacompanyprofileshowssomebasicsaswellas(historicalandcurrent
orfuturerespectively)economicprojectrequirementsandspecificsfromtheperspectiveoftheESCO:
Table4-15–ESCO:CompanyProfile,economicProjectRequirementsandSpecifics
OrganisationoftheESCO–Companyprofile
Basics:
SectorclassificationNACE-CodeM71.1:Architecturalandengineeringactivitiesandrelatedtechnicalconsultancy
Operatingperformance EUR50Mio.<FY2016<EUR100Mio.
Numberofemployees Ca.200
Typeofenterprise Privatelimitedcompany,affiliate
Accountingstandard IFRS(currentsituationfromgroup)//HGB(alsohistorically)
Economicprojectrequirementsandspecifics(historically–phase1ofcorporatedevelopment):
Capitalisation Irrelevant
Funding Ownresources
Collateralavailable Notneeded
CollateralisationfromCustomer Bankguarantee
Other Longcontractterms(>=10years)aredesiredfromCustomerretentionperspective
Economicprojectrequirementsandspecifics(currentsituation–phase3ofcorporatedevelopmentandforfutureprojects):
Capitalisation Off-balancerequired
Funding Externalrequired(CustomerorTPF)
Collateralavailable CessionofEScontractrates
CollateralisationfromCustomer• Easement
• Waiveroftheobjectionondebtservice
Other Longcontracttermsareconsideredproblematicfromriskperspective
The change in economic project requirements and specifics between the phases of corporate
developmentcanclearlybeseenfromthecompanyprofile.
Chapter4:EmpiricalWork
74
It is finally to be emphasised again, that, in accordancewith themost recent corporate policy, EEI
projectscouldonlyberealisedthroughexternalfundsandonthebasisofanoff-balancesolutionforthe
ESCO.
4.2.2 CustomerOrganisations
Theenergy-intensivebusinesspurposewascommontotheparticipatingCustomerorganisations.Ofthe
fiveorganisationsintotal,threewereengagedinthefoodproductionsector(CustomersB,CandE),one
inthechemicalindustry(CustomerA)andoneinthehospitalactivitiessector(CustomerD).Duetothe
energy requirement profile, Customer D was assigned to the industrial sector and not to the
public/municipalorrealestate/residentialsectorandthereforecameintothefocusofthisresearch.
AllorganisationswerelocatedinnorthernandeasternGermanyandweremainlyactiveintheGerman
market.
ThreesucceedingphasesofEEIprojectsweredistinct:
Projectdesign(contractnegotiationsandprojectplanning);
Implementation;
Operationsmanagement.
Duringdatacollection,fourCustomers(CustomerA,B,C,andD)werealreadycontractuallylinkedto
theESCOinEEIprojects.Theseprojectswereindifferentphasesatthattime.Theseandfurtherdetails
concerning the Customer organisations are presented in detail (the respective project content is
describedinsection4.3,p.81andfollowing):
• CustomerAwasanaffiliateofoneofthelargestautomotivesuppliersintheworldandwaspresent
atseveralsitesthroughoutGermany.Theparentcompanywasa listedblue-chipstockcompany.
Participantwasthecommercialheadforoneofthesesites.
The Customer's location had its origins in the 1930s as production site, and a large part of the
infrastructurestilloriginatedinthosetimes.Atthetimeofdatacollection,variousgroupcompanies
(hencesisterorganisationoftheCustomer)werelocatedonthesite,theirbusinesspurposesranged
fromadministrationandtrainingofnewemployeestoresearchanddevelopmentandproductionof
aspecialsub-productarea.Thespacesforusebythedifferentsisterorganisationsweresubletby
theCustomer'sorganisation.
The organisationwas a long-standing Customer of the ESCO, the contractual basiswas already
concludedbetweenapredecessorcompanyoftheESCO(phase1ofitscorporatedevelopment)and
apredecessorcompanyoftheCustomerorganisation.TheCustomer’splanttechnologywasinthe
operations management phase, contract negotiations on follow-up projects were currently
conductedandtheprojectdesignphasewasontheway.
Chapter4:EmpiricalWork
75
Table4-16–CustomerA:CompanyProfile,economicProjectRequirementsandSpecifics
OrganisationofCustomerA–Companyprofile
Basics:
Sectorclassification NACE-CodeC20:Manufactureofchemicalsandchemicalproducts
Operatingperformance Site:EUR100Mio.<FY2016
Numberofemployees Site:ca.3,500
Typeofenterprise• Organisation:Privatelimitedcompany,affiliate• Site:Oneofseverallocationsofthecompany
Accountingstandard IFRS(currentsituationfromgroup)//HGB(alsohistorically)
Economicprojectrequirementsandspecifics(historically):
StartofES 2001
Capitalisation Off-balancerequired
Funding Externalrequired(providedfromESCO)
Collateralavailable N/A
MotivationforESCOengagement• Outsourcing,concentrationoncorebusiness,reductionofheadcount• Reductioninfixedassetscapitalised• Creationofliquiditythroughthesaleoffixedassets
Economicprojectrequirementsandspecifics(futureprojectsaswellascontractrenewal):
Capitalisation Irrelevant(duetonewaccountingstandardIFRS16)
Funding Ownresources,companyprojectscompeteforfunds
Collateralavailable Notneeded
MotivationforESCOengagement Systemavailability
Other• Three-partycontract(participationofTPF)notwanted• Onlyshortcontracttermsmaybeagreedupon(<=threeyears)
This Customer was the largest andmost important in the ESCO portfolio and one of the most
important in thecompanygroup'sportfolio.AsareferenceCustomer(i.e.anorganisationwhich
agreed that the ESCO could use a detailed presentation of the project specifics for marketing
purposes, including the full company name), the project was actively used by the ESCO for
acquisitionactivities.
• CustomerBbelongedtoanowner-managedmedium-sizedgroupofcompanies,activeinthedairy
industry with a focus on yoghurt and fresh delicatessen products. Customer B had a single
productionsite.Thecommercialofficerwasnotavailableforaninterview, insteadthemanaging
directoroftheorganisationparticipated.
TheCustomerwasfoundedatthebeginningofthe20thcenturyasadairycooperativeand,inthe
course of its existence, developed into a specialist supplier with a wide range of refined dairy
products.
The organisationwas a long-standing Customer of the ESCO, the contractual basiswas already
concludedwithapredecessorcompanyoftheESCO(phase1of itscorporatedevelopment).The
Customer’splant technologywas in theoperationsmanagementphase, contractnegotiationson
follow-upprojectswerecurrentlyconductedandtheprojectdesignphasewasontheway.
Chapter4:EmpiricalWork
76
Table4-17–CustomerB:CompanyProfile,economicProjectRequirementsandSpecifics
OrganisationofCustomerB–Companyprofile
Basics:
Sectorclassification NACE-CodeC10.5:Manufactureofdairyproducts
Operatingperformance FY2016>EUR100Mio.
Numberofemployees Ca.300
Typeofenterprise Privatelimitedcompany,affiliate
Accountingstandard HGB
Economicprojectrequirementsandspecifics(historically):
StartofES 2005
Capitalisation Irrelevant
Funding Externalrequired
Collateralavailable Bankguarantee(incaseofcovenantbreach)
MotivationforESCOengagement
• Liquidityprotection,asownandavailablebankfundsweretiedupbyotherinvestmentmeasures
• Costreduction• Systemavailability• Accesstoknow-how
OtherTransferofownershipoffixedassetsinvestedtoCustomerrequiredattheendoftheEScontractterm
Economicprojectrequirementsandspecifics(futureprojectsaswellascontractrenewal):
Capitalisation Irrelevant
Funding Externalrequired
Collateralavailable• Easement
• Waiveroftheobjectionondebtservice
MotivationforESCOengagement
• Costreduction• ReductionofCO2(using‘Greenenergy’)• Systemavailability• Accesstoknow-how
ThisCustomeralsowasareferenceCustomer,whoseprojectwasusedbytheESCOforacquisition
purposes. One of the implemented technical solutions was awarded by the Ministry of the
EnvironmentoftheFederalRepublicofGermany.Moreover,theCustomer'smanagingdirectorwas
willing to present the EEI project to interested third parties and also to introduce potential
CustomersoftheESCO.
• CustomerCwasanowner-managedorganisationwithasingleproductionsite.Participantwasthe
headofcontrollingandfinanceandhencethecommercialresponsiblefortheEEIproject.
Theorganisationhaditspredecessorsinthe19thcenturyasasmallshopbutchery,whichoverthe
yearsdeveloped intoahandcraftedbutchery factory.Thecurrent locationhasbeen inoperation
since1993andhasbeensuccessivelyexpandedinseveralstages.
The implementationphaseof thisCustomer'sEEIprojecthad justbeencompletedandtheplant
technology had been handed over to operationsmanagement phase. The contractual basiswas
concludedinphase3ofthecorporatedevelopmentoftheESCO.
Chapter4:EmpiricalWork
77
Table4-18–CustomerC:CompanyProfile,economicProjectRequirementsandSpecifics
OrganisationofCustomerC–Companyprofile
Basics:
Sectorclassification NACE-CodeC10.1:Processingandpreservingofmeatandproductionofmeatproducts
Operatingperformance EUR50Mio.<FY2016<EUR100Mio.
Numberofemployees Ca.150
Typeofenterprise Privatelimitedcompany
Accountingstandard HGB
Economicprojectrequirementsandspecifics(currentsituation):
Startofservicecontract 2015
Capitalisation Irrelevant
Funding Externalrequired;subventionaspired
Collateralavailable• Pledge(blanketassignment)
• Mortgage
MotivationforESCOengagement• Independencefromenergysuppliers• Accesstoknow-how• Costreduction
Atthetimeofdatacollection,theCustomerwasnotyetareferenceCustomer.Theresearcherhad
noinformationastowhethertheCustomercouldbeacquiredinthemeantimeforthesemarketing
purposes–andwhetheritwasintheinterestoftheESCOtousethisprojectwithacomparatively
limitedscope(regardingtheprojectcontentrefertosubsection4.3.3,p.85andfollowing)ofservices
foracquisitionpurposes.
• CustomerDhadseveral locations inamajor city.Participantwas theheadof strategicbusiness
development–thecommercialresponsiblefortheEEIprojectatonelocation.
TheCustomerwasoneofthelargestuniversityhospitalsinEuropeandhadahistoryofmorethan
300years.Intotal, thehospitalhadmorethan3,000bedsat its locationsandtreatedmorethan
800,000patientsannually.Over7,000studentswereenrolledinvariousuniversitycourses.
TheimplementationphaseofthisCustomer'sEEIprojectwasstillinprogress,thecontractualbasis
wasconcludedinphase3ofthecorporatedevelopmentoftheESCO.
Chapter4:EmpiricalWork
78
Table4-19–CustomerD:CompanyProfile,economicProjectRequirementsandSpecifics
OrganisationofCustomerD–Companyprofile
Basics:
Sectorclassification NACE-CodeQ86.1:Hospitalactivities
Operatingperformance EUR100Mio.<FY2016
Numberofemployees Ca.6,500
Typeofenterprise Publiccorporation
Accountingstandard HGB
Economicprojectrequirementsandspecifics(currentsituation):
StartofES Proposed:2017
Capitalisation Irrelevant
Funding Externalrequired
Collateralavailable• Easement
• Waiveroftheobjectionondebtservice
MotivationforESCOengagement
• Costreduction• Liquidityprotection,sinceownandbankfundswerenotdirectlyavailabletothe
publicsector• Independencefromenergysuppliers
Asaninstitutionunderpubliclaw,thisCustomerwasdependentonthefinancingpossibilitiesofthe
publicsectorandwasthereforepredestinedasaCustomerforEEIcontractingprojects.Incontrast
to office buildings used for administration or education, this type of organisation was energy-
intensive.
Atthetimeofdatacollection,theCustomerwasnotyetareferenceCustomer.Theresearcherhad
noinformationastowhethertheCustomercouldbeacquiredinthemeantimeforthesemarketing
purposes.
• CustomerEwasamedium-sizedcompanywithasingleproductionsiteandbelongedtoagroupof
companies.Theparentcompany–oneofthelargestagriculturalorganisationsinEurope–wasa
listedstockcorporation.Thisparentcompanygotintoanexistentialcrisisduringthedatacollection
phaseandwaswoundupasaresultofinsolvency.TheCustomeralsowasdirectlyaffectedbythis
situation.
Projectdesignphasewasontheway,howevercontractnegotiationswiththispotentialCustomer
wereunsuccessfulandwereterminatedshortlybeforethetimeofdatacollection–duetoapparent
barriers.
Chapter4:EmpiricalWork
79
Table4-20–CustomerE:CompanyProfile,economicProjectRequirementsandSpecifics
OrganisationofCustomerE–Companyprofile
Basics:
Sectorclassification NACE-CodeC10.3:Processingandpreservingoffruitandvegetables
Operatingperformance FY2016<EUR50Mio.
Numberofemployees Unknown
Typeofenterprise Privatelimitedcompany,affiliate
Accountingstandard Unknown
Economicprojectrequirementsandspecifics(currentsituation):
StartofES N/A
Capitalisation Unknown
Funding Externalrequired
Collateralavailable Unknown
MotivationforESCOengagement • Creationofliquiditythroughthesaleoffixedassets• Costreduction
Theprojectwasterminatedbeforeallconditionsweredefined,thereforecapitalisationaswellas
collateralavailablearequalifiedas‘Unknown’.
4.2.3 ThirdPartyFinancingOrganisations
Atthetimeofdatacollection,theESCOwasincontactwithatotalofthreeTPForganisations.Inthepast
(startingwithphase2ofcorporatedevelopmentoftheESCO),financing–mainlylease–wasconcluded
withfurtherTPForganisations,butitwasintendednottocontinuethesebusinessrelationshipsafter
terminationofthecurrentcontracts.
OneoftheTPForganisations(TPF2)wascontractuallyalreadylinkedtotheESCOinEEIprojects,the
tworemainingTPForganisations(TPF1andTPF3)werein(final)contractdiscussionsregardingfuture
EEIprojects,alsowithsomeoftheCustomerorganisationsinvolvedinthisresearch.
• TPF 1 was the affiliate of a public bank and with about 400 employees one of the largest
manufacturer-independent lease companies inGermany.The structured financedivisionoffered
financing solutions for special investment objects, including EEI projects. The organisation's
portfolioincludedleasefinancingaswellashirepurchase(fordefinitionsanddetailsofkeyterms
regardingfinancingmethodsrefertoglossary,p.11andfollowing).
Chapter4:EmpiricalWork
80
Table4-21–TPF1:CompanyProfile,economicProjectRequirementsandSpecifics
OrganisationofTPF1–Companyprofile
Basics:
SectorclassificationNACE-CodeK64.9:Otherfinancialserviceactivities,exceptinsuranceandpensionfunding
Type Leasecompany(affiliateofapublicbank)
Refinancing Parentcompany(publicbank)
Economicprojectrequirementsandspecifics(currentsituation):
Criteriaforgrantingfinancing Customercredit-worthiness
Financingmethodoffered• Lease• Hirepurchase
Financingvolume EUR200,000<InvestmentEEIproject<(theoretically)nolimit
Optionsforcollateralisationrequired• Easement• Guarantee• Legalownershiponfixedassetsinvested
• TPF2,withabout80employees,wasoneofthelargerleasecompaniesinGermany,independentof
bothbanksandmanufacturers.OneofthedivisionsfocusedonfinancialsolutionsforEEIprojects.
Theorganisation'sportfolioincludedseveralfinancingmethods.
Table4-22–TPF2:CompanyProfile,economicProjectRequirementsandSpecifics
OrganisationofTPF2–Companyprofile
Basics:
SectorclassificationNACE-CodeK64.9:Otherfinancialserviceactivities,exceptinsuranceandpensionfunding
Type Leasecompany(independent)
Refinancing Refinancingpartners(externalbanks)
Economicprojectrequirementsandspecifics(currentsituation):
Criteriaforgrantingfinancing• Affiliationtocertainindustries• Customercredit-worthiness
Financingmethodoffered• Forfeiting• Lease• Hirepurchase
Financingvolume EUR500,000<InvestmentEEIproject<EUR25Mio.
Optionsforcollateralisationrequired
• Easement(incaseoflease)• Mortgage(incaseoflease)• Pledge(incaseofhirepurchase)• Waiveroftheobjectionondebtservice• Legalownershiponfixedassetsinvested
• TPF3wasaSwissinvestmentmanagerwithabout50employees.Theorganisationspecialisedin
financingEEI projects and saw itself as a global leader in ‘Financing the energy transition’. The
organisationwasthefirstinvestmentmanagertosetupitsownEEIfund,inwhichprivateinvestors
committed themselves to long-term stable returns for financing EEI projects. The organisation
concentratedonESprojectsintheareasofindustry,realestate/residentialandpublic/municipal.
Theportfolioincludedalsoseveralfinancingmethods.
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81
Table4-23–TPF3:CompanyProfile,economicProjectRequirementsandSpecifics
OrganisationofTPF3–Companyprofile
Basics:
Sectorclassification NACE-CodeK64.3:Trusts,fundsandsimilarfinancialentities
Type Funds(independentinvestmentmanager)
Refinancing Investors
Economicprojectrequirementsandspecifics(currentsituation):
Criteriaforgrantingfinancing• EffectiveCO2-reduction• Customercredit-worthiness,hastoberatedatleast‘Investment-grade’
Financingmethodoffered• Forfeiting(preferred)• Lease• Loan
Financingvolume EUR20,000(standardised)//EUR750,000<InvestmentEEIproject<EUR24Mio.
Optionsforcollateralisationrequired
• Guarantee(incaseofforfeiting)• Easement(incaseoflease)• Mortgage(incaseoflease)• Legalownershiponfixedassetsinvested
Other• Fixed-interestdistributiontoinvestorsresultsincomparativelyhighinterestrates• ESCOisusuallycontractualpartner
4.3 DetailsontheCasesselected
InadditiontotheESCOandtherespectiveCustomerorganisations,theTPForganisationswereinvolved
insomeoftheCases.ThisandthefurtherspecificsoftheCasesofthismultiple-casestudyaredescribed
indetailinthefollowingsubsections.
TheESCOwasanactivestakeholderineachoftheCases.Themaindistinguishingfeaturebetweenthe
CaseswasthestakeholderCustomer,thiswasdifferent ineachCaseandgavethedesignationtothe
respectiveCase (Case ‘A’–Case ‘E’). InCaseC,only these twostakeholderswere involved.TheTPF
organisationswereinvolvedactivelyintheotherCasesorwereinterviewedatleastabouttheseCases.
4.3.1 CaseA
ThecontractualbasisinCaseAwasanESC,which,howevercontainedaperformancecomponent.The
followingfigureshowsthestakeholdersinvolvedandtherelevantcontractspecificsofthepersisting
contractfrom2001:
Figure4-11–CaseA:ContractStructure
Forthe10-yearcontractterm,ESCOguaranteedtheCustomerasavingof5%ofthepreviousenergy
costs–toberealisedbymeansofpurchasepricesforusefulenergystreamsandservicessupplied,which
CustomerAESCO
LEGALandECONOMICOwneroffixedAssets
FundingCapitalisationoffixedAssets
Collateral:• None
EnergyServiceContractincl.DebtService
Chapter4:EmpiricalWork
82
were determined on the basis of planned quantities. The primary energies required for this were
purchasedbytheCustomer,passedontotheESCOandboughtbackintheformofusefulenergystreams.
AnysavingsbeyondthisremainedwiththeESCO.Thedebtservicewaspaidaspartofabasicprice.
Fromthestartofthecontractuntilthedateofdatacollection,theESCOhadinvestedanamountinEUR
wellintothedouble-digitmillions(thethreeparticipantswereunabletoreachanexactvalue).
Afterexpiryoftheoriginalcontractterm,theESCcontracttermwasextendedagainbyoneyear,unless
itsterminationwithanoticeperiodofsixmonths.
The following ES respectivelymeasures have been implemented since the start of the contract and
duringthecontractterm:
• Energyanalysis;
• Purchaseoftheexistingenergyconversion,distributionandcontrolequipment,previouslyowned
bytheCustomer;transferofemployeestotheESCO,thusfinancingofEEImeasure;
• Takeover of the operation and maintenance of the equipment as well as facility management;
refurbishment,modernisationandoptimisationoftheplants;extensionofthecontrolsystemsto
ensuretrouble-freeoperationandtoenabletheanalysisofmediaflows;
• SupplyoftheCustomer'sproductionsitewithusefulenergystreams(includingelectricity,butalso
hot,coldandpressurisedwater,steam,compressedair);
• Monitoringandevaluationofsavings;
• Conductofenergyaudits.
Only the stakeholders ESCO and Customer were involved in the existing contract from 2001. The
followingtableshowsthe(potential)stakeholders,organisationsaswellastheparticipantsinvolvedin
thisresearch:
Table4-24–CaseA:Stakeholders,OrganisationsandParticipantsinvolved
Stakeholder Organisation(Designation) Participant(Job/RoleinOrganisation)
Effective:
EnergyServiceCompany ESCO01_E CommercialDirector
02_E HeadofCorporateControllingandFinance
Customer CustomerA 07_CA CommercialHeadofSite
Potential:
ThirdPartyFinancier TPF1 03_T1 HeadofEnergyFinancing
At the time of data collection, the ESCO intended, in the context of major investment measures
(developmentof independentelectricitygenerationandsteamsupply), to re-equip theESCcontract
withalongerterm.ThismeasurewastobefinancedthroughtheparticipationofaTPForganisation,
since the financing solutionoriginallypractisedwithESCO fundswasno longerpossibledue to the
paradigmshiftincorporatepolicythathadtakenplaceinthemeantime.
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83
ThepotentialEEImeasureconsistedofthefollowingadditionalES:
• Projectdesign;
• Implementationofanindependentelectricitygeneration(aCHPunit)andsteamsupply;
• FinancingviaTPF.
TheCustomerorganisation,however,rejectedacontractconstellationwithmorethanonecontractual
party. The participation of a TPF organisation was therefore generally excluded. As the Customer
organisationassumedthatitwouldalsohavetocapitalisethefixedassetscurrentlycapitalisedbythe
ESCOonitsownasaresultoftheupcomingamendmentstoIFRS(particularlyIFRS16),off-balance
solutionsnolongerplayedaroleforfuturemeasures.Furthermore,financingshouldbepresentedfrom
thegroup'sownresources.EEIprojectscompetedwithotherinvestmentmeasuresonthebasisoftheir
possiblereturnoninvestment.Duetoaparadigmshiftinthemaximumtermofsuppliercontracts,which
alsotookplaceontheCustomerside,thosewithtermsofmorethanthreeyearswereexcluded.Asa
result,nonewcontractualbasiscouldbefoundatthistimeforimplementingtheEEImeasuresplanned
bytheESCOattheCustomers’site.
Furthermore,inthecourseof2018,theresearcherbecameawarethattheoriginalESCcontract(from
2001)hadbeenterminatedbytheCustomer.Forthiscase,theESCcontractstipulatedthereturnofthe
fixedassetsandtheemployeestakenoverbytheESCO.TheCustomerdeclareditsintentiontonegotiate
anewcontractualrelationshipwithasignificantlyshortertermandonlycoveringmaintenanceofthe
equipmentasscopeofES.
4.3.2 CaseB
ThecontractualbasisinCaseBwasanESC,which,howevercontainedaperformancecomponent.The
followingfigureshowsthestakeholdersinvolvedandtherelevantcontractspecificsofthepersisting
contractfrom2005:
Figure4-12–CaseB:ContractStructureofinitialEEIProject
Forthe10-yearcontractterm,theESCOguaranteedtheCustomerasavingof5%ofthepreviousenergy
costs–toberealisedbymeansofpurchasepricesforusefulenergystreamsandservicessupplied,which
were determined on the basis of planned quantities. The primary energies required for this were
purchasedbytheCustomer,passedontotheESCOandboughtbackintheformofusefulenergystreams.
AnysavingsbeyondthisremainedwiththeESCO.Thedebtservicewaspaidaspartofabasicprice.
CustomerBESCO
LEGALandECONOMICOwneroffixedAssets
FundingCapitalisationoffixedAssets
Collateral:• Easement• Bankguarantee
EnergyServiceContractincl.DebtService
Chapter4:EmpiricalWork
84
The following ES respectivelymeasures have been implemented since the start of the contract and
duringthecontractterm:
• Energyanalysis;
• Purchaseoftheexistingenergyconversion,distributionandcontrolaswellaswasteequipment,
previouslyownedbytheCustomer,thusfinancingofEEImeasure;
• Takeover of the operation and maintenance of the equipment as well as facility management;
refurbishment,modernisationandoptimisationoftheplants;
• SupplyoftheCustomer'sproductionsitewithusefulenergystreams(steam,icewater,roomcooling,
compressedair,drinkingwater,wastewater–sewagetreatmentplant);
• Monitoringandevaluationofsavings;
• Conductofenergyaudits.
Further expansion during the contract termwas already contractually agreed at the beginning. So,
duringthelifetimeoftheoriginalESC,thescopeofES–withthecontractstructureunchanged–was
amendedbythefollowingmeasure:
• Projectdesign;
• ImplementationofanenergycentrewithCHPunitandabsorptionchiller,steamboilerandoil-free
compressedair.
The investmentat thebeginningof the contractamounted toaroundEUR2Mio., theenergycentre
representedafurtherinvestmentofaroundEUR5Mio.
The existing ESC contract term was extended in advance by 15 years. The contractually agreed
terminationarrangementprohibitedtheESCOfromsellingtheenergycentretoaTPForganisation(e.g.
a lease company) in order to grant the Customer various rights to the equipment. Financing and
capitalisationwerethereforestillpartoftheresponsibilityoftheESCO.
Hence,onlythestakeholdersESCOandCustomerwereactiveinthepersistingcontractfrom2005.The
followingtableshowsthe(potential)stakeholders,organisationsaswellastheparticipantsinvolvedin
thisresearch:
Table4-25–CaseB:Stakeholders,OrganisationsandParticipantsinvolved
Stakeholder Organisation(Designation) Participant(Job/RoleinOrganisation)
Effective:
EnergyServiceCompany ESCO
01_E CommercialDirector
02_E HeadofCorporateControllingandFinance
10_E (Former)ProjectManager
Customer CustomerB 11_CB ManagingDirector
Potential:
ThirdPartyFinancier
TPF1 03_T1 HeadofEnergyFinancing
TPF2 04_T2 DirectorofStructuredFinancing
Chapter4:EmpiricalWork
85
Atthetimeofdatacollection,CustomerandESCOwerenegotiatingtheexpansionoftheenergycentre.
TheintendedEEImeasureconsistedofthefollowingadditionalES:
• Projectdesign;
• ImplementationofafurtherCHPunit;
• FinancingoftheinvestmentviaTPF.
ThismeasurewastobefinancedthroughtheparticipationofaTPForganisation,sincethefinancing
solutionoriginallypractisedwiththeESCOfundsonitssidewasnolongerpossibleduetotheparadigm
shiftincorporatepolicythathadtakenplaceinthemeantime.
Thefollowingfigureshowsthestakeholdersinvolvedandtherelevantcontractspecificsoftheproposed
contractandthefinancingintheformofahirepurchase:
Figure4-13–CaseB:ContractStructureofproposedEEIProject
Inthecourseof2018,theresearcherbecameawarethat–aftercompletionoftheprojectdesign–the
implementationoftheintendedfurtherEEImeasurehadbeenstoppedbytheCustomerforthetime
being. The background to this was the prospect of a deterioration in the economic viability of the
measureasaresultofexpected legislativechanges to theEEGaswellasKWKG(fordefinitionsand
detailsofkeytermsregardingenergy,efficiencyandcorrespondinglegislationrefertoglossary,p.7and
following),inwhichcorrespondingremunerationshouldbereducedandexemptionsfromEEGlevies
shouldnolongerapply.
The exact modalities of this legislation have been changed several times in recent years, but even
operational plants have so far been granted preservation of the status quo in principle. Recent
developments have led the Customer to suspect effective deteriorations in the economic conditions
calculatedforthisEEIproject.
4.3.3 CaseC
ThebasisinthisCasewasaservicecontract.ThecontributionoftheESCOtothisEEIprojectwaslimited
tothedesignandimplementationoftheequipment.Attheendofthisphase,theoperationsmanagement
of the technologywas transferred to theownershipandresponsibilityof theCustomer,who in turn
financedtheEEtechnologythroughaseparatecontractualrelationshipwithaself-providedTPF.The
ESCOwaspaidintheformofabasicprice.
CustomerBLEGALand
ECONOMICOwneroffixedAssets
ESCO
TPF12.HirePurchaseContract
FundingCollateral:
• Mortgage
1.PurchaseofAssets
ServiceContract
CapitalisationoffixedAssets
Chapter4:EmpiricalWork
86
Thereweretwoseparatetwo-partycontracts,whichareshowninthefollowingfigure:
Figure4-14–CaseC:ContractStructure
So,financingwasoutsidethescopeofthismultiple-casestudy.
TheEEIprojectwasonlypartofalargerinvestmentbytheCustomer,whichalsoexpandedtheoverall
productioncapacity.ThefollowingservicesrespectivelymeasureswerepartoftheEEIproject:
• Energyanalysis;
• Projectdesign;
• Implementation of a CHP plant and a waste heat boiler for steam production with thermal
afterburningofthefluegases,whichwasalsousedforsteamgeneration;dissolutionoftwoexisting
energycentres,mergertooneenergycentre;
• Maintenanceofequipment.
TheinvestmentvolumeoftheEEImeasureamountedtoatotalofEUR1.8Mio.
AnEScontractwithacorrespondinglylongtermwasnotconcluded,theonlyservicesremainingwith
theESCOweremaintenanceandrepairoftheplantsoveratermofinitiallythreeyears.Inthisproject,
theESCOthereforeessentiallyonlyactedasaplantconstructor.
The background for this approach chosen by the Customerwas the possibility to receive a subsidy
measure from the German Federal State via KfW Bank in which the Customer was based. The
prerequisite for receiving this subsidywas that the EEImeasurewas embedded in a larger project
connected toproductionexpansion.For thisreason, theESCOwasalsoexcluded fromreceiving this
support.Thevolumeofthesubsidyamountedto25%ofthetotalinvestment.
FromtheperspectiveoftheCustomer'shousebank,whichprovidedthefinancingfortheprojectand
organisedthesubsidy,acomparativelyhighequitycomponentwasreachedbythissubsidy,whichin
turnmadeitpossibletograntfavourableconditionsforfinancingtheentiremeasure.
Thefollowingtableshowsthestakeholders,organisationsaswellastheparticipantsinvolvedinthis
research:
CustomerCLEGALand
ECONOMICOwneroffixedAssets
ESCO
TPF(external)HouseBank
LoanAgreement
ServiceContract
FundingCollateral:
• Pledge(BlanketAssignment)
• Mortgage
CapitalisationoffixedAssets
OutsideCaseStudy
Chapter4:EmpiricalWork
87
Table4-26–CaseC:Stakeholders,OrganisationsandParticipantsinvolved
Stakeholder Organisation(Designation) Participant(Job/RoleinOrganisation)
Effective:
EnergyServiceCompany ESCO
01_E CommercialDirector
02_E HeadofCorporateControllingandFinance
08_E SeniorSalesManager
Customer CustomerC 05_CC HeadofCorporateControllingandFinance
The EEI project could not be realisedwithin the scope of an ES contractwith the ESCO due to the
financingoftheproductionexpansionmeasurerequiredbytheCustomer.EveniftheEEImeasurehad
beeneligibleonitsown,theESCO(underthecurrentcorporatepolicy)wouldnothavebeenableto
obtainthesubsidybecauseoftheloanfinancingrequiredforthis.
4.3.4 CaseD
The contractual basis in Case D was an ESC, calculated savings from the EEI measure were not
contractually guaranteedby theESCOand remainedwith theCustomer,whopaid theESCO for the
operationoftheplantandthefinancingintheformofabasicprice.
Thefollowingfigureshowsthestakeholdersinvolvedandtherelevantcontractspecificsoftheproject:
Figure4-15–CaseD:ContractStructure
ThefollowingESrespectivelymeasureswerepartoftheEEIproject:
• Projectdesign;
• Implementationoftwocombinedcooling,heatandpowerplants(CCHP,theso-calledtrigeneration);
• Takeoveroftheoperationandmaintenanceoftheequipmentaswellasfacilitymanagement;
• SupplyoftheCustomer’sproductionsitewithusefulenergystreams(steam,whichisrequiredin
largequantitiesforthesterilisationofthehospitalequipment,coldforcoolinginsummer,aswellas
electricity);
• Monitoringandevaluationofsavings;
• FinancingoftheinvestmentviaTPF.
CustomerDECONOMICOwneroffixedAssets
ESCO
TPF2LEGALOwneroffixedAssets
Sale-and-lease-backContract
FundingCollateral:
• Easement• Waiverofthe
ObjectiononDebtService
EnergyServiceContractincl.DebtService
CapitalisationoffixedAssets
Chapter4:EmpiricalWork
88
The investment for the EEI technology amounted to approx. EUR 13.5million, the ES contractwas
concludedforatermof15years.
TheprojectwasawardedwithintheframeworkofaEurope-widecallfortenders.Acompetitorofthe
ESCOwasselectedsuccessfullyinthefirstround.Onlywithunsuccessfulcontractnegotiationsdidthe
ESCOdevelopanalternativetechnicalconceptbasedonCCHPafterthesolutionoriginallyrequiredby
theCustomerbasedonagasturbinehadturnedouttobethelesseconomicallyattractivesolutionfor
theEEIproject.
Thefollowingtableshowsthestakeholders,organisationsaswellastheparticipantsinvolvedinthis
research:
Table4-27–CaseD:Stakeholders,OrganisationsandParticipantsinvolved
Stakeholder Organisation(Designation) Participant(Job/RoleinOrganisation)
Effective:
EnergyServiceCompany ESCO
01_E CommercialDirector
02_E HeadofCorporateControllingandFinance
08_E SeniorSalesManager
Customer CustomerD 09_CD HeadofStrategicBusinessDevelopment
ThirdPartyFinancier TPF1 03_T1 HeadofEnergyFinancing
This EEI measure was the largest implementation in the history of the ESCO and its predecessor
organisations.
4.3.5 CaseE
CaseEwasbasedonanEEIprojectthatwasnotimplemented.AnESCcontractwaspreparedbythe
potential stakeholders andwas on its way to completion, but negotiationswere terminated before
contractconclusion.Itwasintendedtofinancetheinvestmentthroughthemethodofforfeiting.
Thefollowingfigureshowsthestakeholdersinvolvedandtherelevantcontractspecificsoftheproject:
Figure4-16–CaseE:ContractStructure
CustomerELEGALand
ECONOMICOwneroffixedAssets
ESCO
TPF3
EnergyServiceContractincl.DebtService
FundingCollateral:
• Pledge(BlanketAssignment)
• BankGuarantee
ForfeitingContract
CapitalisationoffixedAssets
Chapter4:EmpiricalWork
89
ThefollowingESrespectivelymeasureswerepartofthepotentialEEIproject:
• Energyanalysis;
• Projectdesign;
• PurchaseofexistingCHPplant,previouslyownedbytheCustomer,thusfinancingofEEImeasure
viaTPFwiththefinancingmethodofforfeiting(i.e.theESCOfinallysellstheEEIequipmenttothe
CustomerandpassesthepurchasepriceclaimontotheTPF;theCustomerhastopayitsliability
overthetermoftheEScontractwithadebtservicecomponent);
• Extensiontoacombinedcooling,heatandpowerplant(CCHP,trigeneration);
• Takeoverofoperationandmaintenanceoftheequipmentaswellasfacilitymanagement;
• Supply of the Customer’s production site with useful energy streams (steam for cooking the
vegetables,coldforfreezingthereadymeals,electricity);
• Monitoringandevaluationofsavings;
• Conductofenergyaudits.
The investment for the EEI technology amounted to approx. EUR 1.5 million, the ES contract was
proposedforatermof10to15years.
Thefollowingtableshowsthestakeholders,organisationsaswellastheparticipantsinvolvedinthis
research:
Table4-28–CaseE:Stakeholders,OrganisationsandParticipantsinvolved
Stakeholder Organisation(Designation) Participant(Job/RoleinOrganisation)
Potential:
EnergyServiceCompany ESCO
01_E CommercialDirector
02_E HeadofCorporateControllingandFinance
03_E SeniorSalesManager
Customer CustomerE N/A
ThirdPartyFinancier
TPF1 03_T1 HeadofEnergyFinancing
TPF3 06_T3 DirectorofEnergyEfficiencyFunds
Atthetimeofthecontractnegotiations,massiveliquidityproblemsonthepartoftheCustomer'sparent
company became public. Expiring bond financings could not be redeemed and at the same time
suspicionsoffraudulentactionsinconnectionwiththeliquidationoffixedassetsarose.Asaresult,no
TPFundereconomicconditionswasavailablefortheEEIproject,whichhadtobeterminated.
4.3.6 ScopeofEnergyServicesprovidedintheCases
Ascanbeseenfromthedetaileddescriptionsintheprevioussubsection,thescopeofESprovidedby
theESCOdifferedconsiderablybothbetweenthefiveCasesandovertimewithincertainCases.
Thefollowingtablegivesaconcludingoverviewoftheprojectscopes.Adistinctionismadebetweenthe
effective (in the implementation or operationsmanagement phase) and the potential design phase
(plannedand/orundernegotiation)measuresatthetimeofdatacollection:
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Table4-29–OverviewofESprovided(effectively/potentially)byESCOintheCases
ScopeofES
(effectively/potentially)provided
Case
A B C D E
Effective Potential Effective Potential Effective Effective Potential
Energyanalysis X X X - X
Projectdesign - X X X X X
Implementationofequipment - X X X X X
Operationofequipment X X - X X
Maintenance,facilitymanagement X X X X X
Primary/finalenergypurchase - - - - -
Supplyofusefulenergy X X - X X
Monitoringandevaluationofsavings X X - X X
Financing(Customer//ESCO//TPF) -//X//- X//-//- -//X//- -//-//X X//-//- -//-//X -//-//X
Capitalisation(Customer//ESCO//TPF) -//X//- X//-//- -//X//- X//-//- X//-//- X//-//- Unknown
Energyaudits X X - - X
Fromtheprecedingoverviewitcanbeseenthat...
• ...theESCO–withtheexceptionofCaseC–coveredorplannedtocoveranextensiveandinsome
CasesevencomprehensivescopeofES.
• ...theprimary/finalenergypurchasealonewasnotthesubjectofthe(potential)scopeinanyofthe
Cases, i.e. in all five Cases the Customers held the primary/final energy supply contracts and
provided these energy streams to the ESCO for processing or charged the ESCO with the
correspondingenergyprocurementcosts(orintendedtodoso).
• ...thescopeoftheESinCaseConlycomprisedthedesignandimplementationoftheequipmentand
itsmaintenance,whileintheotherCasesaformofESCwithcorrespondinglylongcontractterms
wasintendedorassigned.
• ...animportantdistinguishingfeaturebetweenallofthefiveCasesandwithinthese–ifapplicable–
between effective and potential situations was the financing method and the capitalisation,
followingthelatestcorporatepolicyoftheESCO,accordingtowhichthisESscopenolongercould
beoffered.
4.4 SummaryofChapter4
In this chapter, after an introductorydescriptionof thedata collectionandanalysisprocedures, the
organisations involvedasstakeholders in the fiveCasesof thismultiple-casestudywereoutlined in
detail.Specificsituations,especiallywithregardtofinancingandcapitalisation,werepresented,alsoin
viewofthechangingcorporatepolicyoftheESCO.
ItwasmadeclearthattheEEIprojectsintheCaseswereatdifferentstagesoftheEEIprojectcycleat
thetimeofdatacollection.
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InformationoneventsrelatingtotheCasesrelevanttothisresearchwhichoccurredafterthetimeof
datacollectionandwhichcametotheknowledgeoftheresearcherhasalsobeenincluded.Influences
andeffectsofthesesituationswerepresentedinthedescriptionsoftheCases.
Thefollowingchapterexplainsindetailthebarriersthathavebeenfoundthroughtheanalysesresulting
fromthesesituationsinthefiveCasesthathaveinhibitedorevencompletelypreventedtherealisation
ofprojectsormeasures.
92
Chapter5: AnalysesandFindings
Thischaptersystematisesandsummarisesthefindingsfromtheanalysesofthecollecteddataonthe
five Cases of the multiple-case study described in the previous chapter and based on the barrier
frameworkofCagnoetal.(2013).
Inthefollowing,itisdescribedwhicheconomicbarrierswereidentifiedandhowspecificstakeholder
situations and constellations influenced these barriers. It is shown under which conditions the
realisationoftheseEEIprojectsintheGermanindustrialsectorwashinderedorprevented,inparticular
in order to provide a deeper understanding of the underlying influencing factors, to give
recommendations for overcoming these barriers and thereby to promote the development of the
GermanESCObusiness.
5.1 OverviewofFindingsderived
Inthefirstanalysisoftheprimarydata,itwasexaminedwhichofthesixeconomicbarriersfromthe
frameworkofCagnoetal.(2013)wereaddressedbythestakeholdersinvolvedinthefiveCases.The
evaluationdistinguishedthoseCasesinwhichallofthethreestakeholderswereinvolvedfromthosein
whichonlytwostakeholderswereinvolved–eitherbecauseTPFwasnotpartoftheEEIproject(asin
CaseC)orbecausetheCustomerwasnotavailable(asinCaseE).
Inadditiontothesixbarriersofthereferenceframework,afurtherprovisionalbarrier–‘7.UNCOVERED
ISSUES’ –was added in order to include barrier issueswhich, in the opinion of the researcher, are
connectedtotheareaofeconomicbarriersbutcannotbesubsumedtooneofthesixeconomicbarriers
oftheframeworkofCagnoetal.(2013).
In the following table, the number of stakeholders whose participants addressed a barrier issue
(maximumthreeortworespectively)isgivenforeachofthebarriersbyCases.
Usingacolourschemebasedontrafficlightcolours,thesignificanceofthebarriersfortherespective
Caseisvisualisedasafunctionofthenumberofaddressingstakeholdersinthestyleofa‘heatmap’:
Table5-30–OverviewofeconomicBarriersidentifiedbyCases,NominationsofStakeholders
EconomicBarrier
AggregatedfromStakeholders
Case
3of3Stakeholdersinvolved(Max.Nomination=3)
2of3Stakeholdersinvolved(Max.Nomination=2)
B D A C E
1.ExternalRisks 2 1 - 1 -
2.LowCapitalAvailability 3 1 2 1 2
3.Interventionnotsufficientlyprofitable 1 1 - - -
4.HiddenCosts - 1 - - -
5.Investment(Transaction)Costs - 1 1 - -
6.Intervention-relatedRisks - 1 - - -
7.UNCOVEREDISSUES 1 1 1 - -
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Fromtheprecedingoverviewitcanbeseenthat...
• ...with regard to the barriers addressed, the situation is comparatively uneven between the five
Cases; especially inCasesC andEonly fewbarrierswere identified; this isprobablydue to the
incompleteviewoftheseEEIprojects–inbothCasestheperspectiveofonestakeholderwasnot
covered:EssentiallyinCaseEwastheabsenceoftheCustomerperspective–aswellastheearly
terminationoftheprojectbeforefurtherbarrierscouldariseorbeidentified.InCaseC,itwasthe
absence of the perspective of the financing party – normally the TPF organisation – due to the
financingprovidedbytheCustomerorganisationitselfviaitshousebank,resultinginasignificantly
reducedscopeofESprovidedbytheESCO,
• ...in the other Cases, the barriers ‘1. External Risk’ and ‘2. Low Capital Availability’ were very
pronounced,whiletheremainingbarriershavebeenmentionedonlysporadically,
• ...inseveralCasesnominationsalsoweremadetotheprovisionalbarrier‘7.UNCOVEREDISSUES’.
Inafurtheranalysis,thesignificanceofeconomicbarrierswasevaluatedonthebasisofthenumberof
nominationsbystakeholders.Adistinctionastowhetheraparticularbarrierwasidentifiedbyonlyone
or several organisations of the respective stakeholder group is not made in this evaluation – the
following table shows the aggregation according to the three stakeholder perspectives overall.
DependingonthenumberofaffectedCases(fourforeachstakeholder),thenumberofnominations(i.e.
amaximumof4)fortherespectivebarrierisgivenagainintheformofa‘heatmap’:
Table5-31–OverviewofeconomicBarriersidentifiedbyStakeholders,NominationstoCases
EconomicBarrier
AggregatedfromCases
Stakeholder
NominatedinXCases(Max.Nomination=4)
Customer ESCO TPF
1.ExternalRisks 3 1 -
2.LowCapitalAvailability 3 3 3
3.Interventionnotsufficientlyprofitable 2 - -
4.HiddenCosts 1 - -
5.Investment(Transaction)Costs 1 1 1
6.Intervention-relatedRisks 1 - -
7.UNCOVEREDISSUES 1 1 1
Fromtheprecedingoverviewitcanbeseenthat...
• ...the barrier ‘2. LowCapital Availability’ is to be regarded of fundamental significance from the
perspectiveofallstakeholders,
• ...afurtherbarrierwithatleasthighrelevanceforoneofthestakeholdersis‘1.ExternalRisks’,which
wasidentifiedinthreeCasesfromtheperspectiveoftheparticipantsfromtheCustomers,
• ...thethreebarriers‘3.Interventionnotsufficientlyprofitable’,‘4.HiddenCosts’and‘6.Intervention-
relatedRisks’obviouslyonlywereofsignificanceforoneoftheCustomerorganisations,
• ...fromallstakeholderperspectives,alsobarrierissueswereaddressedthatweresubsumedunder
theprovisionalbarrier‘7.UNCOVEREDISSUES’.
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IncontrasttotheinterviewswithparticipantsfromCustomerorganisationsconcerningtheirspecific
Cases,intheinterviewswiththeparticipantsoftheESCOandtheTPForganisationsfurtherissueswere
discussed.TheseandadditionalissuesaddressedfromCustomerD,whoalsoreportedonexperiences
fromafurtherprojectofitsorganisation–areshowninthefollowingtableintheformofa‘heatmap’:
Table5-32–OverviewofeconomicBarriersidentifiedbyStakeholders,furtherIssueswithintrinsicRelevancetoResearchQuestions
EconomicBarrier
FurtherIssueswithintrinsic
RelevancetoResearchQuestions
Stakeholder
4Participants
(Max.Nomination=4)3Participants
(Max.Nomination=3)
Customer ESCO TPF
1.ExternalRisks - 2 -
2.LowCapitalAvailability 1 1 2
3.Interventionnotsufficientlyprofitable - 2 1
4.HiddenCosts - - -
5.Investment(Transaction)Costs - 1 2
6.Intervention-relatedRisks - 1 2
7.UNCOVEREDISSUES - 3 2
Fromtheprecedingoverviewitcanbeseenthat...
• ...fromtheperspectiveoftheESCO,therewerenosignificantadditionalnominationsofbarriers,
• ...barriers addressed at least by several of the participants were ‘1. External Risks’ and ‘3.
Interventionnotsufficientlyprofitable’,
• ...fromtheperspectiveoftheTPForganisations,theanalysesofthebarriersidentifiedinthiscontext
showedthefollowingfocus:Amajorityoftheparticipantsaddressedbarriersfrom‘2.LowCapital
Availability’,‘5.Investment(Transaction)Costs’and‘6.Intervention-relatedRisks’,
• ...fromtheperspectivesoftheESCOaswellastheTPForganisations,thebarrier‘4.HiddenCosts’
wasnotrelevantfromthiscontext,
• ...several economic barriers were addressed by these two stakeholders, which were subsumed
undertheprovisionalbarrier‘7.UNCOVEREDISSUES’.
Infurtheranalyses,theeconomicbarriersaddressedintheinterviewswereconsideredbyeachofthe
stakeholdersseparately.
• CustomerperspectivebyCases:Inthefollowingtable,markedinredarethebarriersthathavebeen
addressedbyparticipantsoftherespectiveCustomerorganisation:
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Table5-33–OverviewofeconomicBarriersidentifiedbyCases,NominationsofCustomerParticipants
EconomicBarrier
CustomerPerspective
Case
A B C D E
1.ExternalRisks - X X X
Unknown
2.LowCapitalAvailability X X - X
3.Interventionnotsufficientlyprofitable - X - X
4.HiddenCosts - - - X
5.Investment(Transaction)Costs - - - -
6.Intervention-relatedRisks - - - X
7.UNCOVEREDISSUES X - - -
Fromtheprecedingoverviewitcanbeseenthat...
o ...sincenoparticipantwasinvolved,CaseEwasnotevaluatedinthiscontext,
o ...forCaseConlyonebarrierwasaddressed–incontrasttoCaseD,withfiveoutofsixbarriers
oftheframeworkofCagnoetal.(2013),
o ...ingeneral, themostsignificantbarrier issues fromtheperspectiveof theparticipants from
Customers were ‘1. External Risks’ and ‘2. Low Capital Availability’ with three out of four
possiblenominations,
o ...thebarrier‘5.Investment(Transaction)Costs’wasnotaddressedatall,
o ...inCaseA,barrierswerealsoaddressedthatweresubsumedundertheprovisionalbarrier‘7.
UNCOVEREDISSUES’.
• ESCOperspectivebyCases:Analogous to thepreviousCustomerperspective, the followingtable
showsthebarriersaddressedbyparticipantsfromtheESCO:
Table5-34–OverviewofeconomicBarriersidentifiedbyCases,NominationsofESCOParticipants
EconomicBarrier–byCase
ESCOPerspective
Case
A B C D E
1.ExternalRisksOnlyeffectiveEEIProject X - - -
2.LowCapitalAvailabilityOnlyeffectiveEEIProject X X - X
3.InterventionnotsufficientlyprofitableOnlyeffectiveEEIProject - - - -
4.HiddenCostsOnlyeffectiveEEIProject - - - -
5.Investment(Transaction)CostsOnlyeffectiveEEIProject - - X -
6.Intervention-relatedRisksOnlyeffectiveEEIProject - - - -
7.UNCOVEREDISSUESOnlyeffectiveEEIProject - - X -
WithregardtoCaseA,barriersspecifictothepotentialEEIprojectweremissedouttoaddressin
theinterviewscarriedoutwiththeparticipantsfromtheESCO.Rather,thoseissueswerediscussed
withintrinsicrelevancetotheresearchquestions.
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96
Fromtheprecedingoverviewitcanbeseenthat...
o ...fromtheperspectiveoftheparticipantsfromtheESCO,thebarrier‘2.LowCapitalAvailability’
wasthemostsignificantwithreferencetothefiveCases,
o ...mostbarrierswereaddressedforCaseBwithtwonominations,
o ...compared to the interviews with the participants from the Customers, those of the ESCO
addressedsignificantlyfewerbarrierstotheCases.
o ...inCaseD,barrierswerealsoaddressedthatweresubsumedundertheprovisionalbarrier‘7.
UNCOVEREDISSUES’.
• TPFperspectivebyCases:Asthethirdofthethreestakeholdersrepresented,thefollowingtable
showsthebarriersaddressedbyparticipantsfromTPForganisations:
Table5-35–OverviewofeconomicBarriersidentifiedbyCases,NominationsofTPFParticipants
EconomicBarrier
TPFPerspective
Case
A B C D E
1.ExternalRisks - -
N/A
- -
2.LowCapitalAvailability X X - X
3.Interventionnotsufficientlyprofitable - - - -
4.HiddenCosts - - - -
5.Investment(Transaction)Costs X - - -
6.Intervention-relatedRisks - - - -
7.UNCOVEREDISSUES - X - -
Fromtheprecedingoverviewitcanbeseenthat...
o ...fromtheperspectiveoftheparticipantsfromtheTPForganisations,thebarrier‘2.LowCapital
Availability’ was the most significant in relation to the five Cases – as was also the case
previouslyfromtheperspectiveoftheparticipantsoftheESCO,
o ...incontrasttothepriorstakeholder,nobarrierwasaddressedforCaseD,
o ....mostbarrierswereaddressedforCaseA,
o ...inbothCasesAandB,barrierswerealsoaddressedthatweresubsumedundertheprovisional
barrier‘7.UNCOVEREDISSUES’.
Inthefollowingsection,allthesebarrierissuesarefurtherexaminedandthedifferenteconomicbarriers
identifiedareanalysedindetail–supportedbystatementstakenfromtheinterviews.
5.2 DetailsontheeconomicBarriersfoundfromAnalyses
Intheprecedentanalyses,thesignificanceofeconomicbarrierswaspresentedfromtheperspectiveof
theparticipantsgroupedbyCasesaswellasbystakeholders.Inthefollowingsubsections,eachofthe
barriersisexaminedinmoredetail.
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Asalreadymentioned,allinterviewswereconductedinGerman.Inordertoprovideacomprehensive
picture of the findings from these interviews, passages of the transcriptions that the researcher
consideredtobesignificantorrevealingarequotedbelow.TheoriginalquotationinGermanlanguage
wasdeliberatelyomitted.Inaccuratelytranslatingtheoriginalquotations,theresearcherensuredthat
theywerereproducedasverbatimandmeaningfulaspossible.
Asanintroductiontoeacheconomicbarrier,itscontentislistedaccordingtoCagnoetal.(2013).
Withintheaggregationbybarriers,thefindingsaregroupedbyCasesandinthembystakeholdersand
atlastbyparticipants.
5.2.1 ExternalRisks
Thisbarrierimplies,thatanEEImeasurecanbeinhibitedorprevented…
...byhighlyvolatileenergyprices,whichcreateahighdegreeofuncertaintyintheestimationof
futureorlong-termoperatingcosts;thismayleadtoBATinvestmentsbeingavoidedcomparedto
conventional technologiesduetohigher investmentneeds–alsouncertaintyabout thepriceof
energyproduced from fossil fuels,whichdoesnotreflectall theenvironmentalandsocialcosts
associatedwithproduction,conversion,transportanduse;thismeansthatEEImeasuresappear
less profitable than would be socially optimal, and price signals are therefore an barrier to
investmentinthepurchaseofEEtechnology.
Becauseofitsnature,theoriginofthisbarrierliesoutsidetheCustomerorganisationandalsooutside
theinfluenceoftheothertwostakeholdersinvolved.AccordingtoCagnoetal.(2013),thisbarrieris
locatedataveryearlystageofthedecision-makingprocessinEEIprojects(refertoFigure2-7,p.44).
DuetothealreadymentionedsignificanceofthisbarrierfortheEEIprojectsoftheCases,anattempt
wasmadetofurthersubdividethisbarrier.Thefollowingdistinctionwasdevelopedinthecourseof
codingoftheinterviewsas ‘Invivo’codes(concerningthedifferentcodesourcesrefertosubsection
4.1.4,p.70andfollowing):
Energyprices–determinedbyvolatilityofpurchasepricesofprimaryandfinalenergyaswellas
electricity
Legislation–determinedbychangesoflegalbasesforremuneration,allocationsandbonifications,
e.g.fromfeed-intariffsorKWKG
FromtheperspectiveoftheCustomers,theaspect‘a)Energyprices’wasaddressedinCasesBandD,the
aspect‘b)Legislation’wasevenmentionedinCasesB,CandD.FromtheperspectiveoftheESCO,the
aspects‘a)Energyprices’aswellas‘b)Legislation’wereaddressedconcerningCaseB.
In theassociatedprojects, savingson theprimaryand final energy sideaswell asbonifications (i.e.
surchargesreceivedby theorganisation inconnectionwith theEEG forelectricitygenerated inCHP
plants)meantsignificanteffectsfortheeconomicefficiencyoftheEEImeasures.
InthecaseofCustomerA,thefocusoftheoriginalEEIprojectwasontheoutsourcingoftherelevant
facilitiesaswellastherevenuesfromtheirsaletotheESCO.Thus,thisbarrieronlyinthisCasehadno
significance.
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98
For the participants of the TPF organisations, this barrier was not significant overall. Legislative
influenceswithaneffectontheirsphereofinfluencewereapparentlynotexpectedoranticipatedby
thisside.
• CaseB:Theratioofelectricitytogaspriceswasanimportantelementfortheamortisationofthe
EEIequipment,asexternalelectricityprocurementwastobesubstitutedbygasprocurementfor
ownelectricitygeneration.
11_CB:”[Thecostof]energyisalwaysverydifficulttoestimate;wherearethe
energycostsinonetotwoyears?Inmycorebusiness,Iknowthingsverywellandcan
determineexactly–okay,Iinvestamillionandhaverefinanceditaftertwoyears.
Withregardtotheenergysector,thisisalwaysverydifficult.Isthepriceofgas
falling?Willthepriceofelectricityfall?Willthe[amortisation]timebeextended?”
Partoftheeconomicefficiencyoftheplannedexpansionoftheenergycentrewasthesituationof
the EEG levies, fromwhich the companywas exempt andwhich, above all, freed the electricity
producedbyanorganisationitself,e.g. fromCHPplants.Atthetimeofthedatacollectionitwas
questionabletowhatextentthismodelwouldbecontinuedinthefuture.
11_CB:“ItwasalreadyaconfusionabouttheEEGinrecentyears.[...]therewere
companiesthatwereexemptfromEEGlevies,othersnot.Ourindustrywasalso
partlyexemptinthisway.Andformany[otherorganisations]itwasunclearhow
longonewouldbeexempted.Willonebeliberatedorwon't?Andthisledtodelays[in
mattersoftherealisationofEEImeasures].”
“Fromtoday'sperspective,thisisagainasomewhatclearerpictureforourcompany,
namelythatourindustrywillnolongerbeexemptfromEEGleviesatallinthefuture
–whichisnotnicefromthefactsifyouarenolongerexempt,butitgivesyouthe
opportunitytomakeadecisionnow.”
OneESCOparticipanthadasimilarperceptionofthisbarrierconcerning‘b)Legislation’.
10_E:“Atthemomentwhenlegislationdraftsthatarerelevanttofutureprojectsare
actuallyunderdiscussion,theCustomerorganisationwillalwaystendtoact
cautiouslyandwaittoseewhatfactis.Anditwon'tmakeadecisionforthatlong.It
doesnottakeanyrisks,whichitcannotforesee;especiallysincewithpaybackperiods
ofmorethansixorsevenyearswealways‘lookintotheglassball’toseehowenergy
prices,EEGleviesorotherthingswilldevelop.Ifitthenknowsthatlegislationis
underdiscussion,itwilldonothing.Fromourperspectiveandcertainlyalso[...]from
theperspectiveoftheCustomerwhowouldliketoincreaseefficiency,[...]itisharmful
ifreliabilityisnotthere.Thenthedecisionisnotmadeinthisform.”
• CaseC:Withregardto'b)legislation'ontheonehand,theCustomerassessedthepossibleburden
of the EEG levies on electricity produced by the organisation itself and, on the other hand, the
handlingoftheKWKGbonificationasproblematic.Atleastthebasicentitlementtothebonification
was beyond question at the time of data collection. This barrierwas therefore presumably not
addressedbytheESCOinthisCase.Thecomponentof‘a)Energyprices’toelectricitygeneration
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99
andtotheratioofelectricitytogaspriceswasnotapriority.ThemainfeatureofthisEEIproject
wastheuseofwasteheatfromtheCHPplantforproductionprocessesandnotthefeed-inoruseof
theelectricityproduced.
05_CC:“[...]thisweretheframeworkconditionsthatdidnotfit.[...]TheMinistryof
EconomicAffairs[inthisFederalState]didnotknowhowhightheEEGleviestobe
paidontheelectricitygeneratedonownequipmentwas.[Also]nobodyknew
anythingaboutthebonification[fromKWKG].Wehaven'tgotthatbackyet,for
2015.[...].Thisisadisaster.[...].Nobodyknewhowtodothat[...]withthecertificate,
i.e.withthecertifiedquantitiesofus.Andthat'swhywe'restillwaitingforthe
bonification.”
• CaseD:AnalogoustoCaseB–besidesthesteamgenerationfortheoperationalprocessesof the
Customer – also in this Case the amortisation via the ratio of gas to electricity prices was an
importantfacetoftheEEIproject.
09_CD:“Howhastheelectricitypricedeveloped?Because[inmyorganisation]Iwas
alwaystold[...]thatthepriceofelectricitywasfalling.Andtheso-calledworking
pricehasactuallyfallen.Butwhatwasalwaysnottakenintoaccount[...]isthat
taxes,leviesandsoonovercompensateandconsequently[...]thegrosspriceof
electricity,whichwehavetopay,isgrowing.”
ComparabletothesituationinCaseC,therewasnoexperiencevaluesonthepartoftheCustomer
withregardtotheprocessofbonificationfromKWKG.Whetheranentitlementtobonificationcould
stillbeassertedatallwasunclearatthetimeofdatacollection.
09_CD:“ThebonificationfromKWKG,thatisaboutEUR3.5millionfortheproject
andthisshouldnotbegivenaway,andmeanwhilethelegalsituationhaschangeda
bit.Wehavetoseeifwecangetit.Inordertobenefitfrombonificationnow,weneed
theconsentofalargesupplier,anditisquestionablewhetheritwillagree.”
“Inmyopinion,itisactuallynotrighttotaketheseCHPplantsorthesedecentralised
issuesawayfromthesubsidyfunds,[...].Ifit'sapoliticalissue,youcan'tchangeit.
Nevertheless,itisapointthattheprofitability[oftheEEImeasure]hasofcourse
beenfurtherandfurtherburdenedbythis.”
• Furtherissuesconcerningthisbarrierwithintrinsicrelevancetotheresearchquestions:Several
ESCOparticipantsraisedsupplementaryissuesregardingthisbarrier.Boththedevelopmentof‘a)
Energy prices’ for primary and final energy as well as ‘b) Legislation’ issues concerning the
continuityofcurrentbonificationfromKWKG,exemptionsfromEEGleviesandtheprotectionof
existing installations as well appeared to be problematic. This barrier applied to both existing
contractsandacquisitionprojectsingeneral:
01_E:“Thelegislatordidnotdistinguishitselfbydemonstratingconsistency,butby
variouschangesinthelegislation,agreatuncertaintyaroseinthecompanies.Inthe
meantime,wehadhopedthatcertainbonifications,forexample,couldshortenthe
paybackperiodifinvestmentsweremadeinparticularlyEEequipment.Butthereis
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100
noprotectionofthestatusquointheseareas.Andifthelegislatortodayreversesa
decisionmadeyesterdaywithnewlaws[...]cuttingoffadvantagesthere,thenthatis
certainlyabarrier.”
“[RegardingbonificationfromKWKG]therehavebeenmanychangeslately.Andit's
alsotruethatatsomepointtherewon'tbeanyonegoingthroughitanymore,andthe
criteriaaresometimesrelativelyspongy.Thereisanuncertainty.Yes,youhaveto
dealwiththelegislator.Youdonotknowhowtheytheninterprettheirownlaws.”
08_E:“Energypricesarecurrentlyverylow.Oilandgasarecheaperthanever.[...]
ThepressureofsufferingthatI[–theCustomer–]havetodosomethingbecauseof
myenergypriceshasbecomeweaker.”
“Weareheavilyinvolvedincombinedheatandpowerplants,CHPplants.Ifyou
simplylookatwhathashappenedinthelastthreeorfouryearstothedeterioration
oflegislationforthistechnologyforindustrialcompanies,theneveryonecouldthink:
‘Oh,CHPplants,that'stheworstthing’,everyyearsomesubsidycaseiswithdrawn.So
it[...]isgettingworseandworseeconomically.[...]Andacompanymanager[ofa
costumerorganisation]couldsay:‘It'snotintentionalformetobuysuchaplant,
otherwisethelegislatorwouldbehavequitedifferently.’Andherewecomeandsay:
‘Yougetagreattechnology.Youhaveahighlyeconomicinvestment.’Andthenhe'll
say:‘Yes,lookwhat'shappeningonthelegislativesideinrecentyears.NowI
suddenlyhavetopayleviesforelectricityIusemyselfandIdon'tgetanymore
subsidies.’Soyoumightthinkthattheplantshaveanegativeimage.”
“[...]Equipmentthatwaseconomicallyviablethree,four,fiveyearsagoisbecoming
worseandworse,sotospeak,duetothelegislativeconditions.Notthattheyarenot
economic,notthat.Itis,however,ifthreeyearsagoIalreadyhadaninhibition
thresholdbecausetheeconomicefficiencywasnotreallyenoughforme,thenthe
inhibitionthresholdhasofcoursenowbecomeevengreater.[...].Soitbecomes
hardertosellsomethingfromaneconomicperspective,becausethesavingseffect
hasdecreased,likethree,four,orfiveyearsago.”
Sincethecausesofthisbarrierwerelocatedoutsidethesphereofthethreestakeholders,noinfluence
ofaconstellationorspecificsituationofindividualstakeholderscouldbedeterminedinthiscontext.
AsdescribedbyCagnoetal.(2013),itcouldbestatedthatthisbarrierhadanimpactonothereconomic
barriersandcouldsuspendanoriginallygiveneconomicefficiencyofanEEImeasure.
ItshouldbenotedthatthisbarrierwasofgreatsignificanceinthecontextoftheCasesofthismultiple-
case study. The issues addressed by the research participants could be qualified as of fundamental
interestinthedecision-makingprocessfortheimplementationofanEEIproject.
Thesignificanceofthisbarrierwasalsodirectlylinkedtothecostreductionmotive,whichwaspursued
by all Customers as an effect of the EEI measure (refer to the company profiles of the Customer
organisationsshowninsubsection4.2.2,p.74andfollowing).
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101
Thereasonforchoosingthemultiple-casestudyoverthesingle-casestudystrategyisthepossibilityto
comparebetweenCases.Inthiscontext,attemptsaremadetoachievetransferableoutcome.
ThetransferabilityoftheresultsoftheanalysesofthiseconomicbarriertotheCasesisasfollows:
Table5-36–TransferabilityofFindingsacrossCasesregardingtheeconomicBarrier‘ExternalRisks’
TransferabilityofFindings
OutcomebyCase
A B C D E
IfsavingsontheprimaryandfinalenergysideaswellasKWKGbonificationswereessentialcomponentsoftheeconomicefficiencyoftheEEImeasuresandthese in turnwereessentialdrivers for their implementation,uncertaintiesregarding the development of these factors inhibited or prevented theimplementationofEEImeasures.Thismeantabarrierfrom‘ExternalRisks’.SimilaroutcomecouldbeobtainedacrossCases(forCaseBreportedfromparticipants of the ESCO after data collection phase was the stop ofimplementationduetoexpectedchangesoftheEEG).
N/A X X X N/A
5.2.2 LowCapitalAvailability
Thisbarrierimplies,thatanEEImeasurecanbeinhibitedorprevented...
...by insufficientcapital frominternal fundsanddifficulties inborrowingorequityraisingorby
internalcapitalbudgetingproceduresandinvestmentassessments.
TheoriginofthisbarriercanbelocatedonlyinternallytotheCustomer,thecausefortheappearanceof
thisbarrierisasituationorconstellationonthepartoftheCustomerorganisationalone.Thereforethe
concrete form of the barrier is very different in the Cases and has concrete effects on the other
stakeholdersorontheperceptionofthisbarrierfromtheirperspective.AccordingtoCagnoetal.(2013),
thisbarrierislocatedatanadvancedstageofthedecision-makingprocessinEEIprojects(refertoFigure
2-7,p.44).
Dueto thesignificanceof thisbarrier forEEIprojectsalreadymentioned in theprevioussection,an
attemptwasmadetofurthersubdividethisbarrier.Thefollowingstructurewasdevelopedinthecourse
ofcodingoftheinterviewsas‘Invivo’codes(concerningthedifferentcodesourcesrefertosubsection
4.1.4,p.70andfollowing):
Credit-worthiness–determinedbycredit-worthinessoftheCustomerforTPForESCOfinancing
Duration–determinedbydurationoffinancing(bothinternalfundsandTPForESCO)
Collateralisation–determinedbycollateralisationforTPForESCOfinancing(fordefinitionsand
detailsofkeytermsregardingcollateralisationrefertoglossary,p.11andfollowing).
Refinancing–determinedbytherequirementsofrefinancing(bothinternalfundsandTPForESCO
financing)
Volume–determinedbytheleveloffinancingrequired(bothinternalfundsandTPForESCO)
FromtheperspectiveoftheCustomers,theaspects‘b)Duration’(inCasesA,BandD),‘d)Refinancing’
(in Case B) and ‘e) Volume’ (nominated in the interview concerning Case D, but with no concrete
referencetothisCase)wereaddressed.Itisinthenatureofthingsthattheaspects‘a)Credit-worthiness’
and‘c)Collateralisation’hadnorelevancefromtheperspectiveoftheparticipantsfromtheCustomers
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–thesehadsignificanceforthetwootherstakeholderswhosefinancing(indirectlyfortheESCOand
directlyfortheTPForganisations)wasaffected.
Accordingly,theparticipantsoftheESCOaddressedtheaspects‘a)Credit-worthiness’(inCasesBand
E),‘b)Duration’,‘c)Collateralisation’(inCaseE),andalso‘d)Refinancing’(inCasesBandC).
As expected, from the perspective of the participants of the TPF organisations, only the aspects ‘b)
Credit-worthiness’(inCaseE)and‘c)Collateralisation’(inCasesA,BandE)wereaddressed.
Below,aspectsofthesesegmentsofthebarrieraredescribedwithintheCases.
• CaseA:SincetheCustomerexcludedtheparticipationofaTPForganisationandwouldtherefore
havetouseitsownresourcesexclusivelyforfutureprojects(duetocorrespondingrestrictionson
thepartoftheESCO),thebarriersinthisarealaidintheCustomer'sperspectiveintheaspectof‘b)
Duration’oftheprojectandtheamortisationtimeoftheEEImeasure:
07_CA:"...andthereIhave[...]abig[...]problem,wehaveaperiodofconsideration
forbiggerinvestmentsofabout10years,whileanESCOlooksat15oreven20years
[...]andthatalsomeansthatfromtheperspectiveoftheESCOahighlyefficient
projectorahighlyefficientmeasureissimplynoteconomicalfromourperspective.”
“AnESCOalwaysthinkscompletelydifferentlythanaproducerdoes,andwehave
hurdleratesforprojectsinourgroup,whichmeansthattoacertainextentwewould
agreetoaproject;[...]ifthesehurdleratesareexceeded,theprojectisactuallyno
longereconomicallyinterestingforus.”
AsabarriertoapossibleTPFinvolvementinthepotentialEEIproject,theparticipantsfromtheTPF
organisationsaddressedtheaspectof‘c)Collateralisation’:
03_T1:“He[theCustomer]wasnotpreparedtomakeadeclarationofobligation[in
theformofawaiverofobjectionsasaninstrumentofcollateral]toafinancing
partneroftheESCO[thusfinancingcouldnotbeprovided].”
• CaseB:With regard to the aspect ‘c)Collateralisation’ and the resulting financingmethod tobe
chosen for the potential EEImeasure, the TPF organisation in question explained the following
limitation–alsoasthereasonforfinallyselectingthefinancingmethodofhirepurchase:
03_T1:“Soweasaleasecompanyhavenoproblemtograntathirdpartyoutsidethe
leasecontract[inthiscasetheCustomerorganisation]apurchaseoption.[...]Butthe
lessee[inthiscasetheESCO]cannotsayfromtheoutset:‘Icanselltheobjecttoyou
[theCustomerorganisation]’,becausetheESCOdoesnotownitatall.”
04_T2:"LeaseisnotpossiblefromtheexistingconstructwiththeEScontract,
becauseattheendoftheleasetermwehavevariousoptionsandtheownershipdoes
notautomaticallyreturn[tothelessee].SoitwasdifficultfortheESCObecausethere
mightnotbeanenergycentreavailabletofulfiltheEScontract.Soafter
negotiations,weswitchedfromleasetohirepurchase.”
During a certain phase (phase 2 to 3 of the corporate development of the ESCO), neither the
CustomernortheESCOwasabletoprovidefundingforEEIprojects.TheESCOitselfwasnotableto
Chapter5:AnalysesandFindings
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raiseeither itsownfundsorexternal funds,andtheCustomerwasnotallowedtoraiseexternal
fundsundertheaspectof‘a)Credit-worthiness’:
10_E:“TheCustomerdidnotwanttofinance[throughTPF]onthebasisofits
solvency,itsshareholderdidnotallowthis;wecouldnot,ourshareholderdidnot
allowthis.Nevertheless,therewereprojectsthatweretotallysensibleintermsof
efficiency,butsimplycouldnotbefinanced;Nowwe[...]managedtonegotiateand
agreeonthefinancingonitscredit-worthiness[withTPFintheformofhire
purchase].Thisgaveusthego-ahead[...]togetnewprojectsbackontrack.”
EEI projects competed with other potential projects of the Customer in financing with own
resources,atatimewhenexternalfinancingbyTPForganisationswasexcludedandtheESCOwas
notabletoprovideit,theaspect‘b)Duration’playedanimportantrole:
11_CB:"...everythingundertwoyears[amortisationtime]isactuallyalwaysdone
andeverythingoverfiveyearsislookedatvery,veryclosely.”
“Itisoftenthatprojectswillonlyberefinancedinafewyears'time.Inthree,four,
maybeevenfive.AndthereIcanalwaysfindprojectsinmyownprocessesthatcanbe
refinancedquitequickly,namelysomewhereintwoortwoandahalfyears,sothat
energyprojectsoftenfallbehindasaresult.”
TheparadigmshiftincorporatepolicyonthepartoftheESCOregardingthefinancingofpotential
EEIprojectsalsoinducedtheperceptionofabarrierconcerningtheaspectof‘d)Refinancing’onthe
partoftheCustomer:
11_CB:"…thedecisioncouldhavebeenmademorequicklyifthefinancinghadstill
beencompletelywiththeESCO.Sure,atthattimeeverythingwasinonehand,only
onecompany[theESCO]hadtodecide.Nowwithapartnershipthatonecompany
[theTPForganisation]isfinancingandtheotheroneistheESCO,[...]two[parties]
areatthetablewhohavetodecide.”
• Case C: The participant from the Customer did not identify any issues at all to this barrier. A
participantfromtheESCOagainaddressedtheaspectof‘d)Refinancing’,inthisCaseasareasonfor
thesmallESScopefinallycontracted:
08_E:"Subsidymechanismscomplicateourbusinesstoacertainextent.Ifwedonot
benefitfromthissubsidy,weareinaworsepositionpersethaniftheCustomer
buildstheplantonitsown.[...]It'sthesameequipment,butiftheCustomerdoesiton
itsown,itgetsa25%subsidy.Ifwebuildtheplantforit,thereisnone.Inour
possibilitiesoffinancingwedonotgetthesubsidy.”
And further, concerning EEI measures in the context of subsidy mechanisms in general, the
participantfromtheESCOexplained:
08_E:"Thelegislator[viaKfWBank]wantstoseewhatit[theCustomer
organisation]bringsforthe25%ofsubsidies:Aretheyspentproperly?Andthen[...]
exactlythatcomestolightthat[theCustomer]theninvitestendersandcompares
plantconstructors.Thelegislatoriscertainthataslittlemoneyaspossiblehasbeen
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spent.Thisisperhapsthecheapestsystem,butnotthebestsystemintermsofEE,
[becausetheinvitationtotender]isaimedataninvestmentvolumeandthepressure
comesfromthesesubsidymechanismstodisclosethistothesubsidybank.[Hence,the
cheapestsolutioninmattersofinvestmentvolumeistobeselectedandnotthemost
efficientone].”
• Case D: In contrast to the previous Case C, in this Case only the Customer addressed aspects
concerningthisbarrier.NeitherparticipantsfromtheESCOnortheTPForganisationsmentioned
furtheraspects–asthiswasapublic-sectororganisation,externalfinancingcouldinprinciplebe
easilyobtained.Inparticular,theaspectof‘b)Duration’oftheprojectandtheunderlyingexternal
financingappearedproblematicfortheCustomerbeforesigningtheEScontract:
09_CD:“Welivehereinaveryconservativelandscapewhenitcomestosucha
project,[...]theresistancewehadtoovercomewasconsiderable.”
• CaseE:TheEEIprojectultimately failedbecauseof thisbarrieraddressedbyparticipantsof the
ESCOaswellasoftheTPForganisations.Essentialaspectswere‘a)Credit-worthiness’,whichwas
notgivenbytheCustomerand‘c)Collateralisation’resultingfromthepriorwhichwasnotfeasible
andalsonoteconomicallyjustifiable.
01_E:"...theCustomerdidnothavesuchanoutstandingcreditrating.Inthisrespect,
wefounditdifficulttofindaTPFforthisproject.Wefoundone,subjecttocertain
restrictions–relativelystrictconditions.”
08_E:"WehadaTPF,ofcourse,withahighlevelofcollateral.Duetothe
significantlypoorercredit-worthinessandthenintheendevenduetotheinsolvency
proceedings,onehundredpercentcollateralisationwasnecessary.”
"Oursidecannottakeanyrisktheworsethecredit-worthinessis.Andontheother
hand,theCustomer'shandissimplytied.Howcanitthenprocurecollateralifitisnot
well?”
“Thattheprojectdidnotcometofruitionwastheuncertaintyduetothefastpaceof
thisindustryandthatinthesituationnooneiswillingtoconcludelong-term
contracts.Butnooneispreparedto[conclude]aten-yearcontract.”
03_T1:"TheCustomer[...]facesrisksknowninthemarketthatcouldnotbeassessed
bytheTPForganisationandtheESCO.[...]Theserisks[...]couldbecomeexistential
andthereforeweasTPForganisation[...]finallysaid,thatwewouldnotdoit;we
recommendthatyou[theESCO]makethisriskcleartoyouagain.”
“Infact,wewouldhavereliedonlyon[thesolvencyofthe]ESCO.TheESCOshould
havegivenusacollateralthatevenifit[theCustomerorganisation]fails,weare
reallyrisk-free.”
06_T3:"Theproject[...]failedduetocreditdefaultriskreasons;[...]thiscompanydid
notmeetthecreditriskrequirementsofourfundsguidelines.Wealwaystrytoobtain
acreditratingthatcomplieswithourguidelinesthroughcollateral,[...]forexample
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bycapitalisingtheunderlyingfixedassets,byhavingaresalevalueassessedorby
coveringaportionwithabankguarantee.Butinthisspecificcasetheriskofcredit
defaultwassohighthatthiswasnotpossibleorwouldsimplyhavebecome
uneconomical.”
• Furtherissuesconcerningthisbarrierwithintrinsicrelevancetotheresearchquestions:Afurther
issuewasraisedbytheparticipantofCustomerD,whoreportedonapreviouspublicinfrastructure
projectconcerningtheaspect‘e)Volume’.AnEEImeasurecouldnotbetakenintoaccountbecause
thefundsoriginallyreleasedwereinsufficient:
09_CD:“...alargebuildingwaserectedhere,[...]theconstructionvolumethatwas
estimated[...]wasnotsufficientand[...]alltheenergysavingmeasuresthatwere
plannedwereremoved,sothatthewholebuildingisnowanenergydestruction
machine;[...]theybuiltcheaply,theystayedwithinthebudget,butthefollow-upcosts
arecatastrophic.”
The participants of the ESCO addressed further aspects of this barrier, concerning ‘a) Credit-
worthiness’and‘c)Collateralisation’:
08_E:"TheTPForganisationsignsthefinancingcontractwiththeESCOandwants
collateral.ThismeansthatwehaveatripartiterelationshipbecauseweasESCOdo
notwanttogivethecollateraltotheTPForganisation,sotheCustomerhasto
providethecollateral.Sothisisusuallyamassivenegotiatingpoint,whichcanlead
todifficultiesindraftingthecontract.”
"Forcertainissueseasementshavetoberegistered[ascollateral],whichcanbeabig
barrier,becauseofcoursemanyCustomersdonotwanttofillthelandregister[...],
justbecausetheplantbelongstothecompanyA,BorC[theTPForganisation].
"Basically,wecan'tgetTPFifweinvestsomethinganddon'thaveaCustomerfrom
whomwecangetthecollateral.Example:Districtheatingnetwork–thereare10
different[Customer]organisationshangingbehind.Onwhomthisinvestmentshould
bebasedon?Wealwaysneedathirdpartybecausewedon'tprovidethecollateral
ourselves.Sofar,wehaveonlysucceededindoingthisifwehaveasingleCustomerto
thatcanprovidethecollateral.”
Moreover, specific aspects of this barrierwere also addressed from the perspective of the TPF
organisations.Theseingeneralhadfar-reachingregulatoryorstatutoryrequirementswithregard
to‘c)Collateralisation’:
03_T1:"...adeclarationofobligation[=abstractpromiseofdebt,waiverof
objection]byaCustomertothefinancieroftheESCOisnotsomethingthat[a
Customer]likestodo.Thisisaninstrumentthatisnecessarytofocusonthe
CustomerandnotontheESCO;[...]ifthiscollateralinstrumentdoesnotwork,then
[...]thefinancingfromourcompanywillnotbepossible.”
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106
06_T3:"Inordertomeettheinvestment-gradecriterion,thecollateralprovidedby
anEScontractissufficient.WhatwealsoneedisaguaranteefromtheESCOtocover
theperformancerisk.Sowecannotassumeanyperformancerisk.”
“WithEEprojects[...]savingsareachieved,butyoucannotpaybackanything[aTPF
financing]withsavings,i.e.youaredependenton[theCustomer]havingenoughcash
toreturnittotheTPFbecauseyoucannotseparatethecashflowsofthesavings.
ThereisnoliquiditythatIcanseparateandfocuson,butIalwayshaveacorporate
creditrisk.”
“[...]thereisnostandardisationwithregardtothestructuringofprojectsandin
particularprojectcontracts.ThismeansthatthecontractsbetweenESCOandthe
CustomerdonotmeettherequirementsthataTPForganisationneedstohavethe
certaintythatitcanreallyseparateandassesstherisksappropriately.This
contractualstabilisation,thisunderstandingofwhichcontractualrisksaTPF
organisationcanorcannottakeandwhichfinancingclausesthecontractsmust
have,oftendoesnotexist[...].”
Thefund-basedfinancingprovidedbyTPF3istiedtoitsduration,sotheaspectof‘b)Duration’also
becomesimportantingeneral:
06_T3:"[Thetermofthefundsislimited,]wemusthaverepaidthecapitalbyJune
2027.[...].Wecouldfinance15years,butattheendofthetermwewouldneeda
rightforathirdpartytotakeoverthatfinancingfromus.”
Although the causes of this barrier – as described at the beginning – are solely on the part of the
Customer,thesituationaswellastheconstellationoftheotherstakeholdershadaclearinfluenceon
thisbarrier:ThenecessityoffinancingbymeansofexternalfundsfromthepointofviewoftheCustomer
(e.g. as internal specifications regarding the amortisation period of the project are not achieved)
generatedtheneedforcollateralisationofthisfinancingandcorrespondingcontractualarrangements
(whichmaynegatively influencethebarrier '5. Investment(Transaction)Costs').Furthermore, if the
ESCOdidnotprovidethenecessaryfunds,financingcostsalsoresultedwhich,inthecaseofleaseor
forfeiting,hadpoorerconditionsthanloanorhirepurchasefinancingfromtheCustomer'spointofview.
Therequiredfinancingvolumealsohadaninfluenceontheleveloffinancingcosts.Inaddition,these
formsoffinancingcreatedcomplexstructureswithregardtoownershipandproceduresattheendof
theprojectterm.Theseeffectscouldinturnhaveanegativeimpactonthebarrier'3.Interventionnot
sufficientlyprofitable'.
SubsidymeasuresofKfWBankrequiredtheloanfinancingofanintendedEEImeasureand,ifnecessary,
its embedding in a larger, production-related measure. These conditions could be fulfilled by the
Customer,butnotbytheESCO,asthelatterwasnotabletoarrangealoanfinancinginaccordancewith
its corporate policy. The project structures required to obtain the subsidy measures could thus
significantly reduce the scopeofES servicesand thus impairESCO'spotentialbusiness. In thisway,
legislativeactivitiesresultinginsubsidyschemescouldweakenthepositionoftheESCO–contraryto
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107
whatwasintendedbytheEED.Thus,whenEEImeasureswereonlyoneofseveralfacetsofanoverall
largerproject,existingEEpotentialswerenotbefullyexploitedorevenignored.
ThesignificanceofthisbarrierwasdirectlyrelatedtotheliquidityprotectionmotiveofCustomersA,B
andD(refertothecompanyprofilesoftheCustomerorganisationsshowninsubsection4.2.2,p.74and
following).
Forthisbarrier,itshouldalsobenotedthatitwasofgreatsignificanceinthecontextoftheCasesofthis
multiple-casestudy.IftherewererestrictionsonthefinancingbytheCustomerandevenmoresobythe
ESCO,thisledtosignificantcomplicationsandimpedimentsforpotentialEEIprojects.
ThetransferabilityoftheresultsoftheanalysesofthiseconomicbarriertotheCaseswasasfollows:
Table5-37–TransferabilityofFindingsacrossCasesregardingtheeconomicBarrier‘LowCapitalAvailability’
TransferabilityofFindings
OutcomebyCase
A B C D E
IfaCustomersoughtfinancingfromitsownresources,theEEIprojecthadtocompetewithotherprojects(relatedtotheorganisation'scorebusiness).EEIprojectsusuallywere inferior in theireconomicviability, thereforetheEEIprojects of thismultiple-case studywere generally not financed fromownresources.Thismeantabarrierfrom’LowCapitalAvailability’.SimilaroutcomecouldbeobtainedacrossCases.
X X N/A X N/A
If the financing was provided by the Customer, the ESCO had to accept asignificantlyshortenedprojectdurationandreducedscopeofES.Thismeant(at least for ESCO's business activities) a barrier from ’Low CapitalAvailability’.SimilaroutcomecouldbeobtainedacrossCases(forCaseAreportedfromparticipantsof theESCOafterdata collectionphase, forCaseBconcerningpreviouspotentialEEIprojects).
X X X N/A N/A
IftheCustomerdidnothavesufficientcredit-worthinessorcouldnotprovideappropriate collateralisation, the EEI project could not be realised on thebasis of external financing. This meant a barrier from ‘Low CapitalAvailability’.Contrary outcome could be obtained across Cases (sufficient credit-worthiness can be supposed for the other Cases, as no such barrier wasaddressedfromtheTPForganisationsinvolved).
N/A
X
X X X
5.2.3 Interventionnotsufficientlyprofitable
Thisbarrierimplies,thatanEEImeasurecanbeinhibitedorpreventedby...
...solutionsthatareinprinciple,butnotnecessarilycost-effectiveinallcasesandorganisations.
TheoriginofthisbarriercanbelocatedbothinternallyonthepartoftheCustomerandexternally(e.g.
withtheotherstakeholdersinvolved).
AccordingtoCagnoetal.(2013),thisbarrierislocatedatthefinalstageofthedecision-makingprocess
inEEIprojects(refertoFigure2-7,p.44).
ThisbarrierplayedarathersubordinateroleintheCases,onlyfromtheperspectiveofCustomersin
CasesBandDitwasaddressed.
Chapter5:AnalysesandFindings
108
• CaseB:SeveralEEImeasureshadalreadybeenimplementedatthesiteofCustomerBbytheESCO.
However,theESCOwascontractuallyobligedtocontinuouslyimplementEEImeasuresrelevantto
remuneration. From the perspective of the Customer, the available EE potential gradually was
exhausted:
11_CB:“The80-20rulecanbeappliedhere.Wehavecertainlyskimmedoff80
percentofthepossibilitiesandthelast20arestilltobelifted.Whetherourservice
providerissatisfiedwiththese20percentinthelongterm,wehope,butwecannot
judge.”
• CaseD:ThesituationthatatthetimeofdatacollectiontheEEImeasurewasstillatthebeginningof
theprojecttermandthattheexpectedeffectscouldstillberealisedmeantapossiblebarrierfrom
theperspectiveoftheCustomer:
09_CD:“Ontheotherhand,itisalsothecasethatapresentation[bytheESCO]did
indeedshowthatitwouldbepossibletoachieveeconomicsuccessinthenext15
years.Andtherealsowastheclearstatementthatone[theCustomer]hasacertain
expectation,andunderthisexpectationtheESCOshouldnothavetakenpartatall.”
Inaddition,thefinancingcostsinthisCaserepresentedasignificantportionofthecoststhathadto
beamortisedduetotheeffectstobeachievedfromtheEEImeasure:
09_CD:“[...]ifwecouldhavefinancedbyourselves,thefigureswouldofcourselook
evenbetter.[...].Insuchathree-partyconstellation,everyonewantstoearnmoney,
andthat’slegitimate.[...].Ifwehadnothadthreepartiesnow,butonlytwo,thenit
[theeffects]wouldbedistributeddifferently.”
• Furtherissuesconcerningthisbarrierwithintrinsicrelevancetotheresearchquestions:Further
issues were raised by the participants of the ESCO, concerning additional aspects which could
constitutethisbarrier,arisingfrom
o Customers–bytheirpurchasingguidelinesandtheneedforcomparabilityofoffersforES:
08_E:“SowehaveacasewheretheCustomer’spurchasingdepartmentmusthave
threecomparableoffers.However,thisisnotsoeasytopresentinourarea.And[...]
becauseyouhavetomakethingscomparable,youpoparounduntilitis,andthenthe
projectmaybecomeuninterestingforus.”
o TPForganisations–bycostsofexternalfinancing:
02_E:“Attheendoftheday,thecosts[oftheEEImeasure]areofcoursedecisivefor
theCustomer.Itisthenalways[...]toaskthequestion,howmuchdoestheoverall
projectbecomemoreexpensiveduetoTPF?Heretheinterestrateofthebanks,[...]
competeswiththeopportunityinterestrateofanESCO.[...].Ifathirdpartyis
involved,thereisnolongertalkaboutopportunityinterestrates,whichareincluded
intheproject[onthepartoftheESCO],butaboutrealcosts,whichmustthenbe
generated[bytheEEIproject].Andwiththese,thebottomlineisthattheprojectis
moreexpensive.”
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109
Thespecialsituationofthefunds-basedfinancinginthecaseofTPF3resultedinanissueconcerning
this barrier (which also can be seen as an opportunity) from volume-dependent financing
conditions:
06_T3:“[...]weclearlydifferfromaleasecompanyorabankbecausewehaveahigh
incentivetoinvestalotofmoneybecausewehavereceiveddepositsfromour
investors,andtheywanttoseetheirmoneyplaced.[...].Thismeansthatwehave
roomformanoeuvreintermsofconditions,dependingonthetransactionvolume.I
canofferbetterfora15millionprojectthanforatwomillionproject.”
Withthisbarrier,noinfluencesfromthesituationortheconstellationofthestakeholdersinvolvedcould
beidentifiedintheCases.Withregardtothetwobarriersdescribedpreviously,thisbarrierisunder
theirindirectinfluence,aseffectsfrom‘1.ExternalRisks’and‘2.LowCapitalAvailability’mayleadtoa
costsituationinconnectionwiththeintendedEEImeasure,undertheinfluenceofwhichitcannolonger
economicallyberealised.Asalreadysaid,theparticipantsdidnotattachanyparticularsignificanceto
thisbarrier.
Theanalysesregardingthiseconomicbarrierdidnotproducetransferablefindingswithsignificancefor
thismultiple-casestudy.
5.2.4 HiddenCosts
Thisbarrierimplies,thatanEEImeasurecanbeinhibitedorpreventedby...
...costs,whicharenotincludedintheoriginalestimateoftheinvestmentplanningandeliminate
therebytheoriginallycalculatedcostefficiency.
TheoriginofthisbarriercanbelocatedbothinternallyonthepartoftheCustomerandexternally(e.g.
withtheotherstakeholdersinvolved).Unforeseen(andthushidden)costscanariseonthepartofall
stakeholdersinvolvedorbeyondtheirsphere–andalsoatanytimeorinanyphaseoftheEEIproject.
AccordingtoCagnoetal.(2013),thisbarrierislocatedatthefinalstageofthedecision-makingprocess
inEEIprojects(refertoFigure2-7,p.44).
This barrier also played a minor role in the Cases and only was addressed from the Customer’s
perspectiveinCaseD.
• CaseD:InthisEEIproject,thesituationwasthatcertainelementsoftheequipmentinvestedhadto
beaddedtotheplannedscopewithoutreachinganimprovementoftheefficiencyoftheoverallEEI
measure:
09_CD:“It’sconnectedtothecontractswehadwiththeutilities.Wecouldnotgetout
ofthedistrictheatingcontractwithonesupplier.[...].Thebigproblemisthatthis
supplierownsthedistrictheatingnetwork[onoursite].Thatmeanswehadtothink
again,ifitdoesn’tplayalongnow,whatdowedo?Theendofthestoryisthatwe
havetobuildourownnetworkhere,butthisgoesagainstprofitability.
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110
Evenwiththisbarrier,no influencesfromthesituationorconstellationofthestakeholders involved
couldbeidentifiedintheCases.Asalreadymentioned,theparticipantsdidnotattachanyparticular
significancetothisbarrier.
FromtheperspectivesoftheparticipantsfromtheESCOandtheTPForganisations,thisbarrierwasof
norelevance.
Theanalysesregardingthiseconomicbarrierdidnotproducetransferablefindingswithsignificancefor
thismultiple-casestudy.
5.2.5 Investment(Transaction)Costs
Thisbarrierimplies,thatanEEImeasurecanbeinhibitedorpreventedby...
...initiallyhighdesignandmanufacturingcostsforprovidinganEEtechnology.
TheoriginofthisbarriercanonlybelocatedoutsideoftheCustomerorganisation.Thereasonsforthe
occurrenceofthisbarrierlieinthetransactionitselfonthepartoftheotherstakeholders.
AccordingtoCagnoetal.(2013),thisbarrierislocatedatthefinalstageofthedecision-makingprocess
inEEIprojects(refertoFigure2-7,p.44).
This barrier was not addressed at all from the perspective of the Customers and only twice with
referencetoCases,oncefromthatofaTPForganisation(CaseA)andtheESCO(CaseD).Thesetwo
stakeholders also addressed further issues concerning this barrier with intrinsic relevance to the
researchquestions.
• CaseA:Aprojectstructureconsistingofthreestakeholders–duetotherequirementsoftheESCO–
wouldhaverequiredextensivecontractarrangements,especiallyonpartoftheTPForganisation:
03_T1:"[...]thecontractmodels,whichwouldalsohavemeantanoff-balance
solutionfortheCustomer,wereveryintensiveinreviewing,andintheendit[the
Customerorganisation]didnotwantthat.”
• CaseD:Thetenderingprocedureofthepublicauthoritiesconstituteda(potential)barrierforthe
ESCO:
08_E:“[...]Onebarrieristheincrediblyhighpre-productioncostswithwhichan
ESCOhastomakeanadvancecontributiontothedevelopmentofsuchaprojectina
callfortenders,forprojectdesignandallthesetopics.Thesearetheinitialcoststhat
arenotcoveredifthetenderisawardedtoanotherparty.[...].Wecushionthisby
tryingtogettheanalysespaidfor.[...].One[thetenderingCustomer]couldsay:ifI
havethree[bidders]inthecompetition,thethirdgets50,000EUR,thesecond
100,000EURandthewinner'sprojecthastocoverthat.Butthesemechanismsdonot
existinthepublicsector.Andtothatextentitisadifficultdecisiontoenteratender.”
• Furtherissuesconcerningthisbarrierwithintrinsicrelevancetotheresearchquestions:Further
issueswereraisedbyaparticipantoftheESCO,whoaddressedabarriertoESCO'sbusinessfrom
the fact thatCustomersused its expertise toultimately implement theEEIprojecton theirown
withoutcontractingtheESCO:
Chapter5:AnalysesandFindings
111
02_E:“Strongcompetitionwas,ofcourse,alwaysintheCustomer'sown
implementation.[...]Inthepast,Customersrepeatedlyhadtheprojectdesigndone
[bytheESCO],butattheendofthedaytheymadethedecisionfortheirownsolution
[withouttheparticipationoftheESCO].”
Moreover,fromtheperspectiveoftheparticipantsfromtheTPForganisations,thecomplexityon
thecontractualsideingeneralwasseenasmaindriverfortransaction-relatedcosts–alsoinrelation
tothevolumeofthepotentialEEImeasure:
03_T1:"Themorecomplexthestructureofaproject,themoreexpensivethedeal
becomes.Themorelong-termthisprojectis[...],themoreexpensivethefinancingwill
be.”
"Risksarisingfromsuchaprojectorinvolvedinsuchaprojectdeterminetheprice.”
“Manycompaniesarenotpreparedtodealwithsuchcomplexcontractual
relationships.Manycompanies–especiallyinthecommercialsector–areverymuch
concernedwiththemselves.[...].Ontheotherhand[...]itisanintellectualchallenge
toarrangeallthisinatax,legalandfinancialway.Thisrequirescertaincapacities,
andthesearenotavailableinmanycompanies,evenifwearetalkingaboutlarge
corporations.[...].Itmakesnosensetodiscusssuchcomplexcontractstructuresfor
[aninvestmentof]500,000EUR.Ifwetalkabouttwo,three,four,fiveandmore
millionEUR,thentheefforttoinvestsomuchatthebeginningisalsoworthwhile.”
06_T3:“Onepossibilitythatweofferandthatisparticularlysuitableforverylarge
projectsis[...]thatweourselvesformallyassumetheroleofcontractor,i.e.conclude
thecontractwiththeCustomerandsupplycontractswiththeESCO,whichisa
constructtostructureanoff-balancesolutiononbothsides.Thisiscontractuallyvery
complextoarrange;thereforeithashightransactioncostsandisonlyworthwhilefor
verylargeprojects.”
“AnESCOthatrequiresanoff-balancesolutionforitselfhascleardisadvantagesin
themarket.Notonlyfromthefinancingconditions,butalsofrominthestructuring
oftheproject.”
Referringtothisbarrier,influencesfromthesituationortheconstellationoftheactorsinvolvedwere
generally identified: With an off-balance solution, requested by both the Customer and the ESCO,
significanttransactioncostsarosefromcomplexcontractstructuresassociatedwiththis.
Asdescribedconcerningthetwobarriers‘1.ExternalRisks’and‘2.LowCapitalAvailability’above,this
barrierwasalsoundertheirindirectinfluence,sincecorrespondingeffectscouldleadtoacostsituation
underwhichtheintendedEEImeasurewasnolongereconomicallyprofitable.
Furthermore,thisbarrierwasnotofanygreatsignificance.
ThetransferabilityoftheresultsoftheanalysesofthiseconomicbarriertotheCaseswasasfollows:
Chapter5:AnalysesandFindings
112
Table5-38–TransferabilityofFindingsacrossCasesregardingtheeconomicBarrier‘Investment(Transaction)Costs’
TransferabilityofFindings
OutcomebyCase
A B C D E
IfonthepartoftheCustomeratenderprocedureischosenforprocurement,theEEIprojectcouldbeinhibitedbytheESCO'srefusaltoparticipateintheprocedureduetohighacquisitioncostsasup-fronttransactioncostsandtheirlackofcoverage intheeventofacontractnotbeingawarded.Thismeantabarrierfrom‘Investment(Transaction)Costs’.ContraryoutcomecouldbeobtainedacrossCases (no tenderprocedurewaschosenbytheotherCustomers,nosuchbarrierwasaddressedfromtheESCOfortheotherCases).
X
X X X X
If the Customer demands an off-balance solution, the EEI project could bepreventedduetothecomplexnatureofthecontractandthereluctanceoftheESCO to capitalise the fixed assets. Thismeant a barrier from ‘Investment(Transaction)Costs’.ContraryoutcomecouldbeobtainedacrossCases(nooff-balancesolutionswasdemandedbytheotherCustomers,nosuchbarrierwasaddressedfromtheESCOfortheotherCases).
X
X X X N/A
5.2.6 Intervention-relatedRisks
Thisbarrierimplies,thatanEEImeasurecanbeinhibitedorpreventedby...
...uncertaintiesininvestments,whichalwaysentailrisksofoperationalfailure;uncertaintiesalso
existwithregardtothedurationandavailabilityofEEtechnologiesandthelong-termavailability
ofcalculatedenergycostsavings,especiallyifthediscountratesforfuturecostsandbenefitsare
either lower than theavailablereturnon investmentswithcomparableriskorhigher than the
financingrateofthemeasure.
TheoriginofthisbarriercanbelocatedbothinternallyonthepartoftheCustomerandexternally(e.g.
withtheotherstakeholdersinvolved).
AccordingtoCagnoetal.(2013),thisbarrierislocatedatthefinalstageofthedecision-makingprocess
inEEIprojects(refertoFigure2-7,p.44).
ThisbarrieralsoplayedaminorroleintheCasesandwasagainaddressedfromtheperspectiveofthe
CustomersonlyinCaseD.
• CaseD:ThebackgroundforaddressingthisbarrierfromtheperspectiveoftheCustomerwasthe
needforunrestrictedsupplysecurityofthehospitalinconnectionwiththeimplementationofthe
EEImeasure:
09_CD:“Whatcannothappenunderanycircumstances–becauseweareinthe
healthsector–isthattherearesomenetworkfluctuations,networkfailures[ofthe
steamsupply].[...].Youcertainlyhavetoassesstheriskalittledifferentlyherethanif
youwereinafactorybuilding.”
“Sothequestionisreally,[...]canwecreateourownsupplynetwork?Willwebeable
togettheconnectionsrighttothesteamnetworksupply?Areweinapositiontotake
thesteamnetworkoffthegridbecausewehavea24-hoursupply?Sothesearethe
considerations.Imean,thesimpleoptionwouldreallyhavebeentoreplacethree
boilersandthatwasit.”
Chapter5:AnalysesandFindings
113
ThesituationthatatthetimeofdatacollectiontheEEImeasurewasstillatthebeginningofthe
projecttermandthattheexpectedeffectscouldstillberealisedmeantapossiblebarrierfromthe
perspectiveoftheCustomer:
09_CD:“Largeprojectsdon’tnecessarilygeneratebigprofitleapsrightfromthe
start,butIhavetogopartlyintopre-financinginordertoachieve[...]theefficiencies
inthefollowingyears.”
• Furtherissuesconcerningthisbarrierwithintrinsicrelevancetotheresearchquestions:Further
issueswerementionedbyaparticipantoftheESCO,whoconsideredthisbarrierofintervention-
relatedriskstobefundamentalintheeventthattheCustomerdidnotbelievethattheEEImeasure
wouldguaranteetheunrestrictedavailabilityofitsfacilities:
02_E:“Thepoint,ofcourse,is[...],iftherearetechnicaldifficultiesthatcanstopthe
productionprocess,theCustomerwillmakethedecision[tonotimplementtheEEI
measure]overnight.EEwillneverstopaproductionlineoranythinglikethat.”
Moreover,fromtheperspectiveofaTPForganisation,abarrierinthiscontextlaidaboveallinthe
usabilityoftheequipmentonceinstalledandfinanced:
03_T1:“We[...]aredealingwithobjectsthatarenotfungible[i.e.transferableor
usableinanotherproject],thereisalargeCHP,absorber,compressedairsystemor
boiler,wecanusuallynotusetheseobjectselsewhere[...].Ifyoualsoimaginean
energycentre,youhavethefixedassets[...],whichrepresentcertainvalues,which
areboughtbytheESCO.Butwealsotalkaboutcostsforplanning,development,
installationofpiping,partialconstructionwork.[...]Inotherwords,ifyou’retalking
aboutaCHPprojecttoday,let’sassumethatwe’retalkingaboutfivemillionEURof
investmentcosts,thenwe’retalkingaboutamillioneurosthataren’tworthanything
inthecaseofcases[i.e.intheeventofafailureoftheCustomerorganisation]that
simplygoupinsmoke.SoIdon’thaveanyvalueinreturn[...].”
InthecaseoftheTPF3basedontheEEIfunds,specificrequirementshadtobemetfromthefunds
prospectus:
06_T3:“Wealwayshavetodemonstrate[toinvestors]thatenergyandCO2willbe
savedfortheproject[...].”
With this barrier, once again no influences from the situation or constellation of the stakeholders
involvedwereidentifiedintheCases.Althoughaspectsofthisbarrierwereaddressedbyparticipants
fromallthreestakeholders,itwasstillnotconsideredtobeverysignificant.
Theanalysesregardingthiseconomicbarrierdidnotproducetransferablefindingswithsignificancefor
thismultiple-casestudy.
5.2.7 UncoveredIssues–ComplementaryeconomicBarrier
IssuesmentionedintheinterviewsinhibitedorpreventedtheimplementationofEEIprojectsinterms
ofcontentbutcouldnotbesubsumedunderanyoftheeconomicbarriersoftheframeworkofCagnoet
Chapter5:AnalysesandFindings
114
al. (2013), thus from the researcher's opinion represented an economic barrier. These issues are
structuredandexplainedbelow.
TheupcomingintroductionofthenewstandardIFRS16withthemandatoryrecognitionofrightsofuse
onthebalancesheet(especiallyinconnectionwithleasefinancing)atthetimeofdatacollectionresulted
inexpected thoughunintendedadjustments– i.e.extensions– to thebalancesheetsofStakeholders
CustomerAinCaseAandtheESCOinCaseD,whowererequiredtoapplythisstandardduetotheir
affiliationtogroupstructures.IntheopinionoftheTPFparticipants,thepossibilityofajointoff-balance
solutionforbothstakeholdersCustomerandESCOwithintheframeworkofathree-partycontractcould
nolongerbeassumedinfuture.TheextenttowhichthissituationwouldaffectfutureEEIprojectswas
notforeseeableatthattime.
TheoriginofthisbarriercanbelocatedbothinternallyonthepartoftheCustomerandexternally(e.g.
with the ESCO involved). As this issue is amatter of principle and independent of the specific EEI
measure,thisbarrieristobelocatedataveryearlystageofthedecision-makingprocessinEEIprojects
(concerningthesestagesrefertoFigure2-7,p.44).
Forthisissues,aswell,thesignificantimportancefortheCasesofthismultiple-casestudy,aswellasfor
the ESCO involved in general, applies. Due to this significance of these issues subsumed in this
provisionalbarrierfortheEEIprojects,anattemptwasmadetoestablishacomplementarybarrierto
the area of economic barriers according to the framework of Cagno et al. (2013) – ‘7. Accounting
Standards’.
FromtheperspectiveoftheCustomers,thisbarrierwasaddressedinCaseA.AparticipantfromtheTPF
organisationsaddressedissuesconcerningCaseB,onefromtheESCOconcerningCaseD.
• CaseA:CustomerAwastheonlyCustomerorganisationthatprepareditsfinancialstatementsin
accordancewith the accounting standards of IFRS in addition to those of the GermanHGB (for
definitions anddetails of key terms regarding accounting standards refer to glossary, p. 16 and
following). The introduction of IFRS had an impact on all new ES contracts to be concluded
throughoutthegroupandthusalsoonESCO'spotentialbusiness.
07_CA:“Itisnotanisolatedcaseinthegroup[thisformofES,wheretheESCO
capitalisesthefixedassets],wehavealmostexactlythesameconstellationsattwo
otherlocationsofthecompanyandalsoatothercompaniesofthegroup.Here,too,
thismodelhasbeenrunningsincetheendofthe1990s.Thecurrentmodelisnot
transferabletootherlocationsagainstthesimplebackgroundthatthelegalsituation
hascompletelychanged.Atthetime,westructuredtheEScontractsinaccordance
withtheHGB,butunfortunatelythisisnolongerpossibleduetotheapplicationof
IFRSinourGroup.[...].Inotherwords,ifyouwantedtotakesuchastepagain[to
arrangeanEScontract],youwouldbeputtingitonacompletelydifferentfooting.
ThismeansthatyouwouldnolongerhavetodoclassicESwithoutsourcing,butin
caseofdoubtyouwouldhavetomakeapureservicecontractorperhapsthinkabout
amodelinthecombinationofserviceandfinancing.”
Chapter5:AnalysesandFindings
115
“Icanimaginethatinmanyplacesithasactuallyalreadyhappenedthatway,that
onesaid,wedissolvealltheseconstructs,wedon'tcareaboutthecapitalisationin
themeantime,furthermorethetaxauthoritiesforceusafterwardssomehowto
capitalisemorestrictlythanwestillhadtointhepast[...].”
• CaseB:TheparticipantofaTPForganisationwasinvolvedintheplanningandcontractnegotiations
forthepotentialextensionoftheenergycentre.Inthiscontext,hewasalreadyawareoftheESCO's
corporatepolicyregardingtheundesiredcapitalisationofthefixedassets:
03_T1:“TheESCOhadnointerestincapitalisingsuchavolume–Ithinkwetalked
aboutfourmillioneuros.”
• CaseD:OneESCOparticipantexpected tohavean impacton theESCO’sbalance sheet from the
introductionofIFRS16.AtthetimeofdatacollectionfixedassetswereinlegalownershipoftheTPF
andeconomicownershipoftheCustomer:
01_E:“[IFRS16]willhaveanimpactandIassumethatwewillhaveaproblemthere
–wewillprobablyhavetocapitaliseit[thefixedassets–orrightsofuse,receivables
andliabilitiesundertheleasecontract]then.”
• Furtherissuesconcerningthisbarrierwithintrinsicrelevancetotheresearchquestions:Further
issueswereraisedbyparticipantsoftheESCO,aswellasoftheTPForganisations.Bothstakeholders
attachedgreatimportancetotheissueofcapitalisationunderIFRS16:
01_E:“Then,ofcourse,therearetheaccountingissues,bothwiththeCustomersand
withus.Therearerestrictionsthathavetobeobservedconcerningcapitalisation[...].
Asarule,thisisthat[...]anattempthasbeenmadetofinanceeverythingoff-balance
asfaraspossible.”
“Theactualsituation,asIsaid,isthatwedon'thavecapitalisedthethings[thefixed
assets]atthemoment.Andwiththisamendment,asIunderstoodsofar,the
contractswillberevaluedby2019atthelatest.Andthenwewillcertainlyhave
issuesthatwillspilloverintoourbalancesheetsbecausetheyaresimplythere.We
willnotbeabletopreventthat.”
“SincetheseregulationsareformulatedveryrestrictivelyinIFRS,therewillnolonger
beanydistinctionbetweenformsoflease.Instead,leaseisleaseandmustbe
capitalised.Thatisbasicallytherequirement.Inthisrespect,wewillnotbeableto
preventsomethingfrombeingcapitalised.Myexpectationis,sinceitaffectseveryone
equally,thattherewillalsobearethinkhere,becauseultimately,ifeveryoneinsists
ontheiroldprinciplesandsaysthatInolongerwanttocapitaliseit,thennobodywill
makethisinvestmentanymore.Soifourcorporatepolicyremainsthatwedonot
capitalise,wewillhavemajorproblemsinofferingourmodelstoCustomersinthe
future.ProbablytheCustomerdoesnotwanttocapitaliseiteither.Somewherea
rethinkingmusttakeplace.Butforthetimebeing,thesituationfromthisnew
standardissuchthatwedonotyethaveasolutionforthefuturedesignofthe
existingthree-partymodel.”
Chapter5:AnalysesandFindings
116
“Currently,inthethree-partymodel,theTPForganisationcancapitalise[thefixed
assets].Inmyunderstanding,IFRS16willresultineithertheCustomerorwe[the
ESCO]havingtocapitalisethefixedassetsinaddition.Myperceptionisthat[...]our
classicCustomeroftenfollowsIFRSstandardsandwewillthereforehaveaproblem.
Especiallylargecorporationshavetoapplyit[thisstandard],sointhisrespectwe
willdefinitelyhaveproblems.AndwealsohaveexistingCustomerswhoareaffected.”
“WhethertherewillalsobearethinkonthepartoftheCustomer,whowillthensay
‘yes,ifIhavetocapitalisethisanywaynow,thenInolongerneedthewholeES
solution’.Thatcouldalsobeaconsequenceofthat.Itisnolongerpossibletoconvert
afinanceleaseintoanoperateleaseusingcertainconstructs,butitisnowbeingsaid
thateverythingthathastodowithleaseisleaseandmustbecapitalised.Thatisalso
aclaritythathasbeencreated.Tothatextent,it'snotthatbad.Ofcourse,itisnot
goodforthosecompaniesthatarenegativelyaffectedbecausetheirmodelisatrisk.I
canimaginethat[atTPForganisations]thereisalotofactivityatthemoment
workingonnewmodels,howthiscircumstancewillbedealtwithnow.Itiscertainly
alsoveryinterestingforwholebranchesofindustry.”
02_E:“IfyouhaveasingleCustomerandyouupdateorrebuildtheenergycentre,
youdefinitelyhavetoreorient.Becauseitwillbethecasethatwiththeright-of-use
approachinIFRS16,onewillgetthefixedassettocapitalise,notathirdpartywho
couldbethebank,forexample.Thatwillnolongerwork.”
08_E:“SowehaveaTPForganisationthatfinancesindifferentways.Becauseofour
owncorporatepolicy,wecanonlyfinancethroughleasecompaniesbecausewedon't
wanttocapitalisethefixedassetsourselves.What[...]meansabarrierforus,because
wehavetobuildtheplanttobeleasable.Thismeansitmustbemobile.”
“Wedonotwanttocapitaliseitbecauseitisourcorporatepolicy.Inprinciple,an
ESCOcanofcoursecapitalise[thefixedassets].IfIdobusinesswithenergy,thenI
canalsoowntheequipment.Itisnotdisadvantageous.Butwesaidwedon'twantto
capitaliseit.TheTPForganisationintheleasesectornaturallywantstocapitaliseit,
that'squiteclear.Becauseleasebusinessmoreorlesslivesfromfixedassets.[...].
ThentheCustomersremain,andofcoursetherearequitedifferentones.Thebig
shareholder-drivencompaniesdon'twanttocapitaliseitalso.Leasemodelslikethis
comeinhandy,andthat'sveryconvenientforthem.Amedium-sizedowner-managed
company,ontheotherhand,hasnoproblematallwiththis[capitalisation].If,for
example,itpaysthreemillions[EUR]forequipment,whyshouldn'titcapitaliseit?”
03_T1:“IFRS16statesthat[leasedassetssubjectto]along-termlease[...]mustbe
capitalisedbythelessee[i.e.theCustomerortheESCO].[...]Thisisanabsolute
problemareainourfieldofenergytechnologyequipment,becauseanessential
motiveforbothESCOanditsCustomersisanoff-balancesolutionin[achieving]
savingseffectsfromtheuseoftheseenergytechnologyequipment.”
Chapter5:AnalysesandFindings
117
“Onepossibilitytogetanoff-balancesolutionaccordingtothecurrentstatus
[accordingtoIFRS16]wouldbetoactwithanopenresidualvalue,whichwehave
excludedforenergycentres.[...]TheCustomerleasestheenergycentreandpaysthe
leaseinstalment.Attheendofthecontractterm,I[theTPForganisation]havea
residualvalueopenwiththerefinancerthathasnotyetbeenamortisedandIhaveno
obligationontheCustomertocontinuetoleasetheassetandpaythelease
instalments.Therefore,Ihavetoamortise[theresidualvalue]eitherthroughfollow-
upleaseorfromthesaleofthefixedasset.Weseedifficultiesinthis,becausethe
objectsarenotfungibleornotfungibleenoughandarealwaystailoredtothe
Customerandyoucannotdismantletheplantand300kilometresfurtherexactly
identicalrebuild.Therefore,wedonotenterintoanyopenresidualvalues.”
“SoIthinkwithIFRS16itwon'tbeeasierwiththeoff-balancetopic.Onthecontrary.
Weseealotmoreproblemscomingourwayacrossallassetclasses.Themaintopicis
thatoff-balanceisinprincipleonlypossiblewhenitcomestolow-budgetassets,as
theyarecalled(upto5,000dollarsorEUR).Ionlyhaverealrentswithtermsofupto
12monthswithoutafinalsettlement.Idon'tthinkthatIFRS16willmakeitany
easierfortheenergycentreassetclass.Onthecontrary,itbecomesmuchmore
difficult.”
06_T3:“Youalwayshavetolookunderwhichaccountingstandardwhichpartyis
under–soitislocalaccountingstandardofGermanHGB,oritisIFRSbecausethe
accountingstandardsdiffer.UnderHGBitismucheasiertostructureanoff-balance
operateleasethanunderIFRS.Inmyopinion,oneofthebigbarriersiswhythereare
noverylargeprojectsinthemarket,becauseitsimplycostsalotoftime,oritisvery
difficulttofindariskdistributioninwhichallthreepartiesarecomfortable,andthat
wouldbeanoff-balancesolutionfortheESCOandtheCustomerunderIFRS.”
“IfbothpartiesreportunderIFRS,thisassumesthat[thelease]isclassifiedasa
financeleasesothatitisoff-balancefortheESCO,andthisalsomeansthatthe
Customerwouldthenclassifythecontractasafinanceleaseandthenhaveto
capitalise[thefixedassets].”
“AweakCustomerorganisationwillalwayspreferanoff-balancesolution,becauseit
doesnotgetsocheapmoneythroughitson-balancesolution–orbecauseanon-
balancesolutionwouldinfluencethecovenants(i.e.creditprotectionclauses)ofits
existingcreditors.Thisinturnwouldincreaseitsborrowingcosts.”
“Yes,wehaveoftenexperiencedthatlargerprojectsinparticulararenotrealised
becausethereisnooff-balancesolutionforthepartiesinvolved[...].Sotheclassicis,
howdoIgetacontractoff-balance:Iletitrunforonlyoneyear,orthereisanannual
rightofterminationwithoutcompensation,thenitisanoff-balancecontract.But
thenyouhavetohaveagoodrelationshipwithyourCustomerinordertoenterinto
this.”
Chapter5:AnalysesandFindings
118
“Itisdifficulttopredicthowthedecision-makersattheCustomerseethis.[Itwould
bepossible]tostructureEScontractsthatareoff-balancefortheCustomer,butthen
theyarenotoff-balancefortheESCOandthatofcoursecreatesanopportunityfor
smallandmedium-sizedESCOs,forwhomanoff-balancesolutionisnotimportant,to
gainmarketshare.Iftheygetaccesstocapitaltocarryoutprojectsandmanageto
defineanEScontractthatisoff-balancefortheCustomer,thenthisisdefinitelya
modelthatcanthenassertitselfinthenewworldfrom2019withoutoperatelease
[withIFRS].”
“IwouldsaythatanESCOthatrequiresacompellingoff-balancesolutionforitself
hascleardisadvantagesinthemarket.It'snotjustthefinancingconditionsthat
makeitexpensive,butalsothewaytheprojectisstructured.”
Therewasnoconnectionbetweentheseissuesandanotheroftheeconomicbarriers.
ThetransferabilityoftheresultsoftheanalysesofthiscomplementaryeconomicbarriertotheCasesis
asfollows:
Table5-39–TransferabilityofFindingsacrossCasesregardingthecomplementaryeconomicbarrier‘AccountingStandards’
TransferabilityofFindings
OutcomebyCase
A B C D E
IfaCustomeraccountedinaccordancewithIFRS,thishadnegativeeffectsonopportunities or willingness for capitalisation. This meant an economicbarrierissue,setaseconomicbarrier‘AccountingStandards’.Contrary outcome could be obtained across Cases (HGB is accountingstandardusedbytheotherCustomers).
X
X X X N/A
5.3 SummaryofChapter5
In this chapter the findings from the various analyses of this qualitative multiple-case study were
reported.Therichnessoftheunderlyingdatawasunderpinnedbyillustrativequotations.Accordingto
the researchphilosophyof interpretivismand the inductive approachof this qualitative-explorative
research,theaimwastobetterunderstandthephenomenonofeconomicbarrierstoESandEEIprojects
inGermanindustrialsector.
Themainpurposeofdiscussionandconclusioninthenextchapteristoanswertheresearchquestions
toachievetheresearchobjectivesbasedonthefindingsderivedfromtheanalyses.
119
Chapter6: ResearchSummaryandConclusion
In thischapter, theresearchquestionswillbeansweredandconsideredwithregard to their role in
closinggapsidentifiedfromtheliteraturereview.Recommendationsbasedontheresearchobjectives
andthecontributionofthisresearchtothebodyofknowledgewillbeconcluded.Finally,limitationsand
emergingopportunitiesforfutureresearchwillbepointedout.
6.1 DiscussionofFindingstoanswertheResearchQuestions
TheliteraturereviewrevealedthatnopriorresearchhasbeencarriedoutoneconomicbarrierstoES
andEEIprojectsinGermanindustrialsector–inparticularfromaholisticapproachthatincludesthe
perspectivesofallstakeholdersinvolved,ascanbedonethroughamultiple-casestudy.Thisresearch
wasdirectedtoclosethesegaps.
Theuse of themultiple-case study research strategymade it possible to obtain transferable results
whosecredibilitywasunderpinnedbycarefullycollecteddata.
Thisresearchinparticularaimedtounderstandindepththesignificanceoftheseeconomicbarriers,the
role and importance of ESCOs in relevant EEI projects, and the influencing factors from specific
stakeholdersituationsandconstellations,inordertodeveloprecommendationsforpolicyandpractice
toovercomethesebarriersand(whereappropriate)furtherdevelopexistingconceptualframeworksin
theareaofeconomicbarriers.
Withregardtotheresearchobjectives,threeresearchquestionswerederived.Inordertoanswerthese
questions,theconditionsthatinhibitorpreventtheimplementationofEEImeasuresinGermanindustry
arediscussedbelowasaresultoftheanalysesofthisresearch.
6.1.1 ResearchQuestiona)
‘WhicheconomicbarriersforESandEEIprojectsforCustomersfromindustrialsectorinGermanycanbe
identifiedassignificant?’
EachofthebarriersoftheeconomicareaoftheframeworkofCagnoetal.(2013)wereaddressedbyat
leastoneparticipantwithintheCasesofthemultiple-casestudy.Eventhoughtheresearchapproachdid
notaimtoexposearankingorderwithinthesenominations,significantaswellasinsignificantbarriers
couldbecontrasted.Thefollowingbarrierswereidentifiedasbeingsignificant:
• ‘1.Externalrisks’;
• ‘2.LowCapitalAvailability’;
aswellasacomplementarybarriernotcoveredbythisframeworkandhenceintroducedas
• ‘7.AccountingStandards’.
Atleastinpart,theseresultscorrespondedwithfindingsintherelevantliterature(refertoTable2-6,p.
26andfollowing),concerningotherregionsormarketsectors.
Chapter6:ResearchSummaryandConclusion
120
Thebarrier...
• ...'1. External Risks' has been identified as significant in some papers (Kamenders et al. (2018),
Marino et al. (2011), Stede (2017)), orwas listed (Busch andLagunesDiaz (2013),Nolden and
Sorrell (2016), Polzin et al. (2016a)), partly under alternative designations orwith only partial
aspectsconcerningthespecificationofthisbarrierfromCagnoetal.(2013);
• ...'2.LowCapitalAvailability'hadvariableimportanceintheliterature:thehighestwasinPätäriand
Sinkkonen(2014), followedbyHannonetal. (2015),Kamendersetal. (2018)andStede(2017).
However,thisbarrierplayedonlyaminorroleinotherssuchasBertoldietal.(2014),Kangasetal.
(2018),Kindströmetal.(2016)andVirtanenetal.(2014),orwasabsent;
• ...‘7.AccountingStandards’wasnotevenidentifiedinanyofthepapersfromacademicaswellas
grey literature. Only the barrier issue ‘Complex Accounting/Book Keeping’ (Busch (2013),
Kamenders et al., 2018)) was already mentioned in literature – with minor importance.
Nevertheless, corresponding issues may be subsumed to this complementary barrier in future
research.
Thereasonfortheemergenceofthebarrier'1.ExternalRisks'wasuncertaintyconcerningthevolatility
oftheprimaryaswellasfinalenergyprices(perceivedashighbytheparticipantsconcerned)onthe
onehand,andthefuturelegislativedevelopmentswithregardtotheEEGandtheKWKGontheother.
Inparticular,theconcernfromtheCustomerperspective,thattheconditionsexistingatthetimeanEEI
measurewasimplementedwouldnotbeprotectedfortheentiredurationoftheprojectpreventedthe
implementationofapossibleEEImeasure.
Thesignificanceofthebarrier'2.LowCapitalAvailability'wasbasedonvariouscauses.Inadditionto
thecredit-worthinessoftheCustomerandtherequirementsofcollateralisation,financingdurationand
volume(inthecaseoffinancingfromtheCustomer'sownfunds)aswellasrefinancingwereproblem
areasthatinhibitedandintwoCasesevenpreventedtheimplementationofpotentialEEIprojects.TPF
organisedbytheCustomerreducedthepossibleESscopecontractedbytheESCO.
Asthelastofthesignificantbarriers,thebarrier‘7.AccountingStandards’onlyaffectedorganisations
forwhich– inadditiontoHGB– IFRSwasarelevantaccountingstandard.This isexpectedtoaffect
organisationsintheindustrialsectorinparticular,astheyaremostlikelytohavetheappropriategroup
structures.Participants fromallstakeholdersattachedgreat importancetothisbarrier,althoughthe
IFRS 16 standard was newly introduced at the time of data collection. Among other things, the
introductionof thisstandard led toaCustomer terminating theEScontractual relationshipwith the
ESCOand–asanalternativetotherequiredbalancesheetdisclosureofusagerights–takingoverthe
fixed assets as well as (in accordance with the relevant contractual arrangements) the associated
employeesoftheESCO.
6.1.2 ResearchQuestionb)
‘How do specific stakeholder situations and stakeholder constellations influence the emergence and
significanceofeconomicbarriers?’
Chapter6:ResearchSummaryandConclusion
121
The situation of individual stakeholders as well as their contractual constellation obviously had
influenceontherealisationandperformanceofEEIprojects:
• As explained in the previous subsection, the policy of the ESCO of excluding the financing and
capitalisationoffixedassetsfromthescopeofESofferedhadanimpactontheprojectstructure–
thestakeholderTPForganisationwasrequiredtofinancetheassetstobeinvested.IftheCustomer
couldnotordidnotwanttofinancetheprojectfromitsownresources,athree-partyconstellation
became mandatory, hence lease, forfeiting or hire purchase were the only available financing
methods supported by the ESCO. If the Customer was not willing to accept such a three-party
constellation,thepotentialEEIprojectcouldnotberealised;
• DuetothisneedforTPFfinancing,theissuesofcredit-worthinessoftheCustomerorganisationand
possible collateralisation for the equipment to be financed became a major importance. These
requirementshadtobemetbytheCustomerinordertoobtainfinancingfromtheTPForganisations,
whichhadtoensurecomplianceduetoregulatoryorstatutorystandardsmuchmorestronglythan
theESCOinformerprojectsbyfinancingfromownresources;
• Thisincreaseincomplexity,alsointhestructureofcontracts,ledtoanincreaseintransactioncosts,
whichultimatelyburdenedtheprofitabilityofanEEIprojectandpossiblyeveneliminatedit;
• ItwasfoundthatEEImeasuresthatwereeligibleforsubsidiesfromKfWBank(e.g.becausethey
wereintegratedintolargerinvestmentprojectsandlinkedtoloanfinancing)couldnotbefinanced
bytheESCOorthroughtheTPFavailabletoit.ThisalsoledtothereductionoftheESscopedescribed
intheprevioussubsection.Inaddition,itturnedoutthatduetothetenderingoftheoverallmeasure
which became necessary in connection with the subsidies, suboptimal EEImeasures (i.e. those
which do not fully exploit the existing EEI potential) could systematically be selected and
implementeddependingonthetenderingcriteriafocussingonthelowestcostsand/orinvestment
volume;
• ThisissueinconnectionwithtenderingbytheCustomerforEEIprojectswasalsoevidentinthe
publicsector,whichingeneralhavetofollowthispathforsuchprojects;
• Theaimofthestandard-settingbodyforIFRS,toeliminatethepossibilityofdesigningoff-balance-
sheetsolutionsthroughtheintroductionoftheaccountingstandardIFRS16andthecorresponding
allocationofeconomicownership(e.g.vialeaseagreements),resultedindifferentexpectationsand
intentionsonthepartofthestakeholdersinvolved.WhiletheESCOinitiallyexpectedtheneedto
capitaliseadditionalfixedassetsorrightsofuseandfearedthattheacquisitionoffutureprojects
wouldbeimpairedifthecorporatepolicyremainedunchanged,theCustomer,whoalsowasaffected
bytheintroductionofthisstandard,wentonestepfurtherandfundamentallyquestionedtheES
modelinconnectionwiththeESCO.
6.1.3 ResearchQuestionc)
‘WhatpreventsESCOsfromavoidingorremovingtheseeconomicbarriersthatinhibittherealisationand
developmentoftheirbusinessandwhichmeasures(e.g.policy,businesspractice)couldhelptoovercome
thesebarriers?’
Chapter6:ResearchSummaryandConclusion
122
SomeofthebarriersidentifiedasimportanttotheESCObusinesswereoutsideitssphereofinfluence
andcannotbeproactivelyovercome:
• Energyprices–especiallywithregardtothevolatilityonglobalcommoditymarkets;
• Accountingstandards–especiallywithregardtoIFRS16newlyintroducedfromtheinternational
standardsettingbody.
Atleastinpart,barriersfellwithinthepoliticalframeworkofthelegislationoftheFederalRepublicof
Germany and were thus also outside the productive influence of the ESCO, but at least within the
competenceoftheunitresponsiblefortheNEEAP:
• Energy legislation – especially with regard to EEG levies and feed-in tariffs as well as KWKG
bonifications;
• Tendering–especiallywithregardtoproceduresandcriteria,relevantforpublicauthoritiesand
subsidyrecipients.
However,barrierissuesidentifiedasimportantfortheESCOunderstudyresultedfromitsownsphere
ofinfluence:
• Corporatepolicy–ESwasnotthecorebusinessofthegroupofcompaniesoftheESCO,furthermore
itsbusinessdifferedsignificantly from the specificsof its sisterorganisations.These included in
particular:
o Financing;
o Capitalisation.
Fromachangingcorporatepolicy,theinitialroleoftheESCOasakeyplayerinEEIprojectshadbeen
reducedtothatofaplanner,constructorandfacilitymanager,withcorrespondinglyshortercontract
terms,expectedbroadercompetitionfromspecialisedorganisationsfromtherespectivedisciplines
aswellaslowerCustomerloyalty.TheseissuesalsoweakenedESCO'sacquisitioncapabilitiesfor
futureESprojects.
6.2 RecommendationsforPolicyandPractice
Fromtheanswerstotheresearchquestions,thefollowingrecommendationswerederivedforpolicy
andpracticeoftheESCOinordertoovercomethesebarriersinlinewiththeresearchobjectivesand
thusclosethe‘EnergyEfficiencyGap’andpromotethedevelopmentofGermanESCObusinessactivities:
• Policy: inorder toachievethegoalofexpandingEStoachievereductionofenergyconsumption
concerningtheGermanNEEAP,thefollowingrecommendationswerederivedonthebasisofthe
resultsgainedbythisresearch:
o SafeguardingofthestatusquoofenergylegislationwithregardtoEEGlevies,feed-intariffsand
KWKGbonificationsinordertocreateasufficientlyreliablebasisfordecision-makingonthe
necessaryinvestments–atleastforexistingmeasures;
o Establishmentofnationalbalancingmeasures at volatileprimary and final energypriceson
international markets (especially on the basis of fossil energy resources) in order not to
endangertheefficiencyofEEImeasurementsbyunfavourablepricedevelopments;
Chapter6:ResearchSummaryandConclusion
123
o Establishment of subsidy programmes which do not require (counterproductive) tendering
mechanismsandthatpossiblypreventthemostefficientEEImeasure,unlessitistheonewith
thelowestcostsand/orthelowestinvestmentvolume.
• Practice: in order to foster a successful business development for the ESCO, the following
recommendationswerederivedonthebasisoftheresultsgainedbythisresearch:
o ItisimportantfortheESCOtoavoidadirectcompetitionwithspecialistsinthefieldsofplanning,
plant construction or facility management due to self-inflicted restrictions on a non-
comprehensive or insufficient scope of ES; comparatively longer contract terms with
corresponding customer loyalty appear to be enforceable only in connection with a
comprehensivescopeofEScontracted;
o Opportunitiestogainaccesstosubsidiesthroughthechoiceofeligiblefinancingmethodsare
crucialinordertoprevailovercorrespondingproprietarysolutionsontheCustomerside;
o InconnectionwithIFRS16,theavoidanceofcapitalisationof fixedassets(orrightofuse) is
likelytobecomelessimportantforGroupcompanies(towhichIFRSarepresumedtoapply)on
theCustomer side. So far, off-balance solutionshavebeen important.The issueof financing,
however,remains.Three-partysolutionswithcorrespondingtransactioncostsputtheESCOat
a competitivedisadvantagecompared toESCOs,whichcan finance the investmentmeasures
withtheirownresources.Thisfinancingmethodshouldbesought;
o Uncertaintydueto(perceived)externalrisksontheCustomerssidelimitsthepossibilitiesof
futureEEIprojects.Byassumingthese–especiallyenergyprice–risks,potentialforfurtherEEI
projectscanbetapped.
6.3 ContributionstoKnowledge
Thisresearchcontributestoknowledgebyprovidinganin-depthstudyoneconomicbarrierstoES.
Withtheholisticapproachofamultiple-casestudy,inwhichallperspectivesofstakeholdersinvolved
werecaptured,thisstudyfilledidentifiedgapsonthisissue.Furthermore,amethodicalcontributionis
madewithregardtoresearchonbarrierstoEE.Withthisapproachitwasalsopossibletodeepenthe
understandingofthecomplexityresultingfromthestakeholderconstellationinEScontracts.
This research is relevant because the urgent issue of EE for achieving the reduction of energy
consumption,isgivenspecialimportancebytheUN,theEUandalsotheFederalRepublicofGermany–
and ES are considered to be an essential element in this context. Recommendations for policy and
practicetoovercomethesebarrierswereprovidedintheprevioussection.
Thisresearchalsomakesanimportantcontributiontotheconceptualframeworkofeconomicbarriers
toEEandESbyestablishingabarrierthathasnotyetbeenconsideredbutwillprobablybesignificant
in the future–asproposedbyCagnoetal. (2013)asanobjectof futureresearch.Amissingbarrier
‘AccountingStandards'wasassigned.
Inthefollowing,thisnewbarrierisaddedtotheeconomicbarriersystemofCagnoetal.(2013):
Chapter6:ResearchSummaryandConclusion
124
Table6-40–ComplementedBarrierFramework–Addingthe'AccountingStandards'BarrierBasedonCagnoetal.(2013)
Area Barrier OriginThisbarrierimplies,thatanEEImeasure
canbeinhibitedorprevented…
ECONOMIC
1.ExternalRisks External
...bythecausesprovidedfromCagnoetal.(2013)
2.LowCapitalAvailability Internal
3.Interventionnotsufficientlyprofitable Internal/external
4.HiddenCosts Internal/external
5.Investment(Transaction)Costs External
6.Intervention-relatedRisks Internal/external
7.ACCOUNTINGSTANDARDSInternal/external
...byAccountingStandards,providedthatthe
underlyingEEImeasureandanyrelated
fundingwouldrequireunintendedrecognition
onthebalancesheet.
6.4 LimitationsandOpportunitiesforfutureResearch
Thelimitationsofthisresearchprovidepathsforfutureresearch:
• BasedonexistingcontactsoftheESCOunderstudy,theCustomerperspectivewascoveredprimarily
forEEIprojectsthatweretoenterintoeffectorhadalreadyentered.Thismeansthatfundamental
economicbarriers–whichnotonlyinhibitbuteffectivelypreventtherealisationofanEEIproject–
weresystematicallyexcluded.Theresearcheronlybecameawareoftheterminationofthecontract
inCaseAandthestoppingofthepotentialprojectinCaseBaftercompletionofthedatacollection
phase.OnlytheperspectivesoftheESCOandtheTPForganisationswerecapturedwithregardto
one project that did not come to effect (Case E) – the researcher was unable to contact the
correspondingpotentialCustomerorganisation.
• ThecentralelementoftheCasesunderstudywastheESCOorganisationinwhichtheresearcher
wasemployedatthetimeofdatacollection.ThisESCOwasanaffiliateofaninternationalgroupof
companies.Thisconstellationinfluencedvariousbarriersbymeansofthecorporatepolicy,e.g.on
financingandcapitalisation.Itcanbeassumedthattheanalysesofthesituationofanindependent
ESCOorganisationcanprovideotherfocalpoints.
• TheconsiderationsofthisresearcharelimitedtothesituationinGermanywiththeconditionsand
possibilitiesofthelocalNEAAP.ItcanbeassumedthatotherEUmemberstatesdefineddifferent
policy instruments topursue theobjectivesof therespectiveNEEAPsand that thesehave led to
differentsituationsforthestakeholdersofrespectiveEEIprojects.
• Furtheranalysisof theaddedbarrierof ‘AccountingStandards’ isneeded.Thisalso includes the
impactoftheintroductionoftherecentlyreleasedaccountingstandardIFRS16,whichwillbecome
mandatoryonlyafterthedateofdatacollection,astheeffectsofitsapplicationcouldnotyetbethe
subjectofthisresearch.
• Finally,thisresearchislimitedbytheuseofthemultiple-casestudyapproach.Furtherresearchis
encouragedusingquantitativemethodstotestthereliabilityandvalidityofthefindings.
125
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133
Annex
A BarrierFrameworks Pagesi–xii
B InterviewSchedule Pagesxiii–xxiii
C ConsentForm Pagexxiv
Annex
i
A BarrierFrameworks
Thefollowingtablesconcerningbarrierframeworkscontain–asfarasapplicable–contrastedtothe
BarrierFramework6–Cagnoetal.(2013).
A.1 BarrierFramework1–HirstandBrown(1990)
A.2 BarrierFramework2–Weber(1997)
A.3 BarrierFramework3–Sorrelletal.(2000)
A.4 BarrierFramework4–DeGrootetal.(2001)
A.5 BarrierFramework5–Thollanderetal.(2010)
A.6 BarrierFramework6–Cagnoetal.(2013)
A.7 BarrierFramework7–Reddy(2013)
A.8 BarrierFramework8–Vogeletal.(2015)
A.9 BarrierFramework9–Stede(2017)
Annex
ii
A.1 BarrierFramework1–HirstandBrown(1990)
TableA-41–BarrierFramework1:Barriers,structuredaccordingto‘Types’BasedonHirstandBrown(1990)
Type Barrier
Thisbarriercorresponds–concerning
theframeworkofCagnoetal.(2013)–
tothebarrier…
Structural
DISTORTIONINFUELPRICES EXTERNALRISK
UNCERTAINTYABOUTFUTURE
FUELPRICESEXTERNALRISK
LIMITEDACCESSTOCAPITAL LOWCAPITALAVAILABILITY
Governmental,fiscalandregulatorypolicies
Lackofinterestinenergyefficiencyinterventions
CodesandStandards Technologiesnotadequate/notavailable
SupplyInfrastructureLimitations Technologiesnotavailable
Behavioural
AttitudestowardEELackofinterestinenergyefficiencyinterventions
PERCEIVEDRISKOFEE
INVESTMENTINTERVENTION-RELATEDRISK
InformationGaps Lackofinformationoncostsandbenefits
MisplacedIncentives Divergentinterests
Annex
iii
A.2 BarrierFramework2–Weber(1997)
TableA-42–BarrierFramework2:Barriers,structuredaccordingto‘Types’BasedonWeber(1997)
Type Barrier
Thistypeimplies,thatanEEImeasure
canbeinhibitedorprevented–
bybarriersemerging…
Thisbarriercorresponds–
concerningtheframeworkof
Cagnoetal.(2013)–tothe
barrier…
Institutional
###Notsubjectmatter###
…frompoliticalinstitutions,i.e.stategovernmentandlocalauthorities
###Notsubjectmatter
###
Market…frommarkets,or…frommarketfailure
Organisational …withinorganisations,especiallywithinfirms
Behavioural …insideindividuals
Annex
iv
A.3 BarrierFramework3–Sorrelletal.(2000)
TableA-43–BarrierFramework3:Barriers,structuredaccordingtounderlyingTheoriesand‘Perspectives’BasedonSorrelletal.(2000)
Sub-DivisionofPerspective Barrier
Thisbarriercorresponds–concerningthe
frameworkofCagnoetal.(2013)–tothe
barrier…
a)ECONOMIC
Neo-ClassicalEconomicsTheory
Non-MarketFailure
HETEROGENEITY INTERVENTIONNOTSUFFICIENTLYPROFITABLE
HIDDENCOSTS HIDDENCOSTS
ACCESSTOCAPITAL LOWCAPITALAVAILABILITY
RISKINTERVENTION-RELATEDRISKS/
EXTERNALRISKS
MarketFailure
ImperfectinformationLackofinformationoncostsandbenefits(1/3)/Informationnotclearbytechnologysuppliers(1/2)/Informationissuesonenergycontracts(1/2)
Splitincentives Divergentinterests
AdverseselectionLackofinformationoncostsandbenefits(2/3)/IdentifyingtheinefficienciesIdentifyingtheopportunities(1/2)
Principal-agentrelationship
Lackofinformationoncostsandbenefits(3/3)
b)Behavioural
TransactionCostEconomicsTheory,Psychology,DecisionTheory
Boundedrationality
Lackoftime/Identifyingtheopportunities(2/2)
TheHumanDimension
FormofinformationInformationnotclearbytechnologysuppliers(2/2)/Informationissuesonenergycontracts(2/2)/Imperfectevaluationcriteria
Credibilityandtrust Trustworthinessoftheinformationsource
Inertia Inertia
ValuesLackofinterestinenergyefficiencyinterventions/Otherpriorities/Lackofsharingtheobjectives
c)Organisational
OrganisationTheory
Power Lackofawarenessorignorance(1/2)
Culture
Lowstatusofenergyefficiency/Divergentinterests/Complexdecisionchain/Lackofinternalcontrol/Lackofawarenessorignorance(2/2)
Annex
v
A.4 BarrierFramework4–DeGrootetal.(2001)
TableA-44–BarrierFramework4:Barriers,structuredaccordingto‘Categories’,contrastedtoBarrierFramework6BasedonDeGrootetal.(2001)
Category Barrier
Thisbarriercorresponds–concerningthe
frameworkofCagnoetal.(2013)–tothe
barrier…
General
OTHERINVESTMENTSAREMORE
IMPORTANTHIDDENCOSTS
Technologycanonlybeimplementedafterexistingtechnologyhasbeenreplaced
###NotaBarrier
###ENERGYCOSTSARENOTSUFFICIENTLY
IMPORTANT
INTERVENTIONNOTSUFFICIENTLY
PROFITABLE
EnergyEfficiencyhaslowpriority Lowstatusofenergyefficiency
CurrentInstallationsaresufficientlyefficient###
NotaBarrier###
CurrentlyintroducinganewTechnology###
NotaBarrier###
DifficulttoimplementduetointernalOrganisation
Divergentinterests/Complexdecisionchains/LackofinternalcontrolLackoftime
Financial
INTERNALCONSTRAINTSONTHEBUDGET INVESTMENTCOSTS
PROBLEMSWITHEXTERNALFINANCING LOWCAPITALAVAILABILITY
Uncertainty
UNCERTAINTYREGARDINGTHEQUALITY INTERVENTION-RELATEDRISK
BETTERTOWAITFORSUBSIDIES HIDDENCOSTS
TechnologywillbecomecheaperLackofinformationoncostsandbenefits/Identifyingtheopportunities
NogoodOverviewofexistingTechnologies Informationnotclearbytechnologysuppliers
BettertoawaitExperienceofColleaguesInertia/Lackofawarenessorignorance
MAYBENEWTECHNOLOGYWILLNOT
SATISFYFUTURESTANDARDS
INTERVENTION-RELATEDRISK/
Imperfectevaluationcriteria
Annex
vi
A.5 BarrierFramework5–Thollanderetal.(2010)
TableA-45–BarrierFramework5:Barriers,structuredaccordingto‘Areas’,contrastedtoBarrierFramework6BasedonThollanderetal.(2010)
Area
(Classification)Barrier
Thisbarriercorresponds–concerningtheframeworkof
Cagnoetal.(2013)–tothebarrier…
Thetechnical
System
ACCESSTOCAPITAL LOWCAPITALAVAILABILITY
HETEROGENEITY INTERVENTIONNOTSUFFICIENTLYPROFITABLE
HIDDENCOSTS HIDDENCOSTS
RISKINTERVENTION-RELATEDRISK/
EXTERNALRISK
Thetechnological
Regime
ImperfectInformation
Lackofinformationoncostsandbenefits(1/3)/Informationnotclearbytechnologysuppliers(1/2)/Informationissuesonenergycontracts(1/2)Imperfectevaluationcriteria
AdverseSelectionLackofinformationoncostsandbenefits(2/3)/Identifyingtheopportunities
Splitincentives Divergentinterests
FormofInformationInformationnotclearbytechnologysuppliers(2/2)/Informationissuesonenergycontracts(2/2)
Thesocio-technical
regime
Principal-AgentRelationship Lackofinformationoncostsandbenefits(3/3)
CredibilityandTrust Trustworthinessoftheinformationsource
ValuesLackofinterestinenergyefficiencyinterventions/Otherpriorities/Lackofsharingtheobjectives
Inertia Inertia
BoundedRationalityLackoftime/Identifyingtheopportunities(2/2)
Power Lackofawarenessorignorance(1/2)
Culture
Lowstatusofenergyefficiency/Divergentinterests/Complexdecisionchain/Lackofinternalcontrol/Lackofawarenessorignorance(2/2)
Annex
vii
A.6 BarrierFramework6–Cagnoetal.(2013)
TableA-46–BarrierFramework6:Barriers,structuredaccordingto‘Areas’,contrastedtoBarrierFramework6BasedonCagnoetal.(2013)
Area Origin BarrierThisbarrierimplies,thatanEEImeasurecanbe
inhibitedorprevented…
Technologic
ExternalTechnologiesnot
adequate
....bytechnicalcharacteristicsofEEtechnology(includingguidelinesandnormssettingstandardsforplanninganddesign)whichmaybesospecificthatincertaincasestheycannotbeadoptedregardlessoftheircost.
ExternalTechnologiesnot
available
...by(regionally)limitedavailabilityofEEtechnologyandexperienceandexpertiseofserviceproviders-theremaynotbeasufficientnumberofexpertsavailablefortechnology,operationandmaintenanceofEEtechnologies.
Informational
ExternalLackofinformationon
costsandbenefits
...byalackof(credible)informationabouttheperformanceofEEtechnologiesonperceivedriskscancomplicatedecisionsabouttheintroductionofsuchsystems;incompleteinformationcanalsoleadtoinefficientproductsthatdriveefficientproductsoutofthemarket.
ExternalInformationnotclear
bytechnologysuppliers
....byprovidinginformationfortheinvestmentdecisionbythetechnologysupplierwhichtheCustomerdoesnotacceptbecauseitisnotspecific,descriptive,simpleorpersonal.
ExternalInformationissueson
energycontracts
....byprovidinginformationfortheinvestmentdecisionbytheESprovider/utilitywhichtheCustomerdoesnotacceptbecauseitisnotspecific,descriptive,simpleorpersonal.
ExternalTrustworthinessof
theinformationsource
...byinformationsourcesfortheinvestmentdecisionthatdonotappearcredibleandtrustworthytosuccessfullycommunicateinformationaboutEEImeasures;theabsenceofthesefactorsleadstoinefficientdecisionsbyignoringorsuppressingEEImeasuresbecauseCustomerslackconfidenceintheserviceprovider.
ECONOMIC
External 1.EXTERNALRISKS
...byhighlyvolatileenergyprices,whichcreateahighdegreeofuncertaintyintheestimationoffutureorlong-termoperatingcosts;thismayleadtoBATinvestmentsbeingavoidedcomparedtoconventionaltechnologiesduetohigherinvestmentneeds-anduncertaintyaboutthepriceofenergyproducedfromfossilfuels,whichdoesnotreflectalltheenvironmentalandsocialcostsassociatedwithproduction,conversion,transportanduse;thismeansthatEEImeasuresarelessprofitablethanwouldbesociallyoptimal,andpricesignalsarethereforeanbarriertoinvestmentinthepurchaseofEEtechnology.
Internal2.LOWCAPITAL
AVAILABILITY
...byinsufficientcapitalfromownresourcesanddifficultiesinborrowingorraisingequity,orinternalinvestmentplanningproceduresandinvestmentevaluationrelatedtohigherinvestmentneedsforBATsystemscomparedtoconventionaltechnology;inmanufacturing,EEImeasuresarehinderedbythepreferenceofinvestmentsthatincreaseproductionoverEEIinvestmentsthatreduceoperatingcosts;oftenatwo-tiersystemofinvestmentcriteriaisalsoused,whereproduct-independentinvestments,suchasenergycostreductionsorsavings,mustachieveasignificantlyhigherreturnthanproduct-relatedinvestments;theresultingveryhighdiscountratesthenleadtoasituationknownasthe‘Paybackgap’;oftenatwo-tiersystemofinvestmentcriteriaisalsoused,whereproduct-independentinvestments,suchasenergysavings,mustachieveasignificantlyhigherrateofreturnthanproduct-relatedinvestments;theresultinghigherdiscountinterestratesthenleadtoasituationknownasthe‘Paybackgap’.
Internal/
External
3.INTERVENTION
NOTSUFFICIENTLY
PROFITABLE
…bysolutionsthatareinprinciple,butnotnecessarilycost-effectiveinallcasesandorganisations.
Internal/
External4.HIDDENCOSTS
...bycosts,whicharenotincludedintheoriginalestimateoftheinvestmentplanning(e.g.transactioncostsforthecollection,analysisandapplicationofthemeasures,inaddition,costsoftheinformationprocurementandanalysisaswellasthepersonneltraining)andeliminatetherebytheoriginallycalculatedcostefficiency.
Annex
viii
Area Origin BarrierThisbarrierimplies,thatanEEImeasurecanbe
inhibitedorprevented…
External5.INVESTMENT
COSTS
…byinitiallyhighdesignandmanufacturingcostsforprovidinganenergyefficienttechnology.
Internal/
External
6.INTERVENTION-
RELATEDRISKS
...byuncertaintiesininvestmentsinEEImeasures,whichalwaysentailrisksofoperationalfailure;uncertaintiesalsoexistwithregardtothedurationandavailabilityofEEtechnologiesandthelong-termavailabilityofcalculatedenergycostsavings,especiallyifthediscountratesforfuturecostsandbenefitsareeitherlowerthantheavailablereturnoninvestmentswithcomparableriskorhigherthanthefinancingrateofthemeasure.
Behavioural
InternalLackofinterestinenergyefficiency
interventions
...bytheabsenceofatrulyambitiouspersonresponsiblefortheinvestmentdecision,preferablyrepresentedbyakeymemberoftopmanagement,andbyastrongsocialemphasisoncomfort,lightnessandconvenience,whichmaybeatoddswithEE.
Internal Otherpriorities
…bydecision-makerswhofocusoncorebusinessactivitiesandthereforetendtoevaluateonlythoseinterventionsthathaveasignificantimpactontheactivitiesofthemainproductionsystem,wherebyEEImeasurescanbeignored.
InternalLackofsharingthe
objectives
…bymisaligningthebehaviourofpersonnelwithregardtotheobjectivesofenergymanagement,resultinginalowimplementationofenergymanagementpractices.
Internal Inertia…byanindividualboycottingchangewithinanorganisation,whichpreventsenergyefficiencymeasuresthatarecost-effectivefrombeingimplemented.
InternalImperfectevaluation
criteria
…byalackofinformationaboutEEIpotential,leadingtoinvestmentdecisionsbytheCustomerbasedonothercriteria(e.g.investmentvolumeofthemeasure)ormissedcost-efficientopportunities
Organisational
InternalLowstatusofenergy
efficiency
…byaculturewithintheorganisationthatdoesnotattachvaluetoenvironmentalcontentandthusdoesnotpromoteinvestmentinenergyefficiency.
Internal Divergentinterests
...byalackofinterest,theorganisationmaybeunabletoproperlyaddressthebenefitstothedecision-makersresponsiblefortheinvestment,aswellaspossibleconflictsintheuseoflimitedresources.
InternalComplexdecision
chain...byanoddandnotsmoothflowofinformationduetodecisionprocessesthatinvolvemultiplefunctions.
InternalLackofinternal
control
…bycontrolsystemsputinplacebytheorganisation'smanagementthatareinadequateanddiscouragestafffromimplementingEEImeasures.
Internal Lackoftime...bydecisionstakenonthebasisoftime,attentionandinformationconstraintsandthereforenotasforeseenineconomicmodels(i.e.onthebasisofperfectinformation).
Competences
InternalIdentifyingtheinefficiencies
...bythelackofspecificcompetencesformethodsandtoolstoidentifyenergywastedespiteexistingawarenessofenergyissuesandintheawarenessofthebenefitsofEEtechnologies.
InternalIdentifyingtheopportunities
...bythelackofspecificcompetencesformethodsandtoolstoidentifyEEIpotentialsdespiteexistingawarenessofenergyissuesandintheawarenessofthebenefitsofEEtechnologies.
InternalImplementingthe
interventions…bylackofsupportfromemployeesorexternalconsultantsinimplementingenergyefficiencypracticesandinterventions.
ExternalDifficultyingatheringexternalcompetences
…bypricingoravailabilityofexpertsonexistingenergy-efficienttechnologies.
Awareness InternalLackofawarenessor
ignorance
…bylowenergymanagementstatus(e.g.duetoformalauthoritiesandcontrolofscarceresources)andthuslowpriorityofenergyissues.
Annex
ix
A.7 BarrierFramework7–Reddy(2013)
TableA-47–BarrierFramework7:HierarchicalStructureofthe‘Spheres’BasedonReddy(2013)
Area(SphereofInfluence) BarriersfromthisSphere…
Actoris…
…influencedby/
…inpositiontoremoveBarrier
a)External:Society,MarketandPolicyDesign(Taxes,Regulations,Policies)
Macro
…occuratthehighestlevel:Government,marketandsociety(e.g.electricityprices,laws on savings from EEI projects,subsidies, etc.). Since these barriers arenotproject-ororganisation-specifictheycannot be influenced by the projectstakeholders.
• Technological: Can remove by Lobbying andRuleMaking
• Financial:Canremoveasprimeauthorities
onallocationandenforcement
• Legal: Can remove as Law-making and Law-enforcingBodies
• Market related: Can remove by interveningandtakingcorrectiveMeasures
• Institutional/Organisational: Can removewithstructuralAdjustments
• Informational: Influenced by InformationGaps
• Behavioural: Can remove non-Acceptance ofEETechnology
b)Internal:OrganisationalDesign(Structures,Incentives)/ProjectDesign(Structures,Incentives)
Meso
...refer to the organisations associatedwith the project (in the context of thisresearch the stakeholders, henceCustomer, ESCO or TPF organisation).Thesebarrierscanariseinavarietyoforat all relevant projects (primarily fromthe perspective of the ESCO or the TPForganisation) and can generally beovercome by changes in theirorganisationaldesign.
• Technological: Can remove by DevelopmentandSupplyofEESolutions
• Financial:InfluencedtofollowGuidelines;
Can remove by making requisite
Provisions (Financial Institutions and
Banks)
• Legal:InfluencedtofollowProvisions• Marketrelated:InfluencedbyMarketFailures• Institutional/Organisational: Can remove
withstructuralAdjustments• Informational: Influenced by Information
Gaps• Behavioural: Can remove non-Acceptance of
EETechnology
Micro
…arethosethatoccuratthelowestlevelwithinaproject.Thesebarriersingeneralare unique to a particular project. Bychangingtheprojectdesign(forexampleby changing the incentives for energysavings, replacing the technology orincreasingtheprojectsize)thefeasibilityoftheEEImeasurecanbeincreased.
• Technological: Influenced as user of EESolutions
• Financial:InfluencedtofollowProvisions
• Legal:InfluencedtofollowProvisions• Marketrelated:InfluencedbyMarketFailures• Institutional/Organisational: Can remove
withstructuralAdjustments• Informational: Influenced by Information
Gaps• Behavioural: Can remove non-Acceptance of
EETechnology
Annex
x
A.8 BarrierFramework8–Vogeletal.(2015)
TableA-48–BarrierFramework8:Barriers,structuredaccordingto‘SystemStructure’,contrastedtoBarrierFramework6BasedonVogeletal.(2015)
SystemStructure Barrier
Thisbarriercorresponds–
concerningtheframeworkofCagno
etal.(2013)–tothebarrier…
ContextualLevel
WeaknationalEnergyRegulationswhenrefurbishingBuildings
###Buildingspecific
###
IncoherentnationalandmunicipalEnergyRegulations###
Buildingspecific###
AmbiguousEnergyrelatedRulesandRegulations###
Buildingspecific###
UnclearIncentivesfortheMarkettoreachEnergyTargets
###Buildingspecific
###
RegulationsorCertifications,orboth?NocommonWayforwardwhenplanningmultifamily
###Buildingspecific
###
WeaknationalResearch&DevelopmentinhibitRegulationDevelopment
###Buildingspecific
###
CertificationsandGeography###
Buildingspecific###
CutupPlanningProcess###
Buildingspecific###
BrokenAgency–differentIncentivesfordifferentactors Divergentinterests(1/3)
LackofContactAreasbetweenEnergyUserandEnergyProducer
Difficultyingatheringexternalcompetences
AgreementStructuredonotpromoteInnovationortheUseofemergentTechnologies
###Buildingspecific
###AlteringEnergyAgreements
LowTransparencyofEnergyPricingModelsLackofinformationoncostsandbenefits/Informationissuesonenergycontracts
InnovationandTechnologyAdvancementsnotinlinewiththePlanningProcess
Inertia(1/3)
Vagueornon-existingIncentivesfordistributedEnergyProduction
Divergentinterests(2/3)
BuildingsasPartoftheEnergySystem###
Buildingspecific###
SectorLevel
WeakorlackingFeedbackStructures Lackofinternalcontrol(1/3)
ResistancetoChange Inertia(2/3)
WeakCommunicationStructuresbetweenCompanies,Organisations,andAcademia
Difficultyingatheringexternalcompetences
LackingSystemView,leadingtolostOpportunities Identifyingtheopportunities
LackingComprehensionofSystemBenefits Lackofawarenessorignorance(1/3)
TechnologyLock-ins###
Buildingspecific###
ExtensiveFeedbackCycleTimeLackofinternalcontrol(2/3)/Complexdecisionchain(1/2)
Research&DevelopmentonlyatCompanyLevelsconstrainProgress
Complexdecisionchain(2/2)
Weakornon-existingIncentivesforusinglatestTechnology
Divergentinterests(3/3)
Annex
xi
SystemStructure Barrier
Thisbarriercorresponds–
concerningtheframeworkofCagno
etal.(2013)–tothebarrier…
INNOVATIONBUDGETSCOUPLEDTOPROJECT
BUDGETSLOWCAPITALAVAILABILITY
TECHNICALACCOUNTINGRULESNOTINLINEWITH
LIFESPANSOFTHEPRODUCTS
###
ONLYBARRIERFRAMEWORKINWHICH
THISBARRIERISADDRESSED
###
ProjectLevel
LackingProjectGoalsandObjectives###
Buildingspecific###
LackingKnowledgeofDetailsinProjects Identifyingtheinefficiencies
TimedependentKnowledge Inertia(3/3)
ActordependentKnowledgeLackofinterestinenergyefficiencyinterventions
LackingKnowledgeofandInterestinEnergyrelatedTopics
Informationissuesonenergycontracts/Lackofinterestinenergyefficiencyinterventions
LowInterestoffutureEnergyrelatedTopics Lackofsharingtheobjectives
LackingTransparencyweakensSystemBenefits Trustworthinessoftheinformationsource
PERCEIVEDINCREASEOFOPERATIONCOSTSAND
RISKSWITHINTRODUCTIONOFNEWTECHNOLOGY
HIDDENCOSTS/
INTERVENTION-RELATEDRISKS
Insufficientandinconsistentcalculationmethods Lackofinternalcontrol(3/3)
Lackingknowledgeaboutinvestmenthorizons,risksandlifespans
Lackofawarenessorignorance(2/3)
Lackingtransparencyinnumbers Lackofawarenessorignorance(2/3)
Annex
xii
A.9 BarrierFramework9–Stede(2017)
TableA-49–BarrierFramework9:Barriers,structuredaccordingto‘Categories’,contrastedtoBarrierFramework6BasedonStede(2017)
Category
Mainbarrier
Subbarrier
Thisbarriercorresponds–concerning
theframeworkofCagnoetal.(2013)–to
thebarrier…
Financial
PAYBACKTIMEINTERVENTIONNOTSUFFICIENTLY
PROFITABLEPROFITABILITYOFINVESTMENT
RISKINESSOFINVESTMENTINTERVENTION-RELATEDRISK/
EXTERNALRISK
ACCESSTOFINANCE LOWCAPITALAVAILABILITY
Informational/
Behavioural/
Institutional
ImperfectInformationLackofinformationoncostsandbenefits/Informationnotclearbytechnologysuppliers/Informationissuesonenergycontracts
LackofAwarenessofInvestmentOpportunitiesIdentifyingtheinefficiencies/Identifyingtheopportunities
LackofTrustinESCOs Trustworthinessoftheinformationsource
LackofskilledPersonnelImplementingtheinterventions
LackofinternalCompetences
LowPriorityofEEIMeasuresLackofinterestinenergyefficiencyinterventionsOtherpriorities
OTHERINVESTMENTPRIORITIES HIDDENCOSTS
External
RegulatoryuncertaintyLackofinterestinenergyefficiencyinterventions
Bureaucratichurdles
Annex
xiii
B InterviewSchedule
Thefollowingimagesshowtheinterviewscheduleusedbytheresearcherinspecificversionsforeach
ofthestakeholders.
MAT THIAS VOLKER BERGMANN Interview Schedule
Interview questions – ESCO
Economic barriers to energy services and energy efficiency improvement projects in German Industrial Sector – a multiple-case study
Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Interviewee and organisation
1) Role / function of organisation XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
2) Role / function of interviewee in organisation XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
3) Company affiliation XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Energy efficiency and projects
4) What are energy efficiency projects? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
a) Subjects of / examples for projects? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Invest (average) of projects? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
c) Motivation / trigger for project? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
d) Client specifics (branch, credit rating, ...)? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Annex
xiv
MAT THIAS VOLKER BERGMANN Interview Schedule
5) What are stakeholders in EE projects? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Barriers
6) “Energy efficiency gap “ (Jaffe & Stavins, 1994) XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
7) Reasons for failure / non-implementation of projects XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
8) Financing
a) Which stakeholder funds projects in general – preferred party? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Different types of funding: run time; volume; risks? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
c) Influence of refinancing party on project decisions? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
d) Validation concepts – differing with types of funding? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
e) Further requirements in projects, contracts or stakeholders? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
f) What influences terms of funding? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
g) Barriers on potential project fundings? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Annex
xv
MAT THIAS VOLKER BERGMANN Interview Schedule
9) Capitalisation
a) Which accounting standards are relevant (HGB, IFRS)? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Which stakeholder capitalises investment (assets, liabilities)? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
c) Possibilities and restrictions of off-balance capitalisation (HGB, IFRS) XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
d) Differences of funding types concerning capitalisation XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
e) Further requirements in projects, contracts or stakeholders XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
f) Expected effects on projects, ESCOs, financing parties from IFRS 16? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
g) Importance of capitalisation on realisation of projects? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
10) Further economic barriers on EE projects?
a) External Risks XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX b) Intervention not sufficiently profitable XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX c) Hidden Costs XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Annex
xvi
MAT THIAS VOLKER BERGMANN Interview Schedule
d) Investment (Transaction) Costs XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
e) Intervention-related Risks XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
f) Further / Other XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX QUESTIONS ON SELECTED CASES A B C D E 1) Branch of client (NACE-Code) XX XX XX XX XX
2) Subject of project XX XX XX XX XX
3) Status, start and run time of project XX XX XX XX XX
4) Invest XX XX XX XX XX
5) Stakeholder XX XX XX XX XX
6) Funding of invest XX XX XX XX XX
7) Capitalisation XX XX XX XX XX
8) Expected effect from IFRS 16 XX XX XX XX XX
9) Pecularities / difficulties – if applicable XX XX XX XX XX
Annex
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MAT THIAS VOLKER BERGMANN Interview Schedule
Interview questions – CUSTOMER
Economic barriers to energy services and energy efficiency improvement projects in German Industrial Sector – a multiple-case study
Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Interviewee and organisation
1) Branch of organisation (NACE), size, shareholders XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
2) Role / function of interviewee in organisation XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
3) Company affiliation XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Energy efficiency and projects
4) Concrete project
a) Focus (production or infrastructure); status? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Motivation / trigger for project? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
c) What are stakeholders in project? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
d) Contracting? Why? What is it? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
e) Experience: Model for further project? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Annex
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MAT THIAS VOLKER BERGMANN Interview Schedule
Commercial specifics
5) “Energy efficiency gap“ (Jaffe & Stavins, 1994) XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
6) Were EE projects subordinate to other investments? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
7) Invest
a) Investment decision: whose responsibility? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Crucial criteria for evaluation (e.g. pay off period)? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
c) Prioritisation between infrastructure / production / product & marktet projects? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
8) Financing
a) Invest of projects? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Funding type selected; run time; volume? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
c) If applicable: Why no investment credit of house bank? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
d) Validation concept – what type? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
e) What influenced terms of funding? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
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MAT THIAS VOLKER BERGMANN Interview Schedule
f) Further requirements in projects, contracts and stakeholders? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
g) Conclusion / validation of funding type XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
9) Capitalisation
a) Which accounting standards are relevant? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Which stakeholder capitalises investment? Firm policy? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
c) If applicable: Requirements in contract design? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
d) Conclusion / validation of capitalisation XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
11) Further economic barriers on EE projects?
a) External Risks XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Intervention not sufficiently profitable XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
c) Hidden Costs XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
d) Investment (Transaction) Costs XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
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MAT THIAS VOLKER BERGMANN Interview Schedule
e) Intervention-related Risks XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
f) Further / Other XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Annex
xxi
MAT THIAS VOLKER BERGMANN Interview Schedule
Interview questions – THIRD PARTY FINANCING
Economic barriers to energy services and energy efficiency improvement projects in German Industrial Sector – a multiple-case study
Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Interviewee and organisation
1) Role / function of organisation XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
2) Does organisation hold a banking license? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
3) Company affiliation XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Energy efficiency and projects
4) What are energy efficiency projects? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
a) Subjects of / examples for projects? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Invest (average) of projects? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
5) Client specifics (branch, credit rating,...) XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
6) What are stakeholders in EE projects XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Annex
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MAT THIAS VOLKER BERGMANN Interview Schedule
Barriers
7) “Energy efficiency gap“ (Jaffe & Stavins, 1994) XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
8) Financing
a) Different types of financing; run time; volume; risiks? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Influence of refinancing party on projects decisions? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
c) Preferred stakeholder for financing contract? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
d) Validation concepts – differing with types of financing? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
e) Regulatory requirements (“BaFin“, “Leasingerlass“ ...)? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
f) What influences terms of financing? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
g) Barriers on potential project financing? XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
9) Capitalisation
a) Differences on financing types in combination with accounting standards XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Possibilities and restrictions of off-balance capitalisation (HGB, IFRS) XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Annex
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MAT THIAS VOLKER BERGMANN Interview Schedule
c) Requirements in contract design XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
d) Expected effects on projects, ESCOs, financing parties from amendment of IFRS 16 XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
12) Further economic barriers on EE projects?
a) External Risks XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
b) Intervention not sufficiently profitable XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
c) Hidden Costs XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
d) Investment (Transaction) Costs XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
e) Intervention-related Risks XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
f) Further / Other XX
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX
Annex
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C ConsentForm
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participant
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researcher
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researchdirectorof
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