Towards a more realistic cost–benefit analysis—attempting to integrate transaction costs and energy efficiency services

Abstract

In order to calculate the financial return of energy efficiency measures, a cost–benefit analysis (CBA) is a proven tool for investors. Generally, however, most CBAs for investors have a narrow focus, which is—simply speaking—on investment costs compared with energy cost savings over the life span of the investment. This only provides part of the full picture. Ideally, a comprehensive or extended CBA would take additional benefits as well as additional costs into account. The objective of this paper is to reflect upon integrating into a CBA two important cost components: transaction costs and energy efficiency services—and how they interact. Even though this concept has not been carried out to the knowledge of the authors, we even go a step further to try to apply this idea. In so doing, we carried out a meta-analysis on relevant literature and existing data and interviewed a limited number of energy experts with comprehensive experience in carrying out energy services. Even though data is hardly available, we succeeded in constructing three real-world cases and applied an extended CBA making use of information gathered on transaction costs and energy services costs. We were able to show that, despite these additional cost components, the energy efficiency measures are economically viable. Quantitative data was not available on how energy services reduce transaction costs; more information on this aspect could render our results even more positive. Even though empirical and conceptual research must intensify efforts to design an even more comprehensive CBA, these first-of-its-kind findings can counterargue those that believe energy efficiency is not worth it (in monetary terms) due to transaction costs or energy services costs. In fact, this is good news for energy efficiency and for those that seek to make use of our findings to argue in favor of taking up energy efficiency investments in businesses.