Financial Risks (EEB)

Investments in energy efficiency projects in buildings are business decisions. The invested capital for reducing the building’s operating costs is therefore expected to lead to positive cash flows. Project managers study these expected returns in invested capital in comparison with other competing opportunities and examine the financial risk. For a potential investor, the risk and return are closely tied together and they form the basis of any financial decision.

The return of investment calculations take into account the long-term nature of the benefits generated by energy efficiency projects. The financial risks can be calculated in a similar manner as with other forms of investments (e.g. bonds). Measuring financial risks, based upon the performance of actual projects, can be useful in convincing businesses of the significant high-return and low-risk investment opportunities.  Risk aversion may be the reason why energy efficiency measures are constrained by short pay-back criteria.

This section clusters financial, market and economic risks into one inter-related list of barriers to energy efficiency in buildings.

Underdeveloped Market

The diffusion of high-energy efficient technologies is hindered by the small market size for these products, which still have an innovative character. The underdeveloped market conditions lead to an uncompetitive environment and prevent large-scale production, therefore creating genuine ‘market barriers’ to the penetration of innovative technologies in the overall energy market.

This phenomenon ultimately hinders the dissemination of information about energy-efficient technologies, creating a negative reinforcement effect against the expansion of the market. As a result, the availability of the information and skills required for energy-efficient solutions remains low.

Book navigation