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


a)LeaseContract b)LeaseContract

a)EnergyServiceContract



Customer(ECONOMICOwneroffixedAssets)

ESCO(ECONOMICOwneroffixedAssets)

TPFLEGAL(and

ECONOMIC)OwneroffixedAssets

a)LeaseContract b)LeaseContract

a)EnergyServiceContract


Funding

(a)CapitalisationoffixedAssets) (b)CapitalisationoffixedAssets)

CustomerLEGALand


ESCO

TPF


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.


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?


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


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


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.


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...


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


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


Marinoetal.(2011)JRCScienceandPolicyReport


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

…


27

SourceRegion//

MarketSector



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


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…


28

SourceRegion//

MarketSector



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).


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.


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:


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)



France Realestate/residential Kamendersetal.(2018)

GERMANY

Public/municipal Polzinetal.(2016a)

Public/municipal Polzinetal.(2016b)


Greece Realestate/residential Kamendersetal.(2018)

Italy

INDUSTRIAL Stede(2017)




Latvia Realestate/residential Kamendersetal.(2018)

TheNetherlands




Norway Realestate/residential WintherandGurigard(2017)

Poland



Portugal Realestate/residential Kamendersetal.(2018)

Slovakia Realestate/residential Kamendersetal.(2018)

Slovenia Realestate/residential Kamendersetal.(2018)

Spain




SwedenRealestate/residential SoroyeandNilsson(2010)

INDUSTRIAL Kindströmetal.(2016)

UK

(nosector) Hannonetal.(2015)

Public/municipal NoldenandSorrell(2016)



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’


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 -,-


• ...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.


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:


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.


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.


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


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.


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.


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


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


42


• ...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 --- ---


43


• ...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


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


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


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


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).


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


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


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.


53

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.


54

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


55

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


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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’’;


57

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,


58

• 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.


60

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


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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.


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.


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.


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)


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:


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


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


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):


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.


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.


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.


76

Table4-17–CustomerB:CompanyProfile,economicProjectRequirementsandSpecifics

OrganisationofCustomerB–Companyprofile

Basics:

Sectorclassification NACE-CodeC10.5:Manufactureofdairyproducts

Operatingperformance FY2016>EUR100Mio.



Accountingstandard HGB

Economicprojectrequirementsandspecifics(historically):

StartofES 2005


Funding Externalrequired

Collateralavailable Bankguarantee(incaseofcovenantbreach)

MotivationforESCOengagement

• Liquidityprotection,asownandavailablebankfundsweretiedupbyotherinvestmentmeasures

• Costreduction• Systemavailability• Accesstoknow-how

OtherTransferofownershipoffixedassetsinvestedtoCustomerrequiredattheendoftheEScontractterm

Economicprojectrequirementsandspecifics(futureprojectsaswellascontractrenewal):



Collateralavailable• Easement



• 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.


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Table4-18–CustomerC:CompanyProfile,economicProjectRequirementsandSpecifics

OrganisationofCustomerC–Companyprofile

Basics:

Sectorclassification NACE-CodeC10.1:Processingandpreservingofmeatandproductionofmeatproducts

Operatingperformance EUR50Mio.<FY2016<EUR100Mio.


Typeofenterprise Privatelimitedcompany


Economicprojectrequirementsandspecifics(currentsituation):

Startofservicecontract 2015


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.


78

Table4-19–CustomerD:CompanyProfile,economicProjectRequirementsandSpecifics

OrganisationofCustomerD–Companyprofile

Basics:

Sectorclassification NACE-CodeQ86.1:Hospitalactivities

Operatingperformance EUR100Mio.<FY2016

Numberofemployees Ca.6,500

Typeofenterprise Publiccorporation



StartofES Proposed:2017



Collateralavailable• Easement



• 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.


79

Table4-20–CustomerE:CompanyProfile,economicProjectRequirementsandSpecifics

OrganisationofCustomerE–Companyprofile

Basics:

Sectorclassification NACE-CodeC10.3:Processingandpreservingoffruitandvegetables

Operatingperformance FY2016<EUR50Mio.

Numberofemployees Unknown


Accountingstandard Unknown


StartofES N/A

Capitalisation Unknown


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).


80

Table4-21–TPF1:CompanyProfile,economicProjectRequirementsandSpecifics

OrganisationofTPF1–Companyprofile

Basics:

SectorclassificationNACE-CodeK64.9:Otherfinancialserviceactivities,exceptinsuranceandpensionfunding

Type Leasecompany(affiliateofapublicbank)

Refinancing Parentcompany(publicbank)


Criteriaforgrantingfinancing Customercredit-worthiness

Financingmethodoffered• Lease• Hirepurchase

Financingvolume EUR200,000<InvestmentEEIproject<(theoretically)nolimit

Optionsforcollateralisationrequired• Easement• Guarantee• Legalownershiponfixedassetsinvested

• TPF2,withabout80employees,wasoneofthelargerleasecompaniesinGermany,independentof

bothbanksandmanufacturers.OneofthedivisionsfocusedonfinancialsolutionsforEEIprojects.

Theorganisation'sportfolioincludedseveralfinancingmethods.



Basics:

SectorclassificationNACE-CodeK64.9:Otherfinancialserviceactivities,exceptinsuranceandpensionfunding

Type Leasecompany(independent)

Refinancing Refinancingpartners(externalbanks)


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.


81



Basics:

Sectorclassification NACE-CodeK64.3:Trusts,fundsandsimilarfinancialentities

Type Funds(independentinvestmentmanager)

Refinancing Investors


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


Collateral:• None



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


Effective:

EnergyServiceCompany ESCO01_E CommercialDirector


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.


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


Collateral:• Easement• Bankguarantee



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);



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


Effective:




10_E (Former)ProjectManager

Customer CustomerB 11_CB ManagingDirector

Potential:

ThirdPartyFinancier


TPF2 04_T2 DirectorofStructuredFinancing


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


ESCO

TPF12.HirePurchaseContract

FundingCollateral:

• Mortgage

1.PurchaseofAssets

ServiceContract



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


ESCO

TPF(external)HouseBank

LoanAgreement

ServiceContract

FundingCollateral:

• Pledge(BlanketAssignment)

• Mortgage


OutsideCaseStudy


87

Table4-26–CaseC:Stakeholders,OrganisationsandParticipantsinvolved


Effective:





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);


• FinancingoftheinvestmentviaTPF.

CustomerDECONOMICOwneroffixedAssets

ESCO

TPF2LEGALOwneroffixedAssets

Sale-and-lease-backContract

FundingCollateral:

• Easement• Waiverofthe

ObjectiononDebtService




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.


research:

Table4-27–CaseD:Stakeholders,OrganisationsandParticipantsinvolved


Effective:





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


ESCO

TPF3


FundingCollateral:

• Pledge(BlanketAssignment)

• BankGuarantee

ForfeitingContract



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);



The investment for the EEI technology amounted to approx. EUR 1.5 million, the ES contract was

proposedforatermof10to15years.


research:

Table4-28–CaseE:Stakeholders,OrganisationsandParticipantsinvolved


Potential:





Customer CustomerE N/A

ThirdPartyFinancier


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:


90

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


• ...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.


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.


91

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 - -

Chapter5:AnalysesandFindings

93


• ...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


• ...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


• ...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 - - -


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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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 - -


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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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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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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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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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


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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


104

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


105

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.”


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


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’


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.


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.”


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


...costs,whicharenotincludedintheoriginalestimateoftheinvestmentplanningandeliminate

therebytheoriginallycalculatedcostefficiency.


withtheotherstakeholdersinvolved).Unforeseen(andthushidden)costscanariseonthepartofall

stakeholdersinvolvedorbeyondtheirsphere–andalsoatanytimeorinanyphaseoftheEEIproject.



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.


110

Evenwiththisbarrier,no influencesfromthesituationorconstellationofthestakeholders involved

couldbeidentifiedintheCases.Asalreadymentioned,theparticipantsdidnotattachanyparticular

significancetothisbarrier.

FromtheperspectivesoftheparticipantsfromtheESCOandtheTPForganisations,thisbarrierwasof

norelevance.



5.2.5 Investment(Transaction)Costs


...initiallyhighdesignandmanufacturingcostsforprovidinganEEtechnology.

TheoriginofthisbarriercanonlybelocatedoutsideoftheCustomerorganisation.Thereasonsforthe

occurrenceofthisbarrierlieinthetransactionitselfonthepartoftheotherstakeholders.



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.”


issueswereraisedbyaparticipantoftheESCO,whoaddressedabarriertoESCO'sbusinessfrom

the fact thatCustomersused its expertise toultimately implement theEEIprojecton theirown

withoutcontractingtheESCO:


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:


112

Table5-38–TransferabilityofFindingsacrossCasesregardingtheeconomicBarrier‘Investment(Transaction)Costs’


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


...uncertaintiesininvestments,whichalwaysentailrisksofoperationalfailure;uncertaintiesalso

existwithregardtothedurationandavailabilityofEEtechnologiesandthelong-termavailability

ofcalculatedenergycostsavings,especiallyifthediscountratesforfuturecostsandbenefitsare

either lower than theavailablereturnon investmentswithcomparableriskorhigher than the

financingrateofthemeasure.


withtheotherstakeholdersinvolved).



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.”


113

ThesituationthatatthetimeofdatacollectiontheEEImeasurewasstillatthebeginningofthe

projecttermandthattheexpectedeffectscouldstillberealisedmeantapossiblebarrierfromthe

perspectiveoftheCustomer:

09_CD:“Largeprojectsdon’tnecessarilygeneratebigprofitleapsrightfromthe

start,butIhavetogopartlyintopre-financinginordertoachieve[...]theefficiencies

inthefollowingyears.”


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.



5.2.7 UncoveredIssues–ComplementaryeconomicBarrier

IssuesmentionedintheinterviewsinhibitedorpreventedtheimplementationofEEIprojectsinterms

ofcontentbutcouldnotbesubsumedunderanyoftheeconomicbarriersoftheframeworkofCagnoet


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.


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.”


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.”


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.”


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.”


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.”


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’


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


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?’


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?’


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;


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):


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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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


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


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


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


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


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

xvii


Interview questions – CUSTOMER


Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _


1) Branch of organisation (NACE), size, shareholders XX

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX

2) Role / function of interviewee in organisation XX

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX


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

xviii


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

Annex

xix


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



_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX

b) Intervention not sufficiently profitable XX

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX

c) Hidden Costs XX

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX

Annex

xx



_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX

Annex

xxi


Interview questions – THIRD PARTY FINANCING


Date: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _


1) Role / function of organisation XX

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX

2) Does organisation hold a banking license? XX

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX


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

xxii


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

xxiii


c) Requirements in contract design XX

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX

d) Expected effects on projects, ESCOs, financing parties from amendment of IFRS 16 XX

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX



_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX

b) Intervention not sufficiently profitable XX

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX

c) Hidden Costs XX

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ XX

Annex

xxiv

C ConsentForm

The image below shows a scan of a consent form in German language, completed by a participant.

Personaldetailsoftheresearcher,participantandresearchadvisorhavebeenanonymised.

Anonymiseddetailsof

participant

Anonymiseddetailsof

researcher

Anonymiseddetailsof

researchdirectorof

studies

economic barriers to energy services and energy efficiency

Documents