Barriers to Energy Efficiency Improvement and Decision-Making Behavior In Thai Industry

Barriers to energy efficiency improvementand decision-making behavior in Thai industry

Ali Hasanbeigi & Christoph Menke & Peter du Pont

Received: 3 February 2009 /Accepted: 20 July 2009 /Published online: 5 August 2009# Springer Science + Business Media B.V. 2009

Abstract The industrial sector is one of the mainenergy consuming sectors in Thailand and accountedfor 36.7% of total energy consumption in 2005. Thetrend of rising energy prices and tougher competitionincreases the demand to improve energy efficiency inThai industry. However, the existence of variousbarriers often hinders the realization of even somecost-effective energy efficiency measures. In anattempt to investigate key barriers to and drivers forenergy efficiency improvement in Thai industry, thisstudy found that the most important barrier expressedby both the textile and cement industries studied aswell as experts interviewed is that the management is

concerned about production and other matters ratherthan energy efficiency. Reducing product cost byreducing energy cost is found to be the main driverfor energy efficiency investment. Using a conceptualindustrial energy efficiency policy framework thisstudy shows how various energy efficiency policiescan affect the process of decision-making for andinvestment in energy efficiency in industry.

Keywords Energy efficiency . Barriers .

Decision-making behavior . Industry

Introduction

There are many studies worldwide identifying awide variety of sector-specific and cross-cuttingenergy efficiency improvement opportunities forindustry. Significant numbers of energy efficiencymeasures which are cost-effective are not alwaysundertaken by industry. This so-called efficiency gapis discussed in various studies (DeCanio 1998;Golove and Eto 1996; de Groot et al. 2001; Jaffeand Stavins 1994; Thollander and Ottosson 2008;Rohdin and Thollander 2006; Rohdin et al. 2007).The efficiency gap in industry shows the existence ofvarious barriers to energy efficiency improvementwhich prevent cost-effective potentials from beingrealized. In an attempt to investigate various barriersand the opportunities to overcome the barriers, IPCC(2001) has developed a conceptual framework that

Energy Efficiency (2010) 3:33–52DOI 10.1007/s12053-009-9056-8

A. Hasanbeigi (*)The Joint Graduate School of Energy and Environment,King Mongkut’s University of Technology Thonburi,126 Pracha-uthit Rd, Bangmod, Tungkru,Bangkok 10140, Thailande-mail: [email protected]

C. MenkeDepartment of Building Engineering Services, EnergyTechnology division, University of Applied Sciences,Schneidershof,54293 Trier, Germanye-mail: [email protected]

P. du PontInternational Resources Group,60/1 Phahonyotin Soi 8 (Soi Sailom), Phahonyothin Rd.,Samsen Nai, Phayathai,Bangkok 10400, Thailande-mail: [email protected]

shows physical, technological, socioeconomic, eco-nomic, and market potential for environmentallysound technologies and how different barriers couldprevent each level of potential from being realized. Ithas also discussed some actions and measures thatcould help to overcome the barriers.

Golove and Eto (1996) have discussed in detail themarket barriers to energy efficiency and the rational ofpublic policies intervention to improve energy efficiencyin different economic sectors. DeCanio (1998) investi-gated the barriers using a case study from a voluntarypollution prevention program implemented by USEnvironmental Protection Agency. He found that whileeconomic forces are important factors in energyefficiency investment, organizational and institutionalfactors are also playing major roles in firms’ investmentbehavior. Decision-making refers to the behavior offirms with regard to choosing whether or not toimplement energy efficiency measures. The lack ofknowledge by decision makers in industry is one of themain causes of market failure to undertake cost-effectiveenergy efficiency potentials (Tonn and Martin 2000).

There are also several country-specific studies onbarriers to energy efficiency and decision-makingbehavior in industry which are giving valuable insightabout the issue to researchers and policy makers in anycountry. de Groot et al. (2001) has done a case study innine different Dutch industrial sectors to determine thebehavior of firms towards investment in energyefficiency and their responsiveness to various energypolicies. There are also separate studies exploringbarriers to and drivers for energy efficiency in theSwedish industry. In these studies the barriers areclassified into three major categories, which are: 1—economic barriers, 2—behavioral barriers, and 3—organizational barriers (Rohdin and Thollander 2006;Rohdin et al. 2007; Thollander and Ottosson 2008).For the USA, Brown (2001) has discussed that large-scale market failures and barriers prevent consumers inthe USA from obtaining energy services at least cost.However, she has presented different ways in whichpublic intervention can help to overcome most of thesemarket failures. Using the interpretive structural mod-eling, Wang et al. (2008) has depicted the interrelationbetween the barriers to energy efficiency in China byinvestigating 13 different barriers.

There are a few regional studies on this subject,such as the work by Thiruchelvam et al. (2003). Thiswork shows the obstacles faced in adaptation of

energy-efficient and environmentally sound technolo-gies in small- and medium-sized industries in fiveAsian countries: China, India, Sri Lanka, Philippines,and Vietnam. There are also a few technology-specific studies regarding this topic. Sola and Xavier(2007) have shown how the organizational humanfactor can affect the energy efficiency in an electricalmotor system in Brazilian industry. IPCC (2001) hasalso presented sector-specific and technology-specificbarriers and opportunities as well as regional aspectsof the barriers concerning developing countries,countries under transition, and developed countries.There are also studies on barriers to energy efficiencyin other economic sectors rather than industry. Forinstance, Schleich and Gruber (2008) conductedeconometric analyses for 19 sub-sectors in theGerman commercial and services sectors. Results oftheir study suggest that the most important barriersare the investor/user dilemma and the lack ofinformation about energy consumption patterns.

Different studies have relatively different classifica-tion for various barriers. Table 1 shows the type ofclassification done for existing barriers to energyefficiency in some literatures. As can be seen in Table 1,different studies have different ways of categorizing thebarriers, yet in general there is a significant overlap inthose categorizations. In other words, the barriersclassified under one classification can for the most partbe classified by the other types of categorizations aswell. Our analysis of barriers and the questionsregarding the barriers in our case study is inspired themost by UNEP (2006b), Rohdin and Thollander(2006), Rohdin et al. (2007), and de Groot et al.(2001). Since presenting the situation in Thai industryis the focused concern of this paper and because variousbarriers are well explained in existing literatures, weprefer to avoid the explanation of each barrier here andrather focus on the most important barriers in thecontext of Thai industry, as revealed by the results ofour study discussed in Results and discussion.

This paper presents the results of qualitativeresearch on barriers to energy efficiency anddecision-making behavior in Thai industry. Thestrength of this study is the use of multipleapproaches, i.e. literature review, industry casestudy using the questionnaire, and interview withexperts. This makes this study unique, as most ofthe other studies mentioned above have used eitherone or two of these approaches. After presenting

34 Energy Efficiency (2010) 3:33–52

the methodology used and the existing situation ofThai industry, this paper presents the ideas of bothenergy-intensive and non-energy-intensive industrialsectors, and experts from key Thai institutions dealingwith energy efficiency in industry in order to give acomprehensive and comparable view of this importantissue. Furthermore, this study gives the detailed analysisof barriers and decision-making behavior based on allinformation collected. Finally, a conceptual industrialenergy efficiency policy framework is developed topresent the process of decision-making for and invest-ment in energy efficiency in industry and how variousenergy efficiency policies can affect this process.

Methodology

The information collection of this study comprises ofthree major parts which are: (1) literature review, (2)questionnaire case study conducted in Thai industry, and(3) semi-structured interview carried out with expertsfrom various institutions related to energy efficiency in

industry in Thailand. The case study in industry isconducted to get the industry’s point of view aboutbarriers to energy efficiency in their industrial plants.However, sometimes, policy makers and other majorplayers related to energy efficiency in industry havedifferent ideas about the barriers from the ones expressedby industry. Therefore, we decided to interview severalexperts from themost well-known institutions, includingpolicy-making organizations which are directly involvedin energy efficiency in Thai industry. The combinationof three approaches used in our study, i.e. literaturereview, questionnaire case study in Thai industry, andinterview with experts, allows us to have a betterunderstanding and wider view of the existing barriersand decision-making behavior in industry.

Industrial case study using the questionnaireconducted in Thai industry

This part of the research was conducted as a casestudy in Thai industry (Hamel et al. 1993). Thequestionnaire is used in many case studies for barriers

No. Classification Source

1 Management UNEP (2006b)Knowledge/information

Financing

Policy

2 Economic: non-market failure Rohdin and Thollander (2006) andRohdin et al. (2007)Economic: market failure

Behavioral

Organizational

3 General de Groot et al. (2001)Financial

Uncertainty

4 Lack of awareness, education and training Thiruchelvam et al. (2003)Financial and economic factors

Lack of coordination and slackness

Lack of infrastructure

5 Market failure Brown (2001)Market barriers

6 Prices IPCC (2001)Financing

Trade and environment

Market structure and functioning

Institutional frameworks

Information provision

Social, cultural, and behavioral norms and aspirations

Table 1 Classification ofbarriers in some literatures

Energy Efficiency (2010) 3:33–52 35

to energy efficiency such as Rohdin et al. (2007),Thollander and Ottosson (2008), de Groot et al.(2001), UNEP (2006b), Zilahy (2004), Sola andXavier (2007), etc. Based on literatures reviewedespecially UNEP (2006b), de Groot et al. (2001), andRohdin et al. (2007), we designed a questionnaireconsisting of seven questions. Two of the questionswere to ask general information about companies,their production, and their energy consumption, whilethe other five were the major questions about barriersto energy efficiency, decision-making behavior, andeffective measures and policies concerning this study.Under each major question there were many optionsrelated to the subject of the question that respondentshad to score based on their level of agreement ordisagreement. The scoring system was designed basedon a five-point Likert scale1 to make it easier forrespondents to rate the many options. By calculatingthe average score given to each option by allrespondents, we could find out which option obtainedthe higher score and thus, is more important or likelyto happen. The subjects of the major questions andthe number of options under each question arepresented in Table 2.

We chose the cement industry to represent energy-intensive industries and the textile industry to repre-sent non-energy-intensive industries, which also couldbe considered small- and medium-sized enterprises(SME). The reason for choosing the cement industrywas that it is one of the largest single energyconsuming sector in Thai industry which consumedabout 16% of the overall energy used in Thailand’smanufacturing sector in 2000 (DEDE 2002). Further-more, we had an ongoing study on energy efficiencyin the Thai cement industry. The reason for choosingthe textile industry for the case study was that afterfood and beverage sector, textile industry is animportant non-energy-intensive sector in Thailand interms of the energy use (especially electricity) as wellas gross domestic product (GDP) produced by thesector (Figs. 1, 2, and 3). Furthermore, authors havedone significant work on energy efficiency in thetextile industry and have a good background and

understanding about the nature of energy use in thissector. This study was conducted in year 2008. Thequestionnaire was sent to six cement companies inThailand which account for more than 99% of Thaicement production capacity. For the textile industry,since there are thousands of textile plants inThailand we had to choose a limited number ofcompanies to send the questionnaire to. Sincegetting a high response rate in the industrial casestudy is difficult, we decided to choose the textilecompanies which are more energy cautious. Thus,we decided to send the questionnaire to the textilecompanies that are members of the Textile Club ofthe Institute of Industrial Energy (IIE), a subsidiaryof the Federation of Thai Industry (FTI). This couldhave a minor effect on the results of the study intextile industry since the management of thesecompanies are already showing some interest forenergy efficiency by being a member of this club.However, being a member the Textile Club of theInstitute of Industrial Energy does not mean thattextile plants have to take some practical actionstowards energy efficiency improvement. The num-ber of companies that received the questionnairewas 28. Since all the members of the textile clubhave a representative who attends the regularmeetings organized by IIE to discuss the energymatters, this could raise the chance of getting betterand more responses to the questionnaire. Thequestionnaire translated in Thai language was sentto the person who is in charge of energy matters ineach company. Some information about the compa-

1 A Likert scale is a type of psychometric response scale oftenused in questionnaires, and is one of the most widely usedscales in survey research. When responding to a Likertquestionnaire item, respondents specify their level of agreementto a statement.

Table 2 The subject of each major question and the number ofits options to be given a score

No. Subject of major question Number of optionsfor question

1 What are the key barriers to energyefficiency in your company?

31

2 What are the main drivers forimplementation of energyefficiency measures in yourcompany?

16

3 What is required to improve energyefficiency in your company?

25

4 What if energy becomes moreexpensive?

9

5 Which energy efficiency policy ismore effective?

11


nies which answered our questionnaire is presentedin Table 3.

In question number 4 in Table 2, companies wereasked to answer the question under a hypotheticalassumption which was set considering the energyprice trend in Thailand in recent years. They wereasked how the company would react if the price of theenergy they use suddenly increases by 15% and keepsincreasing by 3–5% each month without decreasing inlater months.

After receiving the responses from companies thatfilled out the questionnaire, we calculated the averagescores given by all companies for every option. Foreach question, the option with the higher averagescore would be the first ranked option and so on.The standard deviation of the scores for each optionis also calculated in order to present the deviation ofscores from the average score. This indicates therange of scores given to an option. We analyzed theanswers sector-wise in order to compare the opinionsfrom two sectors with different natures. In the endwe had the general analysis drawn from the answersby two sectors.

De Groot et al. (2001) concludes that consideringsector- and firm-specific factors in explaining in-vestment behavior and responsiveness to and accept-ability of policy measures is important. We dobelieve that the characteristics and nature of sectorscould influence the investment behavior and that is

why we decided to choose one energy-intensive andone non-energy-intensive sector. We believe thatconsidering different sectors is more important thandistinguishing between the plants within the samesector for studying energy efficiency investmentbehavior. Furthermore, getting more detail informa-tion on the plants characteristics and analyzing it wasout of the scope of this study.

Interview with experts

The semi-structured interview is a well-proven scien-tific methodology to do a qualitative research (Patton2002). The semi-structured interview method is usedin some other studies on barriers to energy efficiencysuch as Rohdin and Thollander (2006), du Pont(1998), etc. In our study, the semi-structured inter-view was conducted with prominent experts fromvarious famous institutions in Thailand that areactively involved in energy efficiency. These institu-tions are from different natures such as policy making,regulator, governmental program implementer, interna-tional consultants, local energy service companies(ESCOs (energy service companies)), and academia.The five major questions mentioned in Table 2 wereasked from each interviewee. They were advised toanswer the questions based on their experience onenergy efficiency in Thai industry. Each interviewlasted for more than an hour. The list of institutions

Basic metals3%

Metal products3%

Non-metallicminerals

35%

Textile1%

Paper2%

Chemical15%

Wood and woodenproducts

0.4%

Other (unclassified)9% Food and beverage

32%

Food and beverage

Textile

Wood and wooden products

Paper

Chemical

Non-metallic minerals

Basic metals

Metal products

Other (unclassified)

Fig. 1 Share of each indus-trial sub-sector from thetotal fossil fuel used by Thaiindustry in 2007 (DEDE2007)

Basic metals12%


12%

Paper4%Chemical

16%


3%

Textile13%

Food and beverage 17%

Other (unclassified)1%Metal products

22%

Food and beverage

Textile


Paper

Chemical


Basic metals

Metal products


Fig. 2 Share of each indus-trial sub-sector from thetotal electricity used by Thaiindustry in 2007 (DEDE2007)


from which the experts were interviewed is asfollows:

& Department of Alternative Energy Developmentand Efficiency (DEDE), Ministry of Energy

& Energy Policy and Planning Office, Ministry ofEnergy

& Demand Side management Office, ElectricityGeneration Authority of Thailand (EGAT)

& Institute of Industrial Energy, Federation of ThaiIndustry

& International Institute for Energy Conservation& Danish Management Group& Department of Energy, Environment and Mate-

rial, King Mongkut’s University of TechnologyThonburi

& Energy Conservation Lab (ENCON Lab)& Able Consultant Company

While we have done our best to reflect the originalopinion expressed by experts, the result of interviewsis simplified in order to be clear and comparable tothe results of the industry case study. We ranked theanswers to each question based on the number ofexperts who expressed the same answer to thatquestion. The higher the number of experts that givethe same answer to a specific question, the higher isthe rank of that answer. With this procedure weranked the answers from interviewees and we putthem at the side of answers obtained from theindustrial case study conducted in order to comparethe ideas expressed from different sides of the table, i.e. industry as well as policy makers and otherinstitutions involved in energy efficiency in Thaiindustry. Furthermore, we have made a holisticanalysis of the barriers and decision-making behaviorbased on all the information obtained in our study.

Overview of situation in Thailand

Overview of Thai industry

The manufacturing and transportation sectors are themain energy consuming sectors in Thailand andaccounted for 36.1% and 36.6% of total energyconsumption in 2007, respectively (DEDE 2007).With the industrialization of Thailand’s economy, theenergy consumption of industry is rapidly increasing.During the period of 1983 to 2007, the average annualgrowth of energy consumption in Thailand’s manu-facturing sector was 7.37% (DEDE 2007), whereasthe average annual growth of GDP (at 1988 prices)originating from manufacturing was 8.37% in thesame period (NESDB, 2008), resulting in an energyelasticity2 of 0.88 for the industrial sector.

Figures 1 and 2 show the share of each industrialsub-sector from the total fuel and electricity used byThai industry in 2004, respectively. Figure 3 showsthe share of each industrial sub-sector from the totalGDP3 produced by Thai industry in 2004.

Using the Divisia decomposition technique4,Bhattacharyya and Ussanarassamee (2005) presentedthat Thai industry has gone through four differentphases of growth and that the industry’s energy usehas closely followed the industrial growth pattern.They show that during the period of 1981–1986,

2 Energy elasticity=annual growth of energy consumption/annual growth of GDP3 GDP at 1988 prices4 Divisia decomposition technique is one technique that is usedto decompose the changes in energy intensity or GHGemissions into several defined factors such as structural changeof the industry, energy efficiency improvement, etc. (Ang andZhang 2000)

Metal products44%

Basic metals1%


4%

Paper2%

Chemical15%

Wood and woodenproducts

0.2%

Textile12%

Food and beverage 16%Other (unclassified)

6%

Food and beverage

Textile


Paper

Chemical


Basic metals

Metal products


Fig. 3 Share of each indus-trial sub-sector from thetotal GDP produced byThai industry in 2007(NESDB, 2008)


both structural effect and intensity effect contributedto the 8% decline of aggregate energy intensity5 ofindustry, but during the rest of the periods the twoeffects acted in opposite directions thereby reducingthe overall effect on aggregate intensity. Ussanar-assamee and Bhattacharyya (2005) found that,during 1981–2000, the share of the food andbeverage industry declined in terms of value additionand energy demand, while the shares of the chemicaland non-metallic minerals industries have increased.

As can be seen from Fig. 1, the non-metallicminerals sector is the major fossil fuel consumer inThai industry followed by the food and beverage andchemical industries. However, in case of electricityconsumption, the metal products sector is the frontrunner followed by the food and beverage, chemical,and textile industries (Fig. 2). Figure 3 shows that themetal products sector has the highest GDP productionamong other industrial sub-sectors followed by foodand beverage and chemical.

Overview of energy policy in Thailand

In 1992, the Thai government passed the law calledEnergy Conservation and Promotion Act (ENCONAct) in order to improve energy efficiency and increasethe share of renewable energy in the national energymix. The Energy Conservation Program as a part of theENCON Act put mandates on so-called designatedfacilities and building to take energy-related measures.The definition of designated facilities changed over aperiod of time, yet based on the last definition adesignated facility is one who has over 1 MW peakpower demand or consumes more than 20 TJ of energy

annually (UNEP 2006a). Mandatory tasks for thedesignated facilities are:

& Assignment of energy managers& Prepare and submit the energy efficiency target

and plan& Six-monthly reporting of energy use. Plants have

to also report their production& Conduct the energy audit funded by the Energy

Conservation Program

However, there have been many issues surround-ing the implementation of the Energy ConservationProgram which are discussed in more detail in Resultsand discussion. It should be noted, though, that someof the mandates are stopped such as mandatoryenergy auditing.

ENCON Act also set a levy on petrol in order tofund the Energy Conservation Program (ENCONFund). The initial amount of levy set was 0.07 bath(about US $0.002) per liter, yet it has been changedover time based on energy price and other reasons.The accumulated money from the tax on petrol hasgiven substantial financial assistance for energyefficiency improvement and the promotion of renew-able energy in Thailand. For instance, with thefinancial support provided by ENCON Fund between1995 and 2003 a total of 6,075 facilities were audited,mainly in the industrial sector (UNEP 2006a).

The Department of Alternative Energy Develop-ment and Efficiency has received approval from theENCON Fund Committee to use THB 2 billion(approximately US $50 million) to set up a so-calledEnergy Efficiency Revolving Fund. The RevolvingFund is managed by financial institutes, which areproviding low-interest loans to designated factories,buildings, and ESCOs to invest in energy efficiencyprojects, under the specific criteria and conditions set.With regard to the criteria, the actual interest rate and

Table 3 Information about companies answered to the questionnaire

Textile Cement

Total number of companies answered the questionnaire 13 3a

Response rate 46% 50%

Number of companies which have energy division 9 3

Number of companies which have R&D division 3 1

a It should be noted that the three companies in the cement industry that answered our questionnaire account for about 70% of cementproduction capacity in Thailand

5 They have defined energy intensity as energy used per unit ofGDP.


period of loan depend upon the agreement reachedbetween the bank and the borrower; however, theinterest rate ceiling is 4% and the loan term cannotexceed 7 years (DEDE 2008).

Furthermore, there have been a number of other fiscalpolicies in Thailand to promote energy efficiency inindustry including:

& Cost-based tax incentives: this program givescompanies a 25% tax break for investing inprojects that result in efficiency improvement.These tax breaks are applicable to the first 50million Baht investment (approximately US $1.25million) and spread over 5 years (UNEP 2006a).

& Performance-based tax incentives: under thisprogram, 100% of achieved energy savings aretax deductible, i.e. all energy savings achieved aretax free. The ceiling for the incentive is 2 millionBaht (approximately US $50,000). Pre- and post-auditing is also required in order to certify savings(UNEP 2006a).

& Incentive through Board of Investment: thisprogram allows for machinery import dutyexemptions and an 8-year cap-free corporateincome tax exemption for new investments inenergy conservation businesses such as highefficiency and renewable energy equipmentsmanufacturing, solar PV manufacturing, energyservice companies, production of electricity orsteam power using alternative energy sources suchas wind, biogas, or agricultural raw materials andproduction of alcohol or fuel from agriculturalproducts (UNEP 2006a).

& Accelerated depreciation: the program allowsinvestors to more rapidly depreciate their invest-ment in energy-efficient equipment. The programeither raises the percentage of depreciation from astandard rate or allows the investors to write offtheir tax in 1 to 3 years (Thai Energy 2008a).

& The 30% subsidy program: this was one of themost successful energy efficiency programs in Thaiindustry. The 30% subsidy program was based on asuccessful Danish program that provides industrialcompanies with a “pre-approved” list of equipmenteligible for subsidies. The Department of Alterna-tive Energy Development and Efficiency provides adirect 30% subsidy funded by the Danish govern-ment for installation of any one of 11 energy-efficient technologies specified by the program. This

program had a simple and concrete procedure thatattracted many investors from industry, yet it wasstopped because of several reasons, the mostimportant of which was the misperception that sucha kind of subsidy is not macro-economicallyjustifiable, despite the fact that such a programmight be much more cost-effective than the manda-tory programs implemented in Thailand (ThaiEnergy 2008b). It is worth mentioning that theevaluation of the Energy Bonus program in theNetherlands which was a large-scale subsidyscheme that exist in 1980–1988 for stimulatinginvestment in energy efficiency and renewableenergy showed an over 85% “free-rider” effect.That means over 85% of energy savings wouldalso have occurred without the investment subsidy(Farla and Blok 1998).

There has also been a demand side management(DSM) program run by the Electricity GenerationAuthority of Thailand that is the national utility inThailand. The DSM program offered energy auditingservice and load management to industrial plants. Itinitiated a high efficiency motor program in Thailand aswell, yet that was not continued due to the financialcrisis in 1997. Moreover, the DSM office conducted apilot ‘Energy Service Company’ project in four indus-tries with limited success through a funding supportfrom the ENCON Fund (Chirarattananon 2006).

Results and discussion

As is presented in Table 2, the core of our industrycase study and interview is five major questions, eachof which has several options to be scored by industryand to be discussed with experts. Below, in Table 4,we present the responses to each question which aregiven highest rank by textile plants, cement plants,and interviewees6. The ranking of the answers bytextile and cement industry is based on the averagescore given to each option, while the ranking foroptions expressed by experts is based on the numberof experts who mentioned the same opinion.

6 It should be noted that while in our questionnaire we providedtextile and cement plants to score the options under each mainquestion, for interviewees we just ask the main questions andlet them answer based on their experience in Thailand.


Tab

le4

Highest-rankedrespon

sesto

thequ

estio

nsby

textile

indu

stry,cementindu

stry,andexperts

Question


sesa

Textileindu

stry

bCem

entindu

stry

bExp

erts

1.Whatarethekey

barriers?

1.Managem

entfind

sprod

uctio

nmore

impo

rtant(3.6/1.5)

1.Managem

entconcerns

abou

tthe

investmentcostsof

energy

efficiency

measures(4.3/1.15)

1.Managem

entconcerns

abou

tother

matters

especially

prod

uctio

nrather

than

energy

efficiency

2.Techn

olog

ywill

becomecheaper(3.5/1.09)

2.Managem

entfind

sprod

uctio

nmoreim

portant(3.7/1.53)

2.Lackof

financialresourcesespecially

inSMEs

3.Maybe

new

techno

logies

will

not

satisfy

future

standards(3.3/1.07)

3.Managem

entconcerns

abou

ttim

erequ

ired

toim

prov

eenergy

efficiency

(3.7/0.58)

3.Lackof

topmanagem

entcommitm

ent/

understand

ing/vision

4.Costof

prod

uctio

ndisrup

tionis

high

(3.3/1.37)

4.There

isalack

ofcoordinatio

nbetween

external

organizatio

ns(3.7/0.58)

4.Lackof

inform

ationandkn

owledg

ein

companies

especially

inSMEs

5.There

isalack

ofcoordinatio

nbetweendifferentsections

with

inou

rcompany

(3.2/1.52)

5.Current

installatio

nsaresufficiently

efficient(3.3/1.15)

5.Lackof

enforcem

entforgo

vernmentregu

latio

ns

6.The

governmentdo

esno

tgive

financialincentives

toim

prov

eenergy

efficiency

(3.2/1.34)

6.Lackof

coordinatio

nbetweendifferent

governmentagencies

2.Whatarethemain

drivers?

1.Reducingenergy

costs(4.6/1.12)

1.Reducingenergy

costs(5/0.0)

1.Reducingprod

uctcostby

redu

cing

energy

cost

2.Im

prov

ingstaffhealth

andsafety

(4.5/0.78)

2.Im

prov

ingprod

uctqu

ality

(4.3/1.15)

2.Managem

ent’svision

/und

erstanding

3.Im

prov

ingprod

uctqu

ality

(4.5/0.97)

3.Im

prov

ingstaffhealth

andsafety

(4.3/1.0)

3.The

imageof

company

especially

for

largecompanies

4.Lon

g-term

strategy

forenergy

efficiency

(4.5/0.66)

4.Im

prov

ingcompliancewith

regu

latio

ns(4.3/0.58)

4.International/local

competition

5.Im

prov

ingrepu

tatio

n/recogn

ition

(4.4/0.87)

5.Im

provingcompliancewith

corporate

environm

entaltargets(4.3/0.58)

5.Strategic

energy

efficiency

plan

6.Im

prov

ingcompliancewith

company’s

environm

entaltargets(4.4/0.96)

6.Lon

g-term

strategy

forenergy

efficiency

(4.3/0.58)

3.Whatisrequ

ired

toim

prov

eenergy

efficiency?

1.Inform

ationabou

tenergy

managem

ent

system

(4.6/0.65)

1.Trainingon

energy

-efficient

techno

logies

(5/0.0)

1.Financial

incentives

(invariou

sform

s)

2.Inform

ationabou

tCleaner

Produ

ction

(CP)/Energyauditin

g(4.6/0.65)

2.Trainingon

energy

managem

ent

system

(4.7/0.58)

2.Realistic

energy

price(rem

ove/redu

cesubsidy)

3.Trainingon

Energyefficient

techno

logies

(4.5/0.66)

3.Inform

ationabou

tgo

vernment

policies/legislation/fiscal

incentives

(4.7/0.58)

3.Inform

ationdissem

inationforenergy

efficiency

measures

4.Trainingon

energy

managem

ent

system

(4.5/0.66)

4.Inform

ationabou

tenergy

-efficient

techno

logies

(4.3/0.58)

4.Trainingon

energy

efficiency

inun

iversitiesand

othertraining

centers

5.New

sletters

with

energy

efficiency

developm

ents(4.4/0.77)

5.Inform

ationabou

tenergy

managem

ent

system

(4.3/0.58)

5.Raise

awarenessof

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ent


Tab

le4

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tinued)

Question


sesa

Textileindu

stry

bCem

entindu

stry

bExp

erts

6.Inform

ationabou

tgo

vernmentpo

licies/

legislation/fiscal

incentives

(4.4/0.77)

6.Software(for

energy

mon

itoring

,benchm

arking

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6.Sector-specific

supp

ortthou

ghindu

strial

associations

4.Whatifenergy

becomes

more

expensive?

1.Introd

uceenergy

efficiency

techno

logies

(4.3/1.11)

1.Introd

uceenergy

efficiency

techno

logies

(5/0.0)

1.Shiftto

alternative(cheaper)sourcesof

energy

2.Startprod

ucingtheless

energy

-intensive

prod

uctmix

(3.3/1.11)

2.Employ

othersourcesof

energy

(4.3/0.58

)2.

Introd

uceenergy

efficiency

measures

3.Increase

prices

offinalprod

ucts(3.3/1.29)

3.Increase

prices

offinalprod

ucts(4/0.0)

3.Increase

theirprod

uctprice

4.Employ

othersourcesof

energy

(3.2/1.07)

4.Startprod

ucingtheless

energy

-intensive

prod

uctmix

(4/1.41)

4.Ifthey

cann

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it,they

may

close

downthewho

leor

partof

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(mainlyforsm

allbu

sinesses)

5.Increase

prod

uctio

n(2.9/1.55)

5.Increase

theprod

uctio

n(4/0.0)

5.Which

energy

efficiency

policyis

moreeffective?

1.Inform

ationdissem

inationand

demon

stratio

n(4.5/0.97)

1.Sub

sidies

onResearchandDevelop

ment

(R&D)(4.7/0.58)

1.Financial

incentives

2.Sub

sidies

onResearchandDevelop

ment

(R&D)(4.5/1.17)

2.Sub

sidies

oninvestmentin

energy

-efficient

techno

logies

(4.3/0.58)

2.Energypricing(realpriceof

energy

with

outsubsidies)

3.Volun

tary

Agreements(w

ithspecific

target)

(4.5/0.82)

3.Voluntary

Agreements(w

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target)

(4/1.73)

3.Inform

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variou

sways

abou

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latio

ns

4.Sub

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revenu

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4.Policiesto

supp

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logy

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liers

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(RD&D)(4.4/0.96)

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ported

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estio

nnaire


Key barriers to energy efficiency in industry

If we look at Table 4 in order to compare the answersfrom two industries as well as experts, we can seethat, generally, the ideas about key barriers arerelatively different. In textile industry, managementpriority for production is the top barrier, the secondand third ranked barriers are related to uncertaintyabout cost and performance of energy-efficient tech-nologies. Because of lack of financial resources,SMEs are always careful about investing in energy-efficient technologies, as they think it may becomecheaper in the future and worry that new technologiesmay not comply with future environmental or energyregulations. However, interestingly, in cement indus-try the top three barriers are all related to managementconcern about production disruption, investment cost,and time required for energy efficiency projects. Incement industry, the cost of production disruptioncould be high which is why the time required forenergy efficiency measures is of high importance inthis sector.

Textile industry expresses that there is a lack ofcoordination between different sections withincompanies, whereas, cement industry complainsabout the lack of coordination between differentgovernment agencies. These views about lack ofcoordination by two industries were somewhatunexpected, as cement companies are normallylarge with many divisions within the company thatmake them more vulnerable to lack of coordinationwithin the company, while textile companies arerelatively smaller with few separate divisions.However, the answers show that cement companiesprobably have better coordination within their owncompanies. Textile industry also asks for morefinancial incentives from the government for energyefficiency improvement. This was expected sinceSMEs always have limited financial resources toinvest in energy efficiency compared to largercompanies like cement producers.

Four out of nine experts also expressed thatmanagement concern about other matters such asproduction and sales rather than energy is the keybarrier. Two experts mentioned that, in an industrialplant, the production manager almost always hasmore power and influence than the energy ormaintenance manager because of higher prioritygiven by top management to production. Thus, they

also said that lack of top management commitment/vision/understanding about energy efficiency isalso an important barrier. Experts also gave moreimportance to lack of financial resources, especiallyin SMEs, as a key barrier. Most of them said thatthe current financial incentives for energy efficien-cy investment are not enough for industry. Further-more, the current fiscal incentives are not workingwell because of complicated procedure and prob-lems in the implementation of the programs.

Besides the top six barriers ranked by experts andshown in Table 4, some other barriers were discussedin our interview with experts that we would like tobriefly mention here. Some experts believe that thereis an uncertainty about the performance and futurecost of energy-efficient technologies in industry. Theyalso point out that there is a lack of expertise andpersonnel in Thai industry with enough knowledgeabout energy efficiency. Companies would not investin a new energy-efficient technology unless their ownengineers accepted that technology and could prove tothe top management that they are able to work with it.Since there is a clear lack of practical studies,particularly about energy efficiency, in universitiesin Thailand, engineers do not have enough knowledgeand confidence to propose and work with newenergy-efficient technologies. They prefer to workwith the existing installation since there is accumu-lated knowledge within the company about existingfacilities.

The lack of knowledge just mentioned was relatedmore to the management and engineer level. However,at the normal operational staff level, this barrier ismore about changing the working behavior. Expertsexpressed that operational personnel resist changingthe way they have been working for a long time.They ask “what is in it for me?” and if they do notget an appropriate answer, they are not willing tocontribute much to energy efficiency improvement.Thus, management should find a way to stimulatethe personnel for energy efficiency improvement andset an incentive mechanism to praise the personnelwho are having prominent contribution to that goal.One expert also raised the point that fluctuation ofenergy price has confused some companies; they arenot sure whether or not to invest in energyefficiency. This issue is even more evident incompanies where management does not have a clearvision for energy efficiency improvements.


Main drivers for energy efficiency in industry

The top key driver for energy efficiency improvementmentioned by both industries as well as experts isreducing final product cost by reducing energy cost. Inthis regard, the rise of energy prices is an importantdriver that was experienced just recently with the rapidincrease of energy prices in mid 2008. Improving staffhealth and safety, and improving products’ quality arethe second and third drivers ranked by industry.Improving compliance with companies environmentaltargets and long-term strategy for energy efficiency isalso given importance by both textile and cementindustry, yet with different ranking. For textile indus-try, improving reputation and recognition is also animportant driver. Having a good image is veryimportant to many companies, especially in Thailand.However, having a good image is of even moreimportance for big companies and corporations, asmentioned by experts as well. Thus, it was a somehowsurprising result to see that textile companies rankedhigher the improvement of reputation and recognitionthan the cement industry. However, in reality almost allcement companies in Thailand are doing manyactivities in order to have a positive and green imagein public, as the cement industry is one of the mostpolluting and energy-intensive industries in Thailand.Since the cement sector is a polluting industry relativeto other industries, there are several environmentalregulations to be met by cement companies. Therefore,improving the compliance with regulations is rankedhigh by cement industry. While experts’ ideas aboutmain drivers for energy efficiency improvement inThai industry were in line with ideas expressed byindustry, they believed that management’s vision andunderstanding about energy efficiency issues is one ofthe most important drivers. Three experts said that ifmanagement has a clear vision on energy efficiencyimprovement, a company would move toward that goalwithout paying much attention to the existing barriersdiscussed in Key barriers to energy efficiency inindustry.

The needs for energy efficiency improvementin industry

It was an interesting result to see that both the textileand cement industry unanimously ask for moreinformation about and training on energy-efficient

technologies; energy management system; and gov-ernment policies, legislation, and fiscal incentives.While we did expect to hear from the textile industrythat they need more information and awareness aboutvarious aspects of energy efficiency, we did not thinkthat large cement companies would rank high theneeds for information and training. As can be seenfrom Table 4, despite the fact that the highest-rankedbarriers are mostly about top management concernabout production priority, investment cost, and timerequired for energy-efficient technologies as well aslack of financial resources, the highest-ranked needsto improve energy efficiency are more related toinformation and training. This is a contradiction inthat the answers to questions 1 and 3 are notcompletely in line with each other. We found thatthe way we designed the questionnaire is one of themain reasons for this controversy. While we didinclude, for question number 3, an option about theneed for financial incentives, we did not explicitlyhave separate options to dealing with top managementconcerns.

Experts, however, did emphasize the importance ofraising the awareness of top management in compa-nies on energy efficiency issues, yet they did not giveconcrete ideas how to do this. Nevertheless, oneexpert expressed an interesting idea based on anexperience with one of the largest industrial corpo-rations in Thailand. He told us that to target the topmanagement and raise its awareness about energyefficiency we should also use the top management ofthe governmental energy agency that is trying topromote energy efficiency in industry. That is to saythe general director or a very high-ranked officialshould directly reach the top management of compa-nies (or at least large corporate) and convince them toimprove energy efficiency in their company.

The experts also gave more priority to financialincentives (in various forms) and realistic energyprices (remove/reduce subsidy from energy price)while they reiterate the need for information dissem-ination, especially for SMEs. Experts believe that theexisting financial incentives are not enough forindustry and should be expanded with the fundingincreased. They also believe that the price of energyin Thailand is still highly subsidized, especially forelectricity, the price of which has even decreased inrecent years despite the rapid increase of fossil fuelprices. They emphasized that if the energy price is its


real price without subsidies, the market will workitself towards energy efficiency improvement andeven less intervention from the government is needed.One more issue raised by experts was sector-specificsupport through industrial associations. This couldhelp in reaching the plants in each specific industry,especially SMEs. The Energy Club can be formed ineach industrial association and members of thatassociation can be benefited by receiving information,training, news, tools, etc. This can make it easier toreach the individual companies since they are alreadyin contact with their association for other matters.Furthermore, sector-specific information and trainingare more attractive and useful for industrial plants.

Other needs for energy efficiency improvementmentioned by experts are:

& Financial and non-monetary supports for energy-efficient technology suppliers (locally producedand imported ones). The technology suppliers canchange the market and provide technologies thatare more efficient. However, the expert who raisedthis issue did not have a concrete idea about howto do this and what kind of support to give totechnology suppliers in order to stimulate them toprovide the market with more energy-efficienttechnologies.

& Provide textbooks in Thai language for advancedand new technologies.

& Practical training about industrial energy efficiencyin universities in order to develop local humanresources with adequate knowledge.

& Acquire expertise from other countries like Japanthat can bring the knowledge and experience andtransfer them to local engineers.

& Easy and simple energy efficiency policies tosupport the implementation of energy efficiencymeasures in industry. Almost all the expertsexpressed that the energy policies in Thailandhave always been complicated and difficult toimplement. Thus, industrial companies havedifficulty getting the support offered by someprograms for improving energy efficiency intheir plants. Often they prefer not to go throughthe long and complicated procedure and do notattempt to get support.

& There is a need to make banks and otherfinancial institutions more aware of energyefficiency issues. Although, in recent years,

banks in Thailand are involved in giving low-interest loans for energy projects through theRevolving Fund program, experts believe that banksstill are not quite aware of energy issues which are arelatively new concept for their business.

& The degree of enforcement for energy regulationsshould be increased. Experts believe that theenergy regulations in Thailand have a lack ofenforcement and are weak. If a company wants toescape the regulation, it can probably find a wayto do so without any serious consequences. Oneexpert mentioned that environmental regulationsare always much stronger than energy regulationsin Thailand.

Industry’s reaction to rapid increase of energy price

With a hypothetical assumption which was set based onthe energy price trend in Thailand in recent years, weasked companies how they would react if the price ofenergy they use suddenly increased by 15% and keptincreasing by 3–5% each month without decreasing inlater months. Both textile and cement industry rankedintroducing energy efficiency technologies and increas-ing the prices of final products as their first and thirdreaction, respectively. However, textile industry chosestarting the production of a less energy-intensiveproduct mix as the second choice, whereas cementindustry employs other sources of energy as their secondchoice. Increasing the level of production in order toutilize the maximum capacity of the plant is also oneoption to react to rapid energy price rise, yet it wasranked fifth by both industries.

Experts, however, believe that the most commonpractice in Thailand as a reaction to rapid increase ofenergy prices is to shift to alternative sources ofenergy which are cheaper. The companies always tryto lower the energy costs first and not necessarily saveenergy. Thus, when companies face the high energyprices, they first look at the share of energy cost in thetotal cost of final products. If the share of energy costis not a significant portion of the final product cost,companies most likely will not do anything. However,if the share of energy cost is high, like in the case ofthe cement industry where the energy cost accountsfor approximately 65–70% of final product cost, thenthe companies try to lower the energy cost by shiftingto cheaper sources of energy. In Thailand many


companies have shifted from using fuel oil or naturalgas to coal, which is cheaper. Although this may notbe acceptable from the environmental and climatepoint of view, it is rational from a cost reduction pointof view, which is the main concern of industry.Nevertheless, experts do believe that recent increasein energy price has also activated many companies toimprove their energy efficiency.

Effective energy efficiency policies for industry

To answer the question “which energy efficiencypolicy is more effective?” textile industry rankedinformation dissemination and demonstration as themost effective one, while cement companies believedsubsidies for research and development is the mosteffective policy. The answer by textile industry can beeasily understood with the fact that textile plants, asSMEs, have limited financial and human resources toacquire information about energy efficiency. Thus,textile companies need some policies that couldprovide this information and also facilitate somedemonstration projects. However, because of thenature of the cement industry and the fact that theyhave enough resources to acquire information, theywant to do things by themselves and adapt themeasures to their existing situation. Thus, cementcompanies ask for subsidy for research and develop-ment so that they can develop their own technology oradapt the existing technology to the local situationwhich is an important issue for using the newtechnologies. Subsidies on investment in energy-efficient technologies and voluntary agreement pro-grams with specific target are also the industries’favorite policies and they believe could be effective.

Experts, however, believe that fiscal policies arethe most effective policy to improve energyefficiency in Thai industry. They believe that theexisting financial incentives for industry are notenough. Almost all the experts agreed that theexisting fiscal policies are complicated, whichhinders the industry’s participation in the programs.They emphasized that policies should be as simpleas possible with the shortest procedure and leastbureaucratic process. Fiscal policies are in differentforms such as investment subsidies, low-interestloans, tax rebates, energy taxes, etc. Based on theexperience in Thailand, most of the experts believedthat direct investment subsidies to purchase energy-

efficient technologies are more effective than otherfiscal policies such as low-interest loans and taxrebates which exist now in Thailand. Severalexperts classified the energy policies that have beenimplemented in Thailand in two categories whichare:

& Mandatory policies: one of the mandatory pro-grams implemented in Thai industry was theenergy auditing program for designated factories(factories that have over 1 MW peak powerdemand or consume more than 20 TJ of energyannually). This program was mentioned as anunsuccessful program with significant cost. Thereason is that in the mandatory energy auditprogram, the companies did not feel it was theirjob or responsibility to conduct an effectiveenergy audit. The government paid someaccredited ESCOs to conduct the energy auditsand submit the reports to the ministry of energy aswell as companies. However, the companies werenot involved closely in the process and they didnot have enough incentive to implement thesuggestions mentioned in the energy audit reports.

& Voluntary programs: an example of a voluntaryprogram which is mentioned as a success byalmost all the experts interviewed in the study wasthe so-called 30% subsidy program implementedjointly by DEDE and Danish International Devel-opment Agency with the funding provided byDanish government. In this program, companiescould submit their proposal to receive 30%investment subsidy for the installation of someenergy efficiency equipment specified by theprogram. Thus, companies could just pay the70% of the equipment cost. Experts said thisprogram was successful because, first, it was veryclear with a simple procedure so that thecompanies were willing to participate. Secondly,since the companies were paying 70% of theequipment cost, they felt the responsibility andownership of the project and, therefore, theycared more about the project. Thus, all theprojects implemented resulted in significantenergy saving, which was the measurable andconcrete result of the program. However, thisprogram was stopped because of the mispercep-tion that this program is not macro-economicallyjustifiable. Nonetheless, many experts believe


that the 30% subsidy program was very success-ful and it should be started again.

Energy pricing policy is also the second mosteffective policy ranked by experts. They believe thatthe real price of energy without subsidies would forceindustry to improve their energy efficiency. Experts saidthat when the energy price is high, the market will workitself and in that case we even need less intervention bygovernment. Another important policy is informationdissemination in different ways about energy efficiencytechnologies, policies, and regulations. Two experts alsoemphasized the importance of sector-specific policiesthat could be implemented through industry associationslike FTI in Thailand, which can give the information toits members directly.

One expert strongly believes that there is a need forpolicies to support energy-efficient technology sup-pliers which is mostly neglected by policy makers. Hesaid if technology suppliers have enough incentivesand support from government, at least in Thai context,they would put more energy-efficient products intothe market. He mentioned that the ENCON Fund,which exists in Thailand to support energy efficiencyand renewable energy projects, does not give enoughsupport to the energy-efficient technology supply sideand just focuses on the demand side, while the supplyside is also important and can lead the demand side touse more efficient technologies. Nevertheless, thefund does support to some extent the renewabletechnology suppliers like solar PV systems suppliers.This expert, however, did not give us very concreteideas about the type and possible procedure forenergy policy to support technology suppliers. Anexample of supporting policy for technology/productsuppliers in Thailand is the program by EGAT whichhas planned to buy 800,000 compact fluorescent lampfrom local manufacturers in Thailand to distribute freeof charge among Thai people. Although this exampleis for an energy-efficient product which is usedmostly in the residential and commercial sector, thiscould inspire the same kind of support for industrialtechnology providers.

Other ideas regarding the energy policies men-tioned by experts that could help industrial energyefficiency improvement are:

& Standards and regulations for industrial equip-ments (locally manufactured and imported ones).

& Policy makers have to focus on the result of thepolicy based on the amount of energy saved andnot based on the number of reports submitted,number of projects, and other administrativeindicators.

& Policy makers should change their old perspective.& Experiences in other countries should be adopted

to local situation and should not be simply copied.& Government should not interfere too much in the

implementation of programs and should just act asthe policy maker and regulator and let the marketwork itself.

& Monitoring and evaluation of the program is alsohighlighted by some experts as an important partof any program that should be included in thedesign of programs and is mostly ignored in theenergy programs implemented in Thailand.

& Strong enforcement for energy policies andregulations.

Policy implications

Based on the result of this study and discussionpresented in Results and discussion, we have devel-oped a Conceptual Industrial Energy EfficiencyPolicy Framework (CIEPF) in order to show howvarious energy efficiency policies can affect theprocess of decision-making and adaptation of energyefficiency measures in industry. Golove and Eto(1996) have given three reasons for the need ofpublic policies to improve energy efficiency:

1. Market failures: companies are trying to maxi-mize their benefit, yet they are hindered fromdoing so by imperfections in the market, ascompanies do not implement even some cost-effective energy efficiency measures.

2. The transaction costs associated with investmentsin energy efficiency, such as the acquisition ofinformation or the risks associated with invest-ments in new technologies, are high in the marketwhich is a key barrier to energy efficiency inindustry

3. Government can help industrial companies tohelp themselves. The behavior of industry is notconsistently economically rational; governmentintervention may help them to correct thisirrational behavior.


Another important reason that is also stated inthe European Energy End-Use Efficiency andEnergy Service Directive (ESD) is the role of thegovernment as a role model. When the governmentset a clear energy policy, it does show the interestof the authorities on the issue and the support theyare willing to give to promote energy efficiency(European ESD 2006). In many studies discussingenergy efficiency policies for industry (de Groot etal. 2001; Price and Worrell 2000; Price et al. 2005;Kumar et al. 2005; UNEP 2006a) the energy policiesare mainly viewed to intervene in two steps of theprocess of an energy efficiency investment: (1)raising awareness and information and (2) support-ing the implementation (action). However, inspiredby few other literatures such as du Pont (1998),Sandberg and Söderström (2003), and Zilahy (2004),we believe that realization of an energy efficiencyinvestment in industry is a process that comprisesthree steps: (1) awareness, (2) motivation, and (3)action. Thus, we have included a motivation step inour conceptual framework and have shown how themotivation step is linked to the other two steps.

Furthermore, we will discuss the effective energypolicies expressed by companies and experts in ourstudy in this framework. Figure 3 shows a schematicof the CIEPF.

Awareness

Raising the awareness of staff and top management isthe basic step in the process of energy efficiencyimprovement in industry. Policies should be designedto make the people in industry more aware of theimportance of energy efficiency and the benefits theyget by improving energy efficiency in their plants.However, the key point is that two different targetgroups, i.e. top management and staff, should bereached differently.

For raising the awareness of staff, educationalprograms can be arranged for companies at differentlevel according to the level and position ofpersonnel. Moreover, various materials such asbrochures, CDs, flyers or sign boards can beprovided to companies to be distributed to theiremployees and used within the company to promoteenergy efficiency (Galitsky et al. 2004).

For top management, however, the more effectiveway to raise their awareness could be though semi-

nars, associations, and personal meetings. One well-known expert in Thailand who has been working for along time on energy efficiency in industry gave us anexample of a successful case in Thailand in which thedirector of the DEDE7 personal met the top manage-ment of one of the biggest industrial corporations inThailand and convinced him to improve energyefficiency in their plants and achieve significantenergy savings. The most successful awarenessraising program is, however, most likely the one thatcan both get the commitment of top management andreach the floor-level personnel by massive informa-tion dissemination and education programs.

Motivation

As it is mentioned in many scientific literatures andreports, various policies and programs have beenimplemented in different countries, yet many ofthem cannot get the results and effectivenessexpected at the start of the program. One of themain reasons is that policies always try to targetawareness and action steps of the process. While wealso believe that those two steps are very importantin the whole process of the realization of an energyefficiency project to be implemented, one morecrucial step is motivation (du Pont 1998; Sandbergand Söderström 2003; Zilahy 2004).

After raising the awareness of people in industry,which is discussed above, we cannot expect that theywill take the action by getting some support fromexisting policies. If the top management is notmotivated to take the steps towards energy efficiencyimprovement, they probably will not implementenergy efficiency measures despite the existence ofinformation and fiscal incentives. In other words, ifthey are not motivated, they will not go to use theexisting technical information and financial incentivesfor the implementation of energy efficiency projects.

The motivation is important for both the topmanagement and staff level, yet it is more crucial formanagement. Rohdin and Thollander (2006), Rohdin etal. (2007), and Thollander and Ottosson (2008) hasshown this fact by finding that one of the main driversfor the implementation of energy efficiency measuresin Swedish industry is the people with real ambition,especially in management level. This shows that if

7 Department of Alternative Energy Development and Efficiency


management is motivated enough to improve energyefficiency in a company, it will move in that directioneven if there is not much support from public policies.

There are some policies that can help to motivatemanagement for energy efficiency. Sector-specificdemonstration projects are the kind of policy that canraise motivation. Once the management sees that anenergy efficiency technology or system is implementedin their rival company and has resulted in energy andcost saving, they could become motivated to take thesame action. Regulations and standards which aremandatory policies to improve energy efficiency canalso act as a push or in other words compulsorymotivation for companies. Fiscal policies can affectboth motivation and action steps of the process.Regarding motivational steps, the fiscal policies act intwo ways. While fiscal incentives can act as the motiveto stimulate top management to invest in energyefficiency technologies, the management should bemotivated enough to use those incentives. In otherwords, if management is not motivated to improveenergy efficiency, they may not use the existing fiscalincentives. Once decision makers in firms are motivatedenough to benefit from fiscal incentives, these policiescan support the action step which is the implementationpart of a project (Fig. 4).

Regulations and standards can be either applied tospecific equipment such as motors or boilers that areused in a variety of industrial processes, or equipmentthat is used in a particular industry, such as electricarc furnaces in steel industry or rotary kilns in cementindustry. Moreover, regulations can also mandatecompanies to conduct energy audits, employ anenergy manager, or adopt an energy managementsystem (Price and Worrell 2000). While the regula-tions and standards policies can act as motives, thedesign and implementation of such policies is of

critical importance. If the policy is complicated andcreates too much difficulty for an industry to complywith and if there is no supportive program to help theindustry meet the requirement of the policy, compa-nies will either try to find a way to escape or justcomply with regulation without really paying muchattention to improving energy efficiency. A very goodexample of such mandatory policy with low effec-tiveness in Thailand is the mandatory energy audit fordesignated plants and buildings which was discussedin Effective energy efficiency policies for industry.

One industrial energy efficiency policy that hasbeen quite successful especially in some EUcountries is voluntary agreement. Voluntary agree-ments can act as both motive and action support forindustry. Voluntary agreements are “essentially acontract between the government and industry, ornegotiated targets with commitments and timeschedules on the part of all participating parties”(Price 2005). An effective voluntary agreementprogram can motivate decision makers in industryto participate and take action. As is shown in Table 4,both textile and cement industry have expressed thesound effectiveness of voluntary agreement policy.Experts especially gave high value and importanceto voluntary programs and said that voluntaryagreement policy could also work well in Thaiindustry if the policy is well structured and providesenough support to industrial plants. Experiences inother countries have shown that the most effectivevoluntary agreement policy is the portfolio ofdifferent fiscal and non-monetary programs.

Action

The last step of the process of realization of anenergy efficiency investment is the action. If the

Motivation

TechnicalInformationAwareness for top

management

Demonstrationprojects

Fiscal incentives

Benchmarking data,tools and software

Energy ManagementSystem

Awareness for staff

Regulations andstandards

VoluntaryAgreements

Awareness Action

Research &Development

Fig. 4 Conceptual Industri-al Energy Efficiency PolicyFramework (CIEPF)


industrial companies are aware of the benefit andpotential of energy efficiency in their facilities andif they are motivated to capture those potentials,there is a high chance that they will take the actionand implement the energy efficiency measures.Several energy efficiency policies can supportindustry in taking the action. Fiscal policies, whichare discussed in Motivation, are the ones to deal withlack of financial resources in some industries espe-cially SMEs. Technical information disseminationpolicies and programs are also needed as expressedby industries and experts in our study (Table 4,question 3). Thus, policy makers in Thailand shoulddesign innovative sector-specific policies to provideuseful and sectoral-wise information to differentindustries. Benchmarking data which are sector-specific can help plants to evaluate and compare theirlevels of energy efficiency with other plants in theirsector. Tools and software are also useful support forplants, particularly for SMEs. However, to get themost benefit from tools and software, it is veryimportant to make the use of them easy for thepeople in industry. They should be in the locallanguage (if possible), user-friendly, free of charge,and sometimes sector-specific.

Energy management system (EMS) can also helpcompanies in realizing the potential for and improv-ing their energy efficiency. The mandatory orvoluntary policy can be designed to help companiesin the implementation of EMS. In the case ofThailand, in the near future, DEDE is going torevise the implementation of ENCON Act inindustry. The plan is to have a compulsory policywhich mandates industrial companies to applyenergy management systems developed in Thailandin their companies and get the EMS certified by theindependent auditor. The other important policy isResearch and Development (R&D). The need forpolicy to support R&D in Thailand is expressed byboth textile and cement industry (Table 4, question5). However, R&D in Thailand is more for adaptationof technologies to local conditions rather than invent-ing new technologies. This is a common practice indeveloping countries (Price and Worrell 2000). If anenergy-efficient technology is properly adapted tolocal conditions, the industry will have less difficultyin acquiring and using that technology. The cost ofthe technology will also probably be less than the costof an imported one.

Conclusion

This paper illustrates the barriers to energy efficiencyand decision-making behavior and how variousindustrial energy efficiency policies can affect theenergy efficiency improvement in Thai industry.Results of the case study in two industrial sectors inThailand, i.e. the cement sector as the representativeof energy-intensive industries and the textile sector asthe representative of SMEs, and interviews withexperts show that management concern about pro-duction and other matters rather than energy efficien-cy is the key barrier to energy efficiency in Thaiindustry. There is an uncertainty about new technol-ogies expressed by textile companies. Experts, how-ever, give more weight to the lack of financialincentives for Thai industry. Reducing product costby reducing energy cost is by far the highest-rankeddriver for energy efficiency improvement in Thaiindustry. Some experts strongly believe that manage-ment vision/understanding is also a key driver forenergy efficiency investment by companies.

While both the textile and cement industries askfor information about energy-efficient technologies,energy management system, cleaner production, andgovernment regulation and incentives for energyefficiency as the support needed to improve energyefficiency in Thai industry, experts believe that moreeffective financial incentives and realistic energy priceare needed to stimulate Thai industry into movingtowards energy efficiency improvement. The twoindustries expressed that they will introduce energyefficiency measures as the reaction to rapid increaseof energy prices, whereas experts said the commonpractice in Thai industry is to shift to cheaper sourcesof energy, for example shifting from using fuel oil tousing coal. The textile industry believes Informationdissemination and demonstration could be the mosteffective energy efficiency policy, while the cementindustry asks for subsidies for investment as well asResearch and Development. Experts also rankedfinancial incentives as the most effective industrialenergy efficiency policy. However, they did empha-size that policies should be well-designed with themost simple implementation procedure and leastbureaucratic process.

Finally, this study presents a CIEPF. This frame-work illustrated that the process of decision-makingfor and investment in energy efficiency in industry


comprises three steps which are: (1) awareness, (2)motivation, and (3) action. The second step, i.e.motivation, is sometimes ignored in the existingliteratures. This paper, however, discussed that themotivation step is important and how it can help therealization of an energy efficiency investment inindustry. The conceptual framework, furthermore,shows how various industrial energy efficiencypolicies can affect the process of decision-making inindustry.

Acknowledgement Authors are grateful to the cement andtextile companies who cooperated in this study and answeredour questionnaire. We also would like to express our appreci-ation to all the experts who spent their valuable time andparticipated in our interview. Finally, we would like to thankAssoc. Prof. Dr. Apichit Therdyothin and Prof. Dr. SurapongChirarattananon for their valuable input for this study.

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Barriers to Energy Efficiency Improvement and Decision-Making Behavior In Thai Industry

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