The ESI model was developed as a result of many lessons learnt though past projects intended to promote investments in energy efficiency.
Initially it was assumed that investments in energy efficiency were not made due to a lack of awareness. The solution then was to subsidize or enforce energy audits, hoping that with the knowledge of potential savings, the enterprises would invest in efficiency technologies. However, very few of these audits led to actual change in equipment and energy efficiency upgrades. The key learning was that energy audits alone do not necessarily unlock investments in energy efficiency.
It was then thought that the barrier preventing enterprises from investing was a lack of willingness of banks to offer loans for energy efficiency upgrades. The solution then, was to convince the banks to offer these loans. However, once the banks were convinced that energy efficiency was a promising investment opportunity, there were still no clients. Many banks have specific green credit lines in place, but struggle to find clients. The experience showed that the availability of green credit lines does not directly imply investments will be made in energy efficiency.
Enterprises generally have many competing investment opportunities, and investment decisions are usually made based on a risk return perception trade-off. Enterprises are often uncertainty that energy efficiency upgrades will deliver the savings that have been promised.
The key conclusion is that it is critical to focus on mobilising the demand for energy efficiency projects by making these investments as easy and low risk as possible. The ESI model puts simple mechanisms in place to create trust amongst clients, technology providers and banks, and reduce the perceived risk of energy efficiency investments.
