Barriers to energy efficiency in industrial bottom-up energy demand models - A review

Abstract

The goal of this paper is to review bottom-up models for industrial energy demand with a particular focus on their capability to model barriers to the adoption of energy-efficient technologies. The integration of barriers into the models is an important prerequisite for a more detailed and realistic modeling of policies for energy efficiency. Particularly with the emergence of more and more varying policy instruments, it also becomes crucial for the models to take account of these policies as well as the barriers they address in a more realistic way. Our review revealed that, despite the broadly evident existence of market failures and barriers for energy-efficient technologies, they are only partly and in a rather aggregated form considered in today's bottom-up models. The state-of-the-art bottom-up model is based on an explicit representation of the technology stock and considers the costs of energy efficiency options in detail. But with regard to barriers, most models only make use of an aggregated approach, like an adjusted discount rate. While some models do not even consider technology costs and energy prices, but instead use exogenous technology diffusion rates, other more advanced models took first steps towards considering barriers in more detail. The latter allows differentiation between multiple parameters that influence technology adoption. Still, even in the most advanced models, only a few of the observed barriers are explicitly considered. At the same time, new approaches to considering barriers like uncertainty or the (slow) spread of information are being developed in other disciplines. We conclude the paper by summarizing promising ways to improve representation of barriers in bottom-up models.