Energy Efficiency in Electrical and Electronic Goods

Question 1

How is technological innovation and business drivers related?

Answer 1

Technological innovation will only be adopted to the extent that business drivers encourage it. Market factors if in place will drive change through the capitalist economy. However, without these market forces it can be hard to make the progress needed.

Question 2

Describe three business drivers placed on ICT companies?

Answer 2

• Mandatory consumer energy efficiency labelling (EU)
• Voluntary standard (EnergyStar)
• Legislation (Eup, Stand by Power)

Question 3

What is the rebound effect? (discuss in terms of improvements in energy efficiency)

Answer 3

• Energy efficiency saves money (lighting now costs less, people can afford to buy more)
• Hence some gains of efficiency are lost due to increased use
• Depends how elastic the good is – if it’s cheaper will people buy much more? E.g. computer power - more people can now afford it and use it
• Innovation is stimulated – new services come into being consuming even more power

Question 4

Give an example of the Eup directive being applied

Answer 4

• Standby power had been creeping up 20W
• Not a big consideration when people were buying – market failure
• Required all standbys to be less than 2W
• Also required an automatic power off to standby if left on
• Efficiency gains lost be larger televisions?

Question 5

How does economics drive efficiency? Why doesn’t it work?

Answer 5

• Electricity costs – prices are going up. So it is in the customer’s interest to buy a device which is more efficient
• In an economically perfect world, manufacturers would invest in energy efficiency, increasing the price, provided this is offset by cost savings during use – consumers consider total cost of ownership. But in reality this doesn’t always happen – people are not completely rational
• Also uncertainty about future prices. Using current prices might result in underinvestment in efficiency - even if consumer’s behaviour rationally

Question 6

What was the potential market failure around transformers?

Answer 6

• Potential market failures around energy efficient transformers could be 85% but people were using 70%
• Cost was small but non-trivial. PC market is commoditized and highly cost-conscious – first more disadvantage
• WWF worked with PC manufactures – Climate Savers Computing Initiative’ – all take action together

Question 7

What has been the impact of energy star? has does it compare to the EU approach?

Answer 7

• Voluntary approach
• Less impact on consumer buying behaviour compared to EU approach – consumer don’t pay attention
• DOES WORK because - corporate, institutional and gov policy was energy efficient device
• Requiring energy star or meeting the specification is a cheap way of enforcing it – become de-facto for companies

Question 8

Why can energy efficiency be considered to be a market failure? (4)

Answer 8

o People don’t the total cost of ownership – can’t be bothered to work it out – just buy the cheapest

o complexity of businesses: department commissioning a data centre may not be the one responsible for its electricity bills

o Low priority, and choice is made on features – energy is not a big factor in the decision making process for consumers. Other features are prioritised higher

• Companies are discouraged from investing in efficient technology due to ‘first mover disadvantage’ on headline price – e.g. Dell puts up price to pay for improvements and loses market share – (commoditised market)