Energy Risk Management

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Social Innovation Centre Risk Management for Energy Efficiency Projects in Developing Countries _______________ Paul KLEINDORFER 2010/18/TOM/ISIC Risk Management for Energy Efficiency Projects in Developing Countries 1 Paul Kleindorfer * * The Paul Dubrule Chaired Professor of Sustainable D evelopment, Distinguished Research Professor at INSEAD Social Innovation Centre, Boule vard de Constance, 77305 Fontainebleau , France and Anheuser-Busch Professor Emeritus of Man age ment Science and Publi c Pol icy, The Wharton School of the Universi ty of Pennsylvani a Ph: +33 (0) 1 60 72 91 28 Email: paul.kleindorfe A working paper in the INSEAD Working Paper Series is intended as a means whe…show more content…
Introduction This report considers the role of risk management i n promoting profitable energy efficiency (EE) projects in industrial enterprises in developing co untries. The paper focuses on developing countries in the middle range of development (e.g., with per capita income greater than $2,000 per annum) where there is a significant industrial sector, although many of the issues here would apply to other countries, both above and below this level of development. 4 The key question posed here is how to improve the payoff in economic and environmental terms from cost- effective energy efficiency projects and initiative s. The starting point for this report is the maxim, by now well known in the development literature and is the banner for this entire report, that ther e are many profitable EE projects in nearly every industrial enterprise that are simply not implement ed. Four problems are often identified as the culprits for failing to harvest such projects: 1) lack of a rational and feasible approach to finance these projects; 2) lack of a rational internal mana gement approach in the enterprise to package these projects in such a manner that they can be id entified and implemented while the “plant is running”; 3) the high perceived risk of these proje cts; and 4) the fact that management is often simply unaware of the existence of EE projects of v alue. 5 This paper is primarily focused
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