Chapter 4 Financial Barriers
  • Many companies impose overly stringent hurdle rates. A McKinsey study estimated that only 25% of companies would invest in efficiency measures with paybacks longer than two years. This means that the majority of companies will turn down energy efficiency investment with an internal rate of return (IRR) of over 40%.1
  • Efficiency investments often feature a significant up-front investment, followed by years of stable and predictable savings. Lack of available cash or financing can impede this investment. Budget cycle may also dictate timing of investments.
  • Companies may not be aware of opportunities for tax incentives or utility subsidies that improve the IRR of energy efficiency investments.
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