The Cost of Delay: Financing the Industrial Energy Efficiency Transition

Energy efficiency promises a rare kind of win-win: reduced emissions and lower operating costs together in one initiative.

But while the business case is undeniable, there’s still one sticking point even among the most motivated industrial players: the lack of accessible and appropriately structured financing.

This financial bottleneck was front and center at the 10th Annual Conference on Energy Efficiency, co-hosted by the International Energy Agency (IEA) and European Commission for Energy and Housing, in partnership with the Energy Efficiency Movement. There, global leaders reaffirmed the goal of doubling energy efficiency progress by 2030 and recognised that unlocking capital is key to unlocking action.

The latest report from the Energy Efficiency Movement paints a familiar picture. Financial concerns top the list of barriers to implementation, above issues like insufficient infrastructure, skills gaps, data shortfalls, and lack of strategy. The message is clear: the return on investment (ROI) may be strong in the long run, but getting projects off the ground in the short term is often where progress stalls.

Cash flow crunch meets capital costs

Even with demonstrable savings on the table, the upfront investment that energy efficiency initiatives require is often a major hurdle — especially for small and medium-sized enterprises. According to the survey, over four in ten respondents ranked finance as their number one barrier to adopting energy efficiency measures. In North America alone, that figure jumps to nearly 50%, where budget uncertainty and price volatility are widespread concerns.

And while 68% of companies said they've increased their budgets for energy efficiency, 84% still admit they don’t allocate enough. This is a signal that internal ambition alone isn’t enough. Practical tools and plain financing options are essential to turn plans into action.

Though limited budgets do present a hurdle, even more pressing is the lack of visibility on when, or if, the investment will pay off. More than half (51%) of the survey respondents say uncertainty around payback periods and expected savings slows their internal decision-making.

Combine that with unpredictable energy prices, and it becomes harder for businesses to move forward with confidence, even when the numbers add up.

Rethinking the ROI mindset

The cultural aspect is one of the softer, but no less important, pieces of the puzzle. Many companies still think of energy efficiency as an "extra", something to invest in only after all the core assets have had their upgrades. And when legacy infrastructure enters the picture, the hesitation deepens.

Uncertainty around new infrastructure being incompatible with new systems or disrupting operations means that efficiency drops further down the list of priorities. In fact, 42% of respondents reported that their organization struggles to incorporate new equipment into existing processes. But that mindset underestimates just how central energy use is to resilience, cost stability, and long-term competitiveness, especially when energy markets are anything but predictable.

The good news: that mindset is starting to shift. As more companies tie energy performance directly to business performance, the internal conversation is changing. Leaders who were once asking, “Can we afford this?” are now asking, “Can we afford not to?”

A new approach to financing

Shifting gears on energy efficiency calls for internal changes along with external backing. First, companies can set aside dedicated funding for energy efficiency, ring-fenced from other CapEx budgets, to help scale initiatives across sites and systems.

Second, creative financing models such as “equipment-as-a-service,” on-bill financing, and performance contracting can lower entry barriers. These models spread costs over time and link repayment directly to savings, managing risk while strengthening the business case.

In some cases, organizations are also working with trusted equipment manufacturers or energy service providers to develop tailored financing packages, turning one-time purchases into long-term partnerships. These collaborative models not only ease financial pressure, but they also shift the conversation from upfront cost to lifecycle value.

Lastly, governments and financial institutions have a part to play. Regulatory incentives and targeted grant programs can work to remove risk from energy efficiency investment and support the energy transition from the top down.

The financing frontier

Financing isn’t the only hurdle on the energy efficiency journey, but it’s often the first one. Getting over it requires a new playbook built on clearer ROI tracking, flexible financing models, and stronger collaboration between technical teams and financial decision-makers.

Companies don’t have to start from scratch; the tools are ready and waiting. What’s needed now is the commitment to use them and the confidence that every dollar invested in efficiency pays dividends in resilience and competitiveness.

Until more organizations treat energy efficiency like the strategic asset it is, funding will continue to be a fork in the road. But with the right mechanisms in place, it doesn’t have to be a dead end.