Editorial

Citation

Leal Filho, W. (2006), "Editorial", Management of Environmental Quality, Vol. 17 No. 3. https://doi.org/10.1108/meq.2006.08317caa.001

Editorial

Welcome to your latest issue of Management of Environmental Quality, where you will find a further set of quality papers on environmental and quality management issues from various parts of the world.

In this editorial, I would like to discuss a new report, published by the UK-based Tyndall Centre for Climate Change Research on the UK market for energy services[1]. The report classifies the different approaches to energy service contracting, provides a general framework for assessing the feasibility of contracting and assesses the status and prospects of the UK non-domestic market.

An interesting feature of the document is that it defends the view that energy service contracting can provide a cost-effective route to overcoming barriers to energy efficiency. Energy service contracts, the report states, allow the client to reduce operating costs, transfer risk and concentrate attention on core activities. However, the energy services model may only be appropriate for a subset of energy services and energy using organisations. A challenge for both business strategy and public policy is to identify those situations in which energy service contracting is most likely to be appropriate and the conditions under which it is most likely to succeed.

The report rightly states that energy service contracting is a form of outsourcing which will only be chosen where the expected reduction in the production cost of supplying energy services can more than offset the transaction cost of negotiating and managing the relationship with the energy service provider. This is where environment and management considerations come into play, since production costs are determined by a combination of the physical characteristics of the energy system – including the production models used and the technical efficiency of the relevant organisational arrangements, including economies of scale and specialisation. Transaction costs, in turn, will be determined by the specificity of the assets required to provide the energy services, the difficulty in specifying and monitoring contractual terms and conditions, the competitiveness of the energy services market and the relevant legal, financial and regulatory rules. They do not necessarily take into account the circumstances within which the energy was produced or whether it comes from renewable sources or from fossil fuels. If energy use is to become sustainable, special considerations need to be made to ways of feeding the energy sources into the energy service contracting schemes. This may raise demands for energy services based on renewable energy and thus contribute towards less dependency on fossil fuels.

Enjoy your reading!

Walter Leal Filho

Note1.The report, authored by Steve Sorrell of the Sussex Energy Group is available at: www.tyndall.ac.uk/research/theme2/final_reports/t3_21.pdf