Standardization of Projects in the M3E

Technical Note No. 8

External and internal challenges currently limit the economic viability of energy efficiency investments under the M3E from the perspective of potential investors. The two main internal challenges within the M3E are high transactions costs and uncertainties resulting from the complex M3E project cycle. Moreover, those internal challenges are particularly pronounced in small projects with lower margins and less-informed project owners. While external challenges such as high inflation or general political and economic uncertainty cannot easily be solved in the short run, internal challenges can potentially be fixed by adjusting the current M3E project cycle.

This paper investigates how the M3E project cycle can be simplified to reduce transaction costs and improve scalability, especially for small projects. A promising solution for reducing these transaction costs is derived from international energy efficiency programs. These programs deal with similar challenges by differentiating between project types. This paper, therefore, provides a review of international experiences with the standardization of energy efficiency projects aiming at reducing transaction costs via project categorization.

Based on the international lessons learned, several recommendations were derived on how standardization might be introduced to the M3E and how the M3E project cycle could be adjusted.

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