Profitability of RE-Technology Regarding the Economic Environment: A Case Study

Lara Thalmann | Yves Hertig＊

Abstract—Considering the important changes in the Swiss energy sector, especially in renewable energy (RE)technologies, new revenue possibilities for small and medium sized enterprises (SMEs) emerge.However, the adaption of RE-technologies for Swiss enterprises relies on tangible financial returns, based on complex calculations.This article analyses business opportunities (BOs) of eight Swiss SMEs considering the net present value of RE-investments in an uncertain economic environment.We identify two profitable BOs for Swiss SMEs and three which are not profitable.Further, the article demonstrates that the profitability of such investments remains mostly positive even under economic uncertainties.Surprisingly the profitability does not change significantly if the SME receives a subsidy or not.The support instrument of the Swiss Government has not a ponderous impact on the decision to invest in RE-technologies or not.Therefore, the article emphasizes the importance of including SME in the Swiss attempt to decentralize the energy market.

1. lntroduction

A continually growing world population and the urbanization are the big challenges for the energy supply in every country in the world and especially in big cities.Under the given organizational circumstances, increasing energy demand will heavily affect the quality of life.If the demand in the Organisation for Economic Co-operation and Development (OECD)-countries is covered with the same energy-mix as today (81% fossils as oil, coal, and gas, 9% renewable energies, and 10% nuclear energy[1]), two problems will aggravate.First, the fossil resources exist only in limited quantities, exacerbating the energy supply in the long-run.Second, the burning of fossils generates CO2, which accelerates the climate change and therefore changes the life terms of all living creatures on the planet.The energy supply in a big part of the world remains centralized, i.e.the electric energy is produced only by power supply companies and all energy is provided in one way from the companies to the customer.To change the market to a more sustainable energy supply, it seems that decentralized electric and heat energy production is inevitable.Technical progresses in smart grids, local energy production and storage, and growing competition on the energy supply-side as well as financial subsidies transform the current centralized energy market into a more decentralized one.Consequently, non-traditional energy-suppliers can participate in the energy market[2].

In a decentralized energy market, different kinds of non-traditional electricity producers, e.g.households, public institutions, big firms, and small and medium sized enterprises (SMEs), feed-in electricity in the decentralized grid.This paper deals with the SME as energy prosumer, electricity or heat producing and consuming entities.The fundamental question arises: What is the financial potential of SMEs to engage in a decentralized energy market?

Nowadays, research focuses mainly on energy efficiency-measures of SMEs.Results show that SMEs face important barriers when engaging in an energy-efficient behavior[3]-[6].So, a new approach is needed if SMEs should participate in a decentralized energy supply.Reference [7] proposes to create new financially profitable business opportunities (BOs), which are not in the core business of the SME.Rather than just lowering energy consumption costs, BOs make use of decentralized electricity and heat production/storage (renewable energy, RE)-technologies in order to generate benefits.To what extent, an SME will invest in such technologies depending on the investments’ profitability.As SMEs have only few financial and human resources compared to a big company or a public institution, they can take less risk in investments[8].In addition to the BO itself, the economic circumstances as well as subsidies, market prices, and the interest rate contribute to the investment’s financial attractiveness[9].

This paper contributes in a first step to identify the concrete and financially profitalbe BOs for SMEs in Switzerland.In the second step, the stability of the financially profitability to changing economic circumstances will be tested.Therefore, the research questions are:

1) Which profitable BOs for Swiss SMEs using RE-technologies can be identified?

2) In which way is the profitability of this BO stable regarding changing economic circumstances?

To understand in which way SMEs are motivated to invest in such BO, the scientific context including the theoretical framework is presented in Section 2.Section 3 shows the research design with the operationalization of the framework for the case studies.The method will be presented in Section 4 followed by the results in Section 5.Section 6 gives the conclusion.

2. Framework

What motivates an SME to make an investment in RE-technologies? Researchers asked the question that in which way investments were done that lower the CO2emission and have a positive net present value (NPV) and a short payback time.Reference [10] argues that it is possible to do business in a sustainable way and still be competitive in the market.For example, slavery, child labor, and working under dangerous circumstances are disestablished in a big part in the world, even it would be more profitable to keep it.On the other hand, we could argue that such “win-win” opportunities, i.e.profitable BOs, cannot exist; they would have already been implemented by rational thinking managers.Different reasons can be found in [11], which inhibit investments in profitable BOs with:

1) Market failure as missing capital for initial investments and information asymmetry between technology manufacturers;

2) Prejudices toward managers that they only invest in projects, which predict a high rate of return, which are profitable in a short term and give them a personal advantage.

To understand what influences the decision of a Swiss SME to invest in RE, two theoretical models are considered: The diffusion of innovation by Rogers[12]and the technology-organization-environment model by Tornatzky and Fleischer[13].

The innovation diffusion theory of Rogers has been applied to a variety of research fields in management,economy, communications, and marketing as well as to different types of innovation[14].In addition, there exist already several research results to the diffusion of RE-innovations.Reference [15] investigates the penetration rate of new energy technology.Reference [16] examines the interaction of technology and social as well as organizational elements when a change of system from a conventional to a renewable energy source happens.Reference [17] develops a business model approach to promote RE for the private sector.Reference [18] analyzes perception of product characteristics by house owners and the influence of the willingness to pay for the product and the technology, respectively.Reference [19] uses the theory of Rogers to determine the factors that influence the diffusion of photovoltaic (PV) plants.

The theory of diffusion explains how, why, and at which speed new ideas and technologies diffuse in cultures,on an individual, as well as on a firm level.The theory contains four elements: An innovation (a), which is communicated through a particular channel (b) over a particular timespan (c) between different members of a social system (d)[12].To analyze the profitability of BOs with RE-technologies, the focus of this research will only be on the first element, the innovation itself.

Following Rogers[12], an innovation is an idea, a practice, or an object which is perceived as new by an individual or another unit of adoption.The characteristics of an innovation, which are perceived by members of a social system, determine the rate of adoption.Rogers identifies five different characteristics: Relative advantage, compatibility, complexity, trialability, and observability, which can explain 49% to 87% of the variation in the adoption rate.The relative advantage describes the degree to which an innovation is perceived as better than the idea it supersedes.Therefore, the “objective” advantage does not matter so much.It is more important that an individual perceives the innovation as advantageous.The definition of the relative advantage of Rogers has been criticized because a variety of aspects can be interpreted like economic profit, social benefit, or time savings[20].Studies focusing on green innovations showed that consumers consider different advantages with the micro-production and efficiency measures for example savings of energy costs, eco-friendliness, or independency of energy resources[18]-[21].Compatibility is the degree to which an innovation is perceived as being consistent with the existing values, past experiences, and needs of potential adopters[12].For micro-production technologies, it is important that the innovation is compatible with the existing procedures, habits, and routines.If an SME decides to produce electric energy by itself, the way of doing it has to be compatible with the daily habits and routines[18].Complexity is the degree to which an innovation is perceived as difficult to understand and use[12].A lot of RE-technologies are high-involvement products and need much cognitive effort of the consumer to understand the advantages and disadvantages of its use[18].Trialability is the degree to which an innovation may be experimented on a limited basis[12].Most technologies of RE cannot be used in advance, which have a negative impact on the rate of adoption[18].Observability is the degree to which the results of an innovation are visible to others[12].Technologies of RE, which are visible on buildings like PV plants, are observable.Others like battery storage or smart meter devices, which are located inside the building, are invisible.The performance of such technologies can only be determined by communicating with other people, who have already invested in such technology.As the SME owner is often the one who makes the decisions, it is vital that he or she is in contact with the people already adapted technologies of RE.Reference [22] argues that the innovation characteristics of Rogers do not cover all aspects.For example, based on the theory of Rogers, [21] identifies nine attributes of solar panels which promote or prevent the diffusion:

Cost related attributes:

1) Total initial investment including installation and connection to the national grid;

2) Payback period;

Environmental benefits:

3) Energy cost savings;

4) Savings in carbon emission;

Market development and policy:

5) Tax incentives and grants;

6) Export reward as per micro-FIT (feed-in tariff) program (pass all or excess capacity to the national grid);

7) Possibility of government policy changes about green energy technologies;

Demand inducing:

8) Yearly inflation on fossil fuel cost;

9) Percentage of local households already adopted one of these technologies.

Not only the characteristic of the innovation itself has an impact on its adoption, also the attributes of the firm play an important role.Reference [12] identifies different categories which have an impact on the adoption rate of the company.On the one hand, the individual characteristics of the CEO as his openness to change influence the adoption.Furthermore, on the inside of the firm, the knowledge and expertise of the employees, few formalities, a decentralized organization, good interconnection, and available resources have a positive effect.Swiss SMEs are different in terms of these categories and cannot be characterized in general.An innovation could be a small adaption for one firm but implicates a much more radical change for another SME[13].

Even though the theory of diffusion by Rogers is a widespread and recognized theory, there exists criticism.First, the theory focuses strongly on the individual adoption of the innovation and does not pay enough attention to the influence of organization and environmental aspects.Second, the theory does not explain the whole process of the adoption but only focuses on the introduction and the decision for or against an innovation[23],[24].

Nevertheless, the theory of innovation diffusion shows that among others, tangible financial considerations influence the rate of adoption.

To pay attention to the criticism of the theory of diffusion and to better understand how Swiss SMEs adopt technologies of RE, the technology-organization-environment (TOE) model of Tornatzky and Fleischer[13]is considered.Compared to that of Rogers[12], where individual adoption of an innovation is the center of attention, the TOE model explains the adoption and implementation of an innovation from an organizational point-of-view.The technological context describes all the technologies (internal, like current practices or equipment, and external)relevant to the firm[23].Adapted on SMEs in Switzerland, it contains all present and new RE-technologies.The organizational context refers to descriptive measures about the organization such as scope, size, and managerial structures.Environmental context depicts the environment in which a firm conducts its business like the industry,the competitors, and the dealings with the government[23].The industry’s structure and the density of competition strongly vary for Swiss SMEs and the analysis does not rely on a homogenous environmental context.On the other hand, the economic circumstances are the same for all SMEs.With the opening of the electricity market, the energy strategy 2050, and diverse subsidies systems, the environment is constantly changing.Furthermore, the market prices of electricity and heat have an impact on how an SME will adapt technologies of RE[9].

From both models we derive that the costs of RE-technologies investments play a major role for the decision of a Swiss SME.Therefore, this research examines the costs of RE-investments for Swiss SMEs, based on the theory of diffusion[12], the technology attributes of [21], and the TOE model[13].

As the relative advantage presented in the theory of diffusion is a broad definition, the focus in the research framework remains on three out of nine attributes presented in [21].It should be analyzed if the total initial investment, the payback period, and the energy cost savings have a positive impact on the rate of adaption.In addition, it will be tested if the economic circumstances with its subsidies, the market prices for electricity and heat,as well as the interest rate influence the profitability of the technology and therefore the decision of the SME to adapt RE-technologies.The analysis is conducted under consideration of the organizational factors of Swiss SMEs.

3. Research Design

The research framework contains different attributes in the categories technology, organization, and environment, which must be operationalized to measure the profitability of RE-investments (see Fig.1).

3.1. Technology

There exist different RE-technologies, e.g.PV modules, solar thermic plants, wind turbines, heat pump, etc.To each of these components, different attributes can be assigned.

A) Total initial investment costs

Part of the initial investment costs are procurement costs of the technical component, e.g.the buying price of the PV plant.Furthermore, consulting fees, installation costs, and other related expenses constitute the investment costs.The investment costs are defined as onetime occurring costs, which are needed to be operational.

B) Maintenance costs

Part of the maintenance costs consist of the costs that occur after the initial operation to assure that the technical components function smoothly.

C) Produced capacity of electricity and heat

The installation’s total produced quantities of electricity and heat, respectively, are measured in kilowatt hour (kWh).

D) Lifetime of the investment

The lifetime of the investment correlates with the duration until a technical component has to be replaced and is measured in years.

Fig.1.Research framework.

3.2. Organization

For each SME, the following attributes have an impact if a technology will be adapted or not.

A) Hourly compensation

If an SME is interested in RE-technologies, time is needed to investigate, search, evaluate, and select the different options.Furthermore, the implementation has to be accompanied and supervised by internal sources.Such opportunity costs arise because the concerning employee is occupied and cannot use his time otherwise or even sell his hours to a paying costumer.The opportunity costs will be calculated with the amount of hours times the hourly compensation of an average worker.

B) Energy consumption

Probably it will be financially more profitable to use the produced electricity or heat by the SME itself instead of selling to third parties.To consider the self-supply in the analysis, the exact energy consumption of the SME needs to be considered.Energy consumption, e.g.electricity and/or heat, is measured in kWh.

C) Energy costs

The energy costs correspond to the costs that the SME has to pay for its energy consumption, which cannot be covered by self-supply.Energy costs are measured in Swiss Cents per kWh (100 Cents = 1 Swiss Franc).

3.3. Environment

Five attributes of the environment will be considered in the analysis.

A) Subsidies

The Swiss Government developed different instruments to support the investment in RE-technologies.Since 2009 the owner of a plant, which produces electricity through solar and wind energy and through energy gained with biomass, can get feed-in compensation.The financing of the subsidies is ensured through an elevation of electricity grid prices[25].With the new energy strategy 2050, the energy law has been revised and implemented at the 1st of January 2018.The goal of the new law is to frame the support instruments more cost efficient and closer to the market.It should generate incentives to feed in the right amount of electricity at the right time into the grid.Therefore, the cost-covering feed-in compensation (the first instrument of the Swiss Government to support REtechnologies) will be limited until 2022.As a consequence, the subsidies do not cover the high demand of current requests[26].Additionally to the cost-covering feed-in compensation, new PV plant owners benefit of onetime compensation, which covers at most 30% of the initial investment costs and will be available longest till 2030[27].For other investments in RE-technologies, diverse subsidies exist.Which RE-investment benefits in which way of the subsidy is regulated differently from one region to another in Switzerland.

B) Tax savings

For the tax invoice, the investment costs can be declared as the maintenance costs.Regarding the profitability analysis, the monetary amount of tax savings is measured in Swiss Francs (CHF) (1 CHF ≈ 1 USD).

C) Energy price

The price for electricity is compounded of the charge for the energy itself, the charge for the utilization of the grid, and the charges for the public welfare, the support of RE, and the protection of waters and fishes[28].Customers with energy consumption of 100000 kWh/year or more can choose the energy supply provider by themselves.In this case, the cheapest provider was chosen.For costumers with lower consumption, the price of the local power supply company is considered.

The price for heat corresponds to the price of oil at the actual market (March 2018).Even not all SMEs heat their buildings with oil, for the analysis only the oil price will be considered.All prices are indicated in Swiss Cents per kWh.

D) Renewable resources

To respect the scope of this research, the following RE-technologies and combinations have been considered.

1) For electricity production, the use of the solar energy with a PV plant and the use of the wind energy with wind turbines are considered;

2) For the heat production, the use of the solar energy with a solar thermic plant and the use of wood and biomass are considered;

3) If a big boiler exists, the storage of heat will be considered.

The storage of electricity with batteries was not included in the research.To calculate the exact electricity consumption and the amount of electricity that is fed in the grid, respectively, data of a time series with a measurement every quarter of an hour for example is needed.In this research neither such data nor the special software to do the calculations[29]was available to the authors.The same reasoning counted for heat pumps.Also,not considered in the analysis were the geothermal energy technologies due to difficult assessment of the initial investment costs.Each drill hole was unique, and the costs varied regarding the consistency of the ground[30].

E) Interest

To calculate the profitability with the NPV, future costs and revenues have to be discounted.Due to the interest,the value of future payments can change over time.

4. Method

In the first step, the methodological proceeding consisted in identifying Swiss SMEs, willing to provide the authors.Eight SMEs were found.The SMEs depict a sample with differing economic activities.

In the second step, the SMEs were analyzed regarding the potential use of RE-technologies.Therefore, a meeting on site was organized, where the concerning person was informed per e-mail before.In the meeting it was clarified what kind of information was available, in which way the data could be used, and if the SME would like to analyze a concrete BO.All the obtained information of the SME was formed into a BO.

In the third step, for each of the identified BO and every SME, several offers of local RE-technology providers were consulted.The bid-providers were searched over the Internet and contacted via e-mail.Often additional information was exchanged by phone with the bid-provider after the first e-mail contact.This was important to make the offer as realistic as possible.If an SME had already implemented a BO, the data was used in the analysis.Though, the search did not contain SMEs with RE-investments explicitly.

The profitability of an investment in RE-technologies was determined with an ex-ante cost-benefit analysis.Therefore, all attributes aspects that yielded in a benefit or that caused costs were estimated in a monetary entity.The NPV results as the difference of all aspects that brought a benefit minus all aspects which caused costs[31].According to the NPV, investments in RE-technologies can be categorized as either a financially beneficial BO or a financially unfavorable BO.If the NPV was bigger than zero, the composition of the technical components of RE constituted a profitable BO.All aspects which could not be measured in a monetary entity were not considered in the analysis.The vague estimation of these aspects would bias the analysis and diminish the validity of the result.

4.1. Calculations of the NPV and Sensitivity Analysis

By reference to the framework derived in Section 3, the NPV of RE-technologies for Swiss SMEs is calculated as follows:

Concretely,

where,

lt: Lifetime of the investment;

paE: Produced amount of electricity;

caE: Consumed amount of electricity by the SME;

fc: Feed-in compensation;

paH: Produced amount of heat;

caH: Consumed amount of heat by the SME;

pH: Obtained price for produced heat;

i: Interest;

j: jth year after the first operation;

S: Subsidies;

tS: Tax savings;

Ecj: Energy costs for the jth year;

Ic: Total investment costs;

Mcj: Maintenance costs for the jth year;

h: Hours for exploitations;

hc: Hourly compensation for exploitations.

When performing a cost-benefit analysis, different assumptions about future events have to be made, which underlie an uncertainty[31].The biggest uncertainty of this research is the aspects of the environment.To see how stable the NPV concerning these aspects of the environment is and how profitable these BOs under a changing economic environment are changing, respectively, a sensitivity analysis for the four attributes subsidies, electricity and heat prices, and interest will be executed.

The subsidies will be simulated with values between 0 and 30% on the initial investment costs, the maximum of a possible subsidy[32].The moment of disbursement will not be considered.The electricity price will be simulated with the feed-in compensation.By the end of 2009, the feed-in compensation for PV plants with a smaller capacity than 30 kW was maximal 74 cent/kWh[33].Afterward the feed-in compensation was never so high again.Therefore,the sensitivity analysis for the electricity price will be done between 5 cent/kWh and 80 cent/kWh.The heat price will be simulated between 3 cent/kWh and 25 cent/kWh.25 cent/kWh corresponds to the triple of the actual oil price on the 16th of March 2018[34].As a reference for the interests, the LIBOR and the 10-year government bond of Switzerland, and the interest of the taxes will be regarded.Considering these three interests, an sensitivity analysis between –1% and 3% seems reasonable[35],[36].

4.2. Samples

The samples consisted eight different SMEs from the region of Berne and Lucerne in Switzerland.The analysis was confidential, so no further information about operation, number of employees, hierarchy, etc.was provided.The samples were active in different economic sectors and showed a different level of energy consumption.

Summarizing Table 1, the electricity production with solar energy on SMEs’ roofs has the biggest potential for the use of RE-technologies.The wind energy can only be used to produce electricity of SME A and wood to produce heat can only be used by SMEs A and F.No SME possesses biomass.

5. Results

With the existing resources of the samples, five BOs have been identified and tested.Table 2 illustrates the set of assumptions in order to calculate the NPVs of different BOs.

The idea of the BO1 is to use solar energy with a PV plant in order to produce electricity.If at a moment of production, the SME also consumes electricity, the produced electricity will supply the SME’s consumption.At the moment the produced electricity exceeds the needed electricity, the surplus energy will be fed in the public electricity grid and the SME will be compensated by the energy supply company with the feed-in compensation.A BO exists, when 1) the level of produced electricity is low and used for own consumption,and the productions costs for the produced electricity are lower than the electricity price of the public grid.Or 2) the level of produced electricity is high and exceeds the own consumption, therefore it is fed in the public grid and the production costs are lower than the feed-in compensation.

Table 1: Sample description

Table 2: Assumptions for NPV-calculation

The investment in BO1 included the costs for the PV modules, the installation of the modules, inverter and scaffolds, the working hours of the electrician, as well as further additional installations.

The BO1 has been tested for SMEs A, B, D, E, H, M, and S.Only SME F did not have conditions to install PV modules on the roof.In total, 14 different offers have been calculated and analyzed.

As shown in Table 3, five BO1 have a positive NPV and therefore are profitable.Four of these BOs concern SME D which has very high electricity consumption.The BOs PV 1, PV 2, and PV 3 of SME D correspond to the PV plants on three different roofs for which none exceeds the peak performance of 30 kWp.As SME D has a separate port for each PV plant, the offers PV 1, PV 2, and PV 3 can be summed up to PV 4 which generates an NPV of 50000 CHF after 20 years.If not all plants are installed, the NPV of a single plant is between 4000 CHF and 6000 CHF.Considering that the investment costs for a single plant are around 70000 CHF, the NPV seems very low.The BO for SME M also has a positive NPV with 57515 CHF.In the initial costs of the offer for SME M, the scaffold to install the PV plant is not included since the SME has to renovate the roof anyways.For all other BOs, the NPV is below zero.Therefore, the BO1 is not profitable.Remarkable is the BO of SME E.The offer contained, for a plant with a peak performance of 29.5 kWp,investment costs of 37490 CHF and maintenance costs of 2500 CHF/year to 3500 CHF/year (3000 CHF/year was chosen for the calculations).The maintenance costs seem to be very high and contrast strongly with the other offers.If the calculations are made with 0.5% of the investment costs for the maintenance costs, the NPV would be positive with a value of 6160 CHF.

It seems the absolute electricity consumption and the NPV of BO1 are linearly related (see Fig.2).All BOs with a positive NPV have higher consumption of the produced electricity than 17000 kWh/year, where all BOs with less consumptions have a negative NPV.The highest NPV of SME M can be explained with the missing scaffold costs.The outlier on the negative side is caused by the very high maintenance costs of the BO1 of SME E.

On the other hand, there seems to exist no linear reletionship between the size of the plant by reference to the produced electricity and the NPV (see Fig.3).

The idea of BO2 is a PV plant for which the produced electricity is not only used if the SME needs electricity for its main operation, but also to provide charging points for electric vehicles.Since the feed-in compensation is often very low, the own consumption should be raised by charging the electric vehicles.For the BO2, we assume that the employee comes with the car to work and leaves it on the parking place for the whole day.Therefore,the employee is the beneficiary.But the SME can subtract the amount of the employee’s salary and offer this option as an incentive.The car is charged only if the sun is shining and enough electricity is produced.The BO contains five charging points.Theinvestment costs contain the charging points, the metering management system, and the electric installation.Possible drill holes for the electricity ports are not considered.

Table 3: NPV for BO1

Fig.2.Relation between NPV and energy consumption.

Fig.3.Relation between NPV and size of power plant.

The BO2 could only be analyzed for SME E.Three different offers were consulted.In 2017 the part of hybrid or electric vehicles was 1.5% and 0.3% of all vehicles on Swiss streets, respectively[37].This is one hybrid or electric vehicle on 56 non-hybrid or electric vehicles.Only SME E has more than 56 parking places and therefore it is meaningful to analyze an investment in charging points for electric vehicles.

The BO2 is profitable (see Table 4).Every offer has a positive NPV.Crucial for the positive NPV are the cost savings for petrol, which result in a high annually return on invest.

The BO3 is very similar to the BO1.The only difference is the energy source.In BO1, the electricity is produced out of the solar energy with a PV plant.For the BO3, the electricity is produced out of wind energy with wind turbines and a generator.The turbines can be freestanding or installed on the roof of a building.If the turbine is freestanding, it is possible that additional infrastructure is needed to feed in the electricity in the public grid and the grid capacities have to be increased.Like for BO2, the costs for such construction work cannot be defined without an expert on site.Therefore, such costs will not be in the cost-benefit analysis.

For SME A, three offers were considered for the analysis.One was for turbines on the roof of the building.The others were freestanding turbines differing in size.

None of the BO resulted with a positive NPV;therefore, the BO3 is financially not profitable (see Table 5).The smaller the turbine, the lower the NPV is.If the own consumption could be raised with a heat pump for example the NPV increases.

The BO4 consists of solar thermic collectors, which use the solar energy to produce heat.The solar energy is used to heat the water or to heat the water and the building.Storing the heat is crucial for the effective use of collectors.Often in summer when the generated heat of the collectors is the highest, the SME’s need for heating is low.Solar collector covers can be used to lower the heat production in summer.In terms of profitability, solar collector covers create no financial return.The size of the solar thermic plant depends mostly on the size of the boiler, i.e.the heat storage.Often the size of the boiler is given, as there is no endless space available to install a boiler of any size.However, if an SME builds a new building, the possibility of using the solar energy to heat should be considered.

Therefore, the BO4 only considers the cost savings from heating with solar thermic collectors.This implies that for the moments where there is not enough heat gained out of solar energy, another heater is needed.The investment costs occur mainly for collectors, pump, control system, expansion tank, and construction work.

The BO4 has been analyzed for SMEs A and M.Only for these two SMEs, the size of the boiler was known.

For none of the BO, a positive NPV was calculated, and therefore, the BO4 is financially not profitable (see Table 6).

The BO5 consists of a woodstove or a woodstove in combination with solar thermic collectors.As the sun is not shining every time, heating with wood is more flexible and can be adjusted with the heat production of the collectors.

Table 4: NPV for BO2

Table 5: NPV for BO3

Table 6: NPV for BO4

The BO arises out of the fact that with the available wood, oil-based heating costs can be reduced.The investment costs include the woodstove itself and the costs of BO4 if the solar thermic collectors are included too.

The BO5 was analyzed for SMEs A and F.Both SMEs are the only ones, which possess the resource firewood.For each offer, a positive NPV resulted.Decisive for the positive NPV were the oil-related cost savings.The usage of firewood exhibits no costs.

If the woodstove is combined with solar thermic collectors, the NPV is lower than that only with the woodstove but still positive (see Table 7).This seems obvious because for the same heat performance, two different heat systems have to be implemented and paid.The possible lower investment costs for a smaller stove cannot compensate the higher investment costs for the collectors.

The sensitivity analysis showed (see Table 8) that the subsidies only have an impact on one BO; the BO PV 1 for SME B.For all other BOs, the NPV did not change from positive to negative or inversely if the height of the subsidy changed in the sensitivity interval of 0 and 30% of the investment costs.This result supports the findings of[38] as well as [39] that the initial onetime investment costs have no impact on the decision to adapt REtechnologies.An integrated financially consideration is more decisive.

Table 7: NPV for BO5

Table 8: Sensitivity analysis

The price for electricity which was simulated with the feed-in compensation had the biggest impact for BO1.For the feed-in compensation of 25 cent/kWh, the BO1 would have a positive NPV for all SMEs.The 25 cent/kWh corresponds to more or less the price an SME has to pay for its energy.Therefore, if the SME gets compensated by the same way it has to pay for electricity, the BO1 is profitable for all SMEs.

The price for oil has only an impact on a special kind of solar thermic collectors.The tubular collectors are more expensive than the traditional ones.The BO4 is, with a very high oil price and flat collectors, profitable.On the other hand, the price for oil has no implication on the NPV of BO5.

The sensitivity analysis of the interest shows the same image as the subsidies.For the BO PV 1 on SME B, the NPV would be positive with a lower interest.For all other BO of all SMEs, the NPV did not change from positive to negative or inversely if the value of the interest changed in the analysis interval of –1% to 3%.

6. Conclusion

The profitability of RE-technologies investments has been tested with eight Swiss SMEs.Additionally, it was analyzed how the profitability changed when economic environment consisting of subsidies, the prices for electricity and oil, and the interest varied.Based on the NPV calculation, two BOs, i.e.the BO2 with a PV plant complementary used to charge electric vehicles and the BO5 wood heating, were profitable.Therefore, they allow SMEs in Switzerland to engage in a decentralized energy supply.Nevertheless, RE-investments can result in negative returns too.Our results demonstrate that individual circumstances not only affect the choices in REinvestments but also their profitability.

Regarding the economic environment, the sensitivity analysis showed that the subsidies as well as the interest rate had no implication on the adoption of RE-technologies.On the other hand, the price for electricity and the price for oil had an impact.Consequently, the instrument of the Swiss Government to support the RE-technologies with the subsidies did not provide the right incentives.For the electricity market, the feed-in compensation or the buying price for electricity should be increased.

Given the ‘case study’-design of the research, results had only weak generalization claims.On the other hand, given the heterogeneous characteristics of Swiss SMEs, generalizable results regarding the effects of subsidies on RE-investments are difficult to produce.Nevertheless, our case study indicates that, for the given sample, current energy-related investment costs do not affect RE-technologies adaption.

On a further critical reflection, it has to be mentioned that the offers of the providers are a rough estimation of the costs.They gave an approximation how profitable a BO is.Thus, ex-post NPV calculations of RE-technologies are necessary to evaluate the investments.Accordingly, ex-post analysis/research of SME investments in REtechnologies for future research is recommended.This would allow to determine how good the assumption of the offers in our calculations is.Further, clustering SMEs according energy consumption patterns or geographical circumstances would further allow larger samples and results that are more generalizable.Based on such, specific sector-relevant recommendations could be drawn.

Further, adaption of RE-technologies may also be motivated by non-financial factors.Reputation concerns,environmental concerns, expectations of shareholders, increasing corporate learning competences, or a green image may also play an important role in RE-investments.However, such considerations are less quantifiable and hamper proper NPV-calculation.

Acknowledgment

The authors thank all small and medium enterprises and bid-providers that contributed to this research and further thank the two anonymous reviewers for their fruitful comments.