Energy conservation in a SME cluster: a system dynamics study

SMEs are considered the backbone of a nation’s economy as they contribute to exports, GDP, and employment. These firms face several challenges and aim to keep up their production targets and ensure the desired quality of products. In the process, they lose sight of energy consumption and emissions. Their electrical energy consumption is also considerable—in 2015, 13% or more (i.e., equivalent to 74 exajoules (EJ)) of the cumulative global energy demand was consumed by SMEs. Indian SMEs fail to take even simple energy-saving measures and lack effective implementation of such measures; SMEs account for almost 45% of GHG emissions annually. Previous studies have provided frameworks for implementing energy-efficient measures (EEM) and listed ways to ascertain their maturity in this regard. However, very little validation of these frameworks, reasons for low adaption of EEM, and actions required have been studied. Energy audit of an energy-intensive industry—washing units of jeans factories—revealed the areas requiring attention and the causes of high energy consumption. Interviews with operational managers and heads of units showed that they are non-adaptive to environmental requirements. A systems dynamics model was developed, and three scenarios were created to demonstrate the plausible energy savings and introduce learning among managers. The study proposes a changed KPI, the means to evaluate returns, and mental models for decision-making.