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Local authorities are key actors for implementing innovative energy efficiency technologies (retrofitting) to reduce end-use energy demand and consequently reduce negative effects of high energy use such as climate change and public budget deficits. This paper reports the results of a large-scale survey of German municipalities by assessing drivers and barriers for deploying LED street lighting as an example of innovative retrofits. The results indicate that competencies and capacities, transparency of the underlying technology base, and a clear proposition of savings are crucial drivers for municipal retrofitting engagement. Most significant barriers include lack of experience, the tendency to wait for future improvements of innovative energy efficiency technologies, and existing contracts with energy suppliers, manufacturers, or other conventional retrofitting contractors. Investments in municipal competency building (both regarding technologies and procurement) as well as diffusing standard tendering criteria and (public) monitoring of their effectiveness are highly recommended to accelerate the municipal modernization process. [ABSTRACT FROM AUTHOR]

Energy efficiency retrofits are often impeded by high perceived investment risks, long payback periods and a lack of skills. At the municipal level these issues are particularly pronounced as procuring, implementing, and managing retrofits can exceed existing municipal governance capacities. The diffusion of municipal LED street lighting as a replacement for conventional lighting serves as an example. This paper argues that technological (e.g. complexity and maturity), economic (e.g. selling services vs. products and financing costs), institutional (e.g. property situation and contracts) and competency barriers to retrofitting (e.g. lack of measurement capacity and qualified facilitators) translate into transaction costs. We develop a taxonomy of appropriate modes of municipal retrofitting governance based on transaction costs economics. The findings indicate that more market-based solutions, energy performance contracts in particular, can facilitate the procurement of innovative energy efficiency retrofitting solutions and associated investments among municipalities if neutral tenders, open-book accounting, municipal ownership and intermediary organisations allow municipalities to choose appropriate governance structures for particular technologies and retrofits. [ABSTRACT FROM AUTHOR]