Evidence from the industrial assessment program on energy investment decisions by small and medium-sized manufacturers

Conference · Wed Dec 31 04:00:00 EST 1997

OSTI ID:347615

Woodruff, M G ^[1]; Jones, T W ^[2]; Roop, J M; Seely, H E ^[3]; Dowd, J ^[4]; Muller, M R ^[5]

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1. International Energy Agency, Paris (France)
2. Alliance to Save Energy, Washington, DC (United States)
3. Pacific Northwest National Lab., Richland, WA (United States)
4. Dept. of Energy, Washington, DC (United States)
5. Rutgers-the State Univ., Piscataway, NJ (United States)

This paper highlights the results of a detailed analysis of investment decisions regarding energy efficiency measures at small and medium-sized manufacturing plants participating in the US Department of energy`s Industrial Assessment Center (IAC) program. This paper is drawn from a larger study that found that most small and medium-sized plants participating in the IAC program will invest in an energy efficiency measure only if the investment`s capital cost can be paid back in operational savings within two years. The most frequently recommended and implemented measures have payback periods of one year or less. Implementation rates appear to drop off only slightly with increasing payback periods. Moreover, the average payback period associated with implemented measures does not appear to increase with plant size or annual energy cost. First cost appears to be more important than payback period in determining whether a recommended measure will be implemented. For most recommended energy efficiency measures, a payback period of up to two years implies an implicit (real) discount rate of about 50%, which is higher than the values typically used to characterize industrial investment decisions in energy-economic models.

• Sponsoring Organization: USDOE, Washington, DC (United States)
• OSTI ID: 347615
• Report Number(s): CONF-970701--
• Country of Publication: United States
• Language: English

Related Subjects

32 ENERGY CONSERVATION, CONSUMPTION, AND UTILIZATION
DECISION MAKING
ECONOMICS
ENERGY CONSERVATION
INDUSTRY
RETROFITTING