Information programs for technology adoption: the case of energy-efficiency audits

Abstract

We analyze technology adoption decisions of manufacturers in response to energy audits provided by Department of Energy Industrial Assessment Centers. Using fixed effects logit estimation to control for unobserved plant characteristics, we find that plants respond as expected to financial costs and benefits, though there are unmeasured project-related factors that also influence investment decisions. Revealed behavior of plants suggests that most require a payback of 15 months or less as their investment threshold, corresponding to an 80% or greater hurdle rate. This is consistent with survey results for stated investment thresholds, suggesting that these programs do not lower hurdle rates, as some suggest. Plants reject about half of recommended projects; the primary rationale given is their economic undesirability, as opposed to remaining market or organizational barriers. This raises concerns regarding engineering-economic estimates of the degree to which there are feasible no-net-cost opportunities for reducing energy consumption and carbon emissions.