Determinants of energy efficiency investments in the US

This paper analyses decisions on energy efficiency (EE) investments by small and medium manufacturing enterprises in the US, which have received assessment from the Department of Energy (DoE). The results confirm the importance of payback time and investment costs as the main determining factors in deciding whether to invest in energy efficiency. Such investment recommendations are frequently not implemented even though they apparently entail major advantages and give rise to considerable energy savings. The data show results which are compatible with a series of elementary valuation processes (limited to availability of information), far removed from other, more academically ambitious methods such as Net Present Value (NPV) and the Real Options (RO) method. The paper analyses the impact of the primary resource streams (Electricity, Natural Gas, Other Energy, Waste and Others), physical situation of firms in line with their geographical locations in different US states, and changes over time from 1984 to 2009. EE investment decisions are analysed here using Probit models whose parameters are calibrated on the basis of the information held in the Industrial Assessment Centres (IAC) database. The results suggest various ideas to improve policies for promoting investment in EE, specially the IAC programme.