|Title||Adoption of Energy Technologies: the Energy Efficiency Paradox|
|Collaborators||Neil Strachan (CMU), Hadi Dowlatabadi (CMU)|
|Keywords||energy, cogeneration, UK, CO2 abatement|
The adoption of a family of new decentralized energy technologies will be crucial in determining the magnitude of future emissions of carbon. In this research we examine the adoption of gas fired engine cogeneration to meet commercial site electrical and heat requirements in the UK and the Netherlands. This technology has been commercially available for over 15 years and thus represents an opportunity to empirically study the early adoption and supply of a decentralized energy technology.
Engine cogen saves money and energy due to its high efficiency. In the UK, despite the promise of significant economic savings, engine cogen only captured 8% of its estimated market. Furthermore, during the study period the rate diffusion in the market slowed dramatically while the economic returns to the investment grew increasingly favorable. This is contrary to classical models of diffusion where it is expected that the slow start to diffusion, led by early adopters, paves the way for a rush of further installations with the total capacity installed following an exponential or S-shaped curve.
Our analysis has focused on the role of early suppliers to explain this poor uptake. Decentralized energy technologies are typically non-core investments in uncertain markets and thus require experienced and expert suppliers to successfully market this promising technology. Our analysis has found economies of scale for engine cogen units. This is due to the flat costs of maintenance. Different suppliers either marketed large profitable units, or sold smaller machines and relied on income from maintenance contracts for revenue. The long term effects of these supplier strategies for the uptake of this energy efficient technology are being investigated.
The uptake of engine cogeneration in the Netherlands has been very different, with over 4,000 installations (representing a 16 fold increase in sites per population compared to the UK). Explanatory factors for this remarkable success include the removal of uncertainty in energy markets, the expertise of suppliers, government support mechanisms and the attitude of Dutch companies and consumers to energy conservation. A cross country comparison study to explain this difference in uptake is ongoing.
We are seeking to better understand factors affecting non-core energy investments while facing regulatory and economic uncertainty. This analysis provides important new insights into the adoption of any energy technology (with the promise of economic and emissions savings) in developed countries with evolving and uncertain energy markets.