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In many manufacturing operations, profitable energy efficiency opportunities remain unexploited. Although previous studies have tried to explain the underinvestment, we focus on how the way in which a portfolio of opportunities is presented in a list affects adoption decisions. We use information on over 100,000 energy-saving recommendations made to more than 13,000 small and medium-sized manufacturing firms under the Industrial Assessment Centers program of the U.S. Department of Energy. We find that adoption rates are higher for initiatives appearing early in a list of recommendations. This sequence effect is consistent and large: simply moving a recommendation one position lower has the same effect on average as increasing up-front implementation cost by at least 17% from the average value. Given this impact of sequence on adoption of individual recommendations, we utilize variations within our data to examine how various sequencing approaches affect adoption at the portfolio level. Sequences in which recommendations are listed from best to worst payback achieve higher potential energy savings given the investments in energy efficiency made by the firms. We also observe a choice overload effect at the portfolio level, but the magnitude of this effect is small. © 2013 INFORMS.

We investigate the adoption of energy efficiency initiatives using information on over 100,000 recommendations provided to more than 13,000 small and medium sized firms under the Industrial Assessment Centers (IAC) program of the US Department of Energy (DOE). We build on an earlier study by Anderson and Newell (2004) that explored the impact of economic factors on the adoption of energy efficiency initiatives, by investigating the role of behavioral factors on the adoption of energy efficiency initiatives. Using a probit instrumental variable model, we investigate three behavioral factors that could affect investment in energy efficiency. First, we find that adoption of a recommendation depends not only on its characteristics but also on the order in which the recommendations are presented. Adoption rates are higher for initiatives appearing early in a list of recommendations. We find evidence that this may in part be due to anchoring effects. Second, we find that adoption is not influenced by the number of options provided to decision makers. Third, we find that adoption is higher for recommendations that need lower managerial effort. Additionally, we identify conditions under which these behavioral factors are mitigated. We draw implications for enhancing adoption of energy efficiency initiatives and for other decision contexts where a collection of process improvement recommendations are made to firms.