Working Paper | 2013

Overcoming Organizational Barriers to Waste Heat Recovery

by Chonnikarn Fern Jira and Deishin Lee

Abstract

Waste heat recovery is a proven technology for improving energy efficiency and reducing the environmental impact of energy-intensive manufacturing firms. However, evidence suggests that opportunities for recovering waste heat are untapped. By showing how the process characteristics of waste heat recovery are manifested in the manufacturing firm's capital budgeting process, we identify organizational barriers to waste heat recovery. In particular, the tight operational coupling between the waste heat recovery system and the manufacturing process, and the technological complexity present challenges during capital project evaluation. We study three mechanisms that can potentially overcome these adoption barriers: government subsidy, corporate environmental initiative, and partnership with an energy service company (ESCO). Our findings suggest that a combination of subsidy with a corporate environmental initiative can make waste heat recovery attractive enough for the manufacturer to pursue. We find that partnering with an ESCO can also create significant value. The ESCO benefits from learning effects, risk diversification, and economies of scale, thus making waste heat recovery in general more profitable and less risky.

Keywords: sustainability; energy; capital budgeting; waste heat recovery; manufacturing; Energy Industry; Manufacturing Industry;

Citation:

Jira, Chonnikarn Fern, and Deishin Lee. "Overcoming Organizational Barriers to Waste Heat Recovery." Working Paper, 2013.