Energy Efficiency Projects in Pennsylvania Small Businesses

Energy efficiency will be an important contributor to reduction of greenhouse gases (GHGs) and will help reduce America’s dependence on energy from the Middle East. The Pennsylvania Small Business Development Center (SBDC) Environment Management Assistance Program (EMAP) makes energy efficiency project recommendations to clients who request assistance. EMAP strives to become more effective in their recommendations. Based on EMAP data from August 2007 to December 2008, they want to determine if there is a relationship between a project recommendation and its implementation. The literature has examined results of other voluntary energy efficiency programs – Industrial Assessment Centers, Green Light, and Energy Star. Many projects were not implemented in spite of having a positive economic effect on the respective businesses. This phenomenon is called the energy efficiency paradox. Are these market failures of imperfect information, bounded rationality, or the principal-agent problem? Chi-squared testing was used to assess whether dependency exists between various categories of a project and the decision to implement or not. The hypothesis developed from early results and confirmed by testing is: Grant money to small businesses in Pennsylvania is the single biggest factor in the decision to implement energy efficiency projects. Analysis of data supports the conclusions from an earlier survey by researchers at the University of Pittsburgh with small businesses in western Pennsylvania during 1976/77 (Doctors, Fahey, & Patton, 1978). The biggest obstacles to energy efficiency investments are lack of capital and the perception that the potential energy savings were not worth the effort.