Industrial Capital Investment Decisions: Pathways to Energy Program Engagement

Key findings

This report presents social science-informed findings drawn from qualitative interviews with industrial firms and energy program administrators, complemented by a review of the relevant literature. The findings below examine how medium- and large-sized U.S. industrial firms, particularly those in energy-intensive industries, make energy-related investment decisions and how organizational structures, decision processes, and program design features influence participation in utility- and government-run capital investment (CapEx) energy efficiency (EE) programs:

Program participation is triggered by project needs. Though large incentives can occasionally generate new project ideas, most firms learn about incentives only after a project idea is already conceived. Yet conception alone does not guarantee implementation. Incentives materially affect whether projects clear internal feasibility, payback, or approval thresholds and proceed at all, making visibility at the right time in the project development life cycle more important than promotion itself.
Projects that “tick multiple boxes” are more likely to gain approval. Energy-saving investments are more likely to win internal approval when they support projects tied to other strategic priorities such as productivity, safety, quality, or decarbonization than when they rely solely on cost savings for justification.
Program timing, from outreach to implementation, matters. Budget cycles and narrow maintenance windows shape feasibility. Short or unpredictable program timelines deter participation.
Program staff can provide significant value by helping firms match incentives to emerging project needs, but this is only possible when a long-term relationship and trusted communication channels already exist.
Internal “scanners”—employees who actively seek out cost-reduction opportunities—are underutilized outreach contacts. These individuals act as information hubs or gateway agents in internal communication channels and are the first people others consult when looking for ways to reduce project costs or identify program opportunities.
Internal buy-in is key to advancing projects and program participation and is usually decisive when obtained. Projects that do not secure informal approvals and multilevel internal engagement prior to submitting a project for formal review can, in some firms, result in the project being automatically declined.
Effective firm outreach requires more nuanced profiling. Program administrators need more nuanced firm profiles to understand variation in decision drivers, market pressures, priorities, and internal processes rather than relying on a one-size-fits-all, cost-focused approach to outreach.

Industrial energy program participation remains often lower than desired, even when significant financial incentives are available, suggesting that simply offering financial incentives is insufficient. This gap points to the need for behavioral approaches to understanding how firms make these decisions. This report applies a social science lens to explore how medium- to large-sized U.S. industrial firms, particularly those in energy-intensive industries, make energy-related capital investment decisions and how they decide to engage with energy programs.

Combining a literature review with qualitative interviews with industrial facility staff and third-party program administrators, this research maps the factors that affect these decisions and how they can be influenced. The findings are intended for federal, state, and utility energy program designers, administrators, and implementers who want to strengthen industrial participation by better aligning engagement strategies with real-world business priorities.

The research affirms that decisions to invest in energy efficiency are shaped by organizational dynamics, strategic goals, trust, and timing rather than being fundamentally triggered by financial incentives alone. Energy efficiency investments largely emerge from identified operational needs (such as maintenance, productivity, reliability, or efficiency improvements), and firms commonly engage with programs encouraging capital investment when they fit an existing project idea or plan. Larger, more capital-intensive efficiency project investments routed through higher-level capital planning processes are more likely to be framed as strategic. For these larger projects, programs offering substantial funding can play a more salient role in spurring a project idea by improving their competitiveness within internal capital allocation processes.

Across both large and small energy projects, however, participation in CapEx improvement programs largely hinges on whether a program is discoverable during the opportunity period in which a project is being scoped or considered. Although project definition and funding considerations typically evolve iteratively, firms generally develop and refine capital projects first and then seek out funding to support them, whether the development occurred within the year or in previous cycles. Funding availability can influence scope and timing, but it is only one of several decision factors. What often matters most is whether the right internal actors know where to look or who to contact when a project is under consideration, not the overall frequency of program promotion. Information discoverability and relationship positioning at the critical points in a firm’s project development process is essential; identifying which internal staff influence these information pathways is just as important as the content of the program information itself.

Other behavioral factors such as timing and predictability also strongly influence program participation. Industrial firms plan major capital expenditures months or years in advance, following strict fiscal and maintenance cycles. Programs with short, uncertain, or unpredictable funding windows—or those with inconsistent, lengthy, or slow administrative processes—introduce uncertainty and pose real production risks that discourage uptake. These risks cause companies to discount the perceived value of incentives or forgo participation altogether. Programs that offer long, predictable funding windows, minimal administrative friction, and consistent availability can enable industrial firms to plan ahead and incorporate program participation into their budgeting and maintenance schedules.

Internal communication channels within firms play an outsized role in shaping program awareness. Internal accounting practices and weak communication between engineering and finance functions remain persistent barriers to capital project approval. Interviewees easily and consistently identified internal staff (such as sustainability managers or government affairs personnel) who act as “scanners” and serve as gateways of internal communication channels by actively identifying cost-saving and incentive opportunities and distributing that information throughout the organization.

These individuals are typically the first point of contact for engineers seeking to reduce project costs. More strategic outreach to these scanner communicators, beyond relying on existing points of contact or energy “champions,” represents a valuable and overlooked channel to improve program awareness within the firm.

Financial motivations such as improved productivity and energy cost reductions remain the clearest drivers of EE investment. Incentives are valued for their ability to improve project proposal returns or make an otherwise unfavorable project financially viable, but payback period remains a strict requirement for most firms.

The strategic impact of investments often supersedes profitability as the primary driver of investment choices. In many firms, the way a project aligns with strategic objectives determines not only its perceived value but also how it moves through internal approval systems. Strategic priorities shape how projects are categorized, and those categories dictate the metrics used to evaluate them. Most energy projects fall under financially driven categories like “cost savings” that usually require short payback periods. Given that not all energy-related investments will meet those strict payback criteria, linking energy projects to other, or even multiple, strategic objectives can improve their positionality in approval processes. Tying energy efficiency improvements to product quality, risk management, or sustainability goals can help reclassify those improvements into categories with more flexible financial thresholds or alternative success measures. Thus, positioning energy projects as contributions to overall business performance rather than as isolated cost-saving efforts may increase their likelihood of approval.

Recent U.S. federal policy shifts away from decarbonization support have made firms cautious about energy-related capital investments. Nevertheless, companies with international operations or customers maintain long-term decarbonization commitments due to unabated global market and policy pressures.

To strengthen participation in energy-related programs and to encourage the associated capital investments, program designers, administrators, and implementers could

Position CapEx energy efficiency programs as a means to achieve broader corporate objectives beyond only cost savings"
Profile firms’ strategic goals, capital investment cycle timing, and project categorization systems
Broaden engagement to multiple levels of the organization
Leverage internal scanner staff to effectively disseminate program information
Offer long, predictable funding windows and clearly signal program stability to reduce uncertainty and perceptions of program risk
Offer a staged proposal process that first encourages concept proposals from industry to assess program fit before requesting full proposals from best-fit applications
Ensure program personnel bring deep, sector-specific technical expertise
Address labor constraints by reducing paperwork, simplifying reporting requirements, and offering staffing grants

Download the report

Download

Suggested Citation

Lewallen, Grace, Reuven Sussman, and Pavitra Srinivasan. 2026. Industrial Capital Investment Decisions: Pathways to Energy Program Engagement. Washington, DC: ACEEE. aceee.org/research-report/i2601.