This paper investigates economic incentives influencing the adoption of energy saving technology by industry, namely, CHP in UK and Dutch manufacturing sectors. The empirical analysis is based on a cross sectional time series econometric model, and examines how industrial output and historical increases in the price of electricity relative to gas prices, spark the diffusion of CHP. Production and price elasticities are estimated across heterogeneous industrial groups. Using data for 13 manufacturing sectors the model shows that fuel cost savings and industry output impact significantly on CHP uptake. Model outcomes are found to differ depending on the period of estimation and the estimation period is key in determining the impact of gas price and purchased power prices on adoption of CHP
