Rice husk generated as a by-product of rice milling process can be utilized as an energy source for rice mills. The advantages of applying the steam engine as a power source for rice mills are discussed. An economic model was developed to find out the internal rate of return, IRR, on the investment in steam engine's as an energy-saving technology in Thai rice mills. Based on the technical and economic data presented in this study, rice mills from 45 to 120 t d(-1) in size are financially feasible for investments in steam engines as an energy-saving technology for the mills. The maximum affordable husk prices at the different levels of mill use for various sizes of rice mill were analyzed and the economic performance of higher efficiency technology was also tested in this study. (c) 2004 Elsevier Ltd. All rights reserved.