BASELINE MARKET RESEARCH WISCONSIN FOCUS …BASELINE MARKET RESEARCH WISCONSIN FOCUS ON ENERGY...

BASELINE MARKET RESEARCH

WISCONSIN FOCUS ON ENERGY

Prepared for

Wisconsin Department of Administration Madison, Wisconsin

Prepared by

XENERGY Inc.

Madison, Wisconsin

together with

Energy Center of Wisconsin Madison, Wisconsin

Opinion Dynamics Corporation

Madison, Wisconsin

Prahl & Associates Madison, Wisconsin

TecMRKT Works

Oregon, Wisconsin

November 28, 2001

Revised February 22, 2002

ma:project:wdoa0001:reports:drafts:overall:formatted:title

XENERGY Inc. • 2001 W. Beltline Highway • Suite 200 • Madison, WI 53713 • (608) 277-9696

This document is the property of the Wisconsin Department of Administration, Division of Energy,

and was funded through the Focus on Energy Program.

Baseline Market Research Team:

Energy Center of WisconsinEnergy Center of Wisconsin Opinion Dynamics CoOpinion Dynamics Corporationrporation

Prahl & AssociatesPrahl & Associates TecMRKT WorksTecMRKT Works

TABLE OF CONTENTS

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SECTION RS REPORT SUMMARY............................................................................. RS–1

RS.1 Introduction.................................................................................................RS–1

RS.2 Products.......................................................................................................RS–1

RS.3 Key Findings and Recommendations .........................................................RS–2

RS.3.1 Gap Analysis...................................................................................RS–2 RS.3.2 Multifamily Study...........................................................................RS–2 RS.3.3 Major Markets Study ......................................................................RS–4

SECTION ES EXECUTIVE SUMMARY ....................................................................... ES–1

ES.1 Introduction.................................................................................................ES–1

ES.1.1 Background on the Wisconsin Focus on Energy ............................ES–1 ES.1.2 Study Goals.....................................................................................ES–1 ES.1.3 New Data Collection and Analysis .................................................ES–1 ES.1.4 Products...........................................................................................ES–2

ES.2 Gap Analysis Findings and Research Recommendations...........................ES–2

ES.2.1 Information Needs ..........................................................................ES–2 ES.2.2 Existing Literature ..........................................................................ES–3 ES.2.3 Key Gaps and Recommendations ...................................................ES–3

ES.3 Multifamily Study Findings........................................................................ES–4

ES.3.1 Some Population Estimates.............................................................ES–4 ES.3.2 Owner Segments .............................................................................ES–4 ES.3.3 Equipment Characteristics ..............................................................ES–5 ES.3.4 Decision-Making.............................................................................ES–6 ES.3.5 Equipment-Related Decisions.........................................................ES–6 ES.3.6 Energy-Efficient Actions Taken .....................................................ES–7 ES.3.7 Barriers............................................................................................ES–7 ES.3.8 Performance Contracting ................................................................ES–7 ES.3.9 Recommendations...........................................................................ES–8

ES.4 Key Findings and Recommendations for Major Markets Programs ........ES–10

ES.4.1 Indicators of Baseline Market Conditions ....................................ES–11 ES.4.2 Business Investment Decision-Making.........................................ES–13

SECTION 1 INTRODUCTION ...................................................................................... 1–1

1.1 Background ....................................................................................................1–1

1.1.1 Objectives ..........................................................................................1–1 1.1.2 Approach and Rationale.....................................................................1–2

1.2 Products..........................................................................................................1–6

1.2.1 Literature Database ............................................................................1–6 1.2.2 Fact Sheets .........................................................................................1–6

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1.2.3 White Paper on Residential Research ................................................1–6 1.2.4 Industry Profiles.................................................................................1–7 1.2.5 Data Sets ............................................................................................1–7

1.3 Organization of the Report.............................................................................1–7

SECTION 2 GAP ANALYSIS ....................................................................................... 2–1

2.1 Gap Analysis..................................................................................................2–1

2.1.1 Background ........................................................................................2–1 2.1.2 Findings..............................................................................................2–2 2.1.3 Recommendations............................................................................2–16

2.2 Methods........................................................................................................2–18

SECTION 3 MULTIFAMILY STUDY............................................................................. 3–1

3.1 Background ....................................................................................................3–1

3.1.1 Objectives ..........................................................................................3–1 3.1.2 Approach and Rationale.....................................................................3–2

3.2 Key Findings and Recommendations ............................................................3–3

3.2.1 Some Population Estimates................................................................3–4 3.2.2 Owner Segments ................................................................................3–4 3.2.3 Equipment Characteristics .................................................................3–5 3.2.4 Decision-Making................................................................................3–6 3.2.5 Equipment-Related Decisions............................................................3–6 3.2.6 Energy-Efficient Actions Taken ........................................................3–7 3.2.7 Barriers...............................................................................................3–7 3.2.8 Performance Contracting ...................................................................3–7 3.2.9 Recommendations..............................................................................3–8

3.3 Organization of the Chapter.........................................................................3–10

3.4 Estimates of Multifamily Operators in Wisconsin.......................................3–11

3.5 Owner Segments ..........................................................................................3–14

3.5.1 The Small Operator Segment...........................................................3–15 3.5.2 The Mid-Sized Operator Segment ...................................................3–16 3.5.3 The Large Operator Segment...........................................................3–17 3.5.4 The Large Fee-Management Segment .............................................3–20

3.6 Characteristics of Energy-Using Equipment ...............................................3–21

3.6.1 Results from the Survey...................................................................3–21 3.6.2 Results from the CEE Assessments .................................................3–24

3.7 How Equipment and Energy-Related Decisions are Made..........................3–33

3.8 The Equipment in Buildings ........................................................................3–34

3.9 The Criteria Decision-Makers Use in Making Decisions ............................3–35

3.9.1 The Criteria for Deciding on Projects..............................................3–35

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3.9.2 Criteria for Equipment in Common Areas.......................................3–37 3.9.3 Criteria for Equipment in Individual Units......................................3–38

3.10 Energy-Efficient Actions Taken ..................................................................3–40

3.10.1 Internal Lighting ..............................................................................3–40 3.10.2 Outdoor and Parking Area Lighting ................................................3–41 3.10.3 Space Heating and Cooling Equipment ...........................................3–42 3.10.4 Water-Heating Boilers .....................................................................3–43 3.10.5 Swimming Pool, Jacuzzi, or Spa......................................................3–44 3.10.6 Laundry Equipment for Residential Use..........................................3–44

3.11 Past Participation in Energy Programs ........................................................3–44

3.12 Plans for the Future......................................................................................3–45

3.13 Barriers to Taking Energy-Efficient Actions...............................................3–45

3.14 Performance Contracting in the Multifamily Sector....................................3–51

3.15 Methods........................................................................................................3–53

3.15.1 Data Sources ....................................................................................3–53 3.15.2 Analysis of Existing Data ................................................................3–58 3.15.3 CATI Surveys ..................................................................................3–61 3.15.4 Analysis of the Assessment Data from the Focus on Energy

Pilot ..................................................................................................3–62 3.15.5 Key Findings from the Data Collection Effort ................................3–64

SECTION 4 MAJOR MARKETS STUDY ..................................................................... 4–1

4.1 Background ....................................................................................................4–1

4.1.1 Objectives ..........................................................................................4–1 4.1.2 Priorities.............................................................................................4–1 4.1.3 Approach............................................................................................4–1

4.2 Key Findings and Recommendations for Major Markets Programs .............4–2

4.2.1 Indicators of Baseline Market Conditions .........................................4–3 4.2.2 Business Investment Decision-Making..............................................4–4

4.3 Detailed Findings ...........................................................................................4–6

4.3.1 Summary Characteristics ...................................................................4–6 4.3.2 Energy-Savings Potential...................................................................4–9 4.3.3 Baseline Energy-Efficiency Investment and Facility

Management Practices .....................................................................4–12 4.3.4 Baseline Indicators: Renewable Energy .........................................4–23 4.3.5 Business Decision-Making: Energy Efficiency in the Context

of Business Strategy and Investment ...............................................4–27 4.3.6 Barriers and Opportunities...............................................................4–36 4.3.7 Energy-Efficiency Programs: Recognition and Participation.........4–39

4.4 Methods........................................................................................................4–40

4.4.1 Data Sources ....................................................................................4–40

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4.4.2 Energy-Savings Potential.................................................................4–41 4.4.3 Omnibus Survey...............................................................................4–46 4.4.4 In-Depth Interviews .........................................................................4–51

4.5 References....................................................................................................4–51

APPENDIX A WHITE PAPER ON RESIDENTIAL RESEARCH NEEDS........................A–1

APPENDIX B FACT SHEETS .........................................................................................B–1

APPENDIX C MAJOR MARKETS INDUSTRY PROFILES ............................................C–1

C.1 Introduction...................................................................................................C–1

C.2 Information Compiled...................................................................................C–1

C.3 Industries Profiled.........................................................................................C–2

C.4 Segment Definitions......................................................................................C–3

APPENDIX D BIBLIOGRAPHY ......................................................................................D–1

APPENDIX E MULTIFAMILY CATI DATA SET DOCUMENTATION AND SURVEY INSTRUMENT ..........................................................................................E–1

E.1 Multifamily Data Set Documentation........................................................... E–1

E.2 Multifamily CATI Survey Instrument .......................................................... E–1

E.3 Multifamily Survey Codebook ................................................................... E–19

APPENDIX F MULTIFAMILY IN-DEPTH INTERVIEW DATA SET DOCUMENTATION AND SURVEY INSTRUMENT ................................. F–1

F.1 Multifamily In-Depth Interview Data Set Documentation ........................... F–1

F.2 Multifamily In-Depth Interview Survey Instrument..................................... F–1

APPENDIX G MAJOR MARKETS OMNIBUS SURVEY DATA SET DOCUMENTATION AND SURVEY INSTRUMENT ................................ G–1

G.1 Major Markets Omnibus Survey Data Set Documentation ..........................G–1

G.2 Major Markets Omnibus Survey Instrument ................................................G–2

APPENDIX H MAJOR MARKETS IN-DEPTH INTERVIEW DATA SET DOCUMENTATION AND SURVEY INSTRUMENTS...............................H–1

H.1 Major Markets In-Depth Interview Data Set Documentation.......................H–1

H.2 Major Markets In-Depth Interview Survey Instruments...............................H–1

H.2.1 CODED OPEN-ENDED QUESTIONNAIRE FOR INDUSTRY OBSERVERS ..............................................................H–1

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H.2.2 CODED OPEN-ENDED QUESTIONNAIRE FOR OWNER-OCCUPANT END-USERS..............................................................H–8

APPENDIX I GUIDE TO THE LITERATURE DATABASE ............................................. I–1

I.1 Description..................................................................................................... I–1

I.2 Database Organization ................................................................................... I–1

I.3 Reports in the Database ................................................................................. I–1

I.4 Database Content ........................................................................................... I–2

I.5 Searching the Database.................................................................................. I–6

I.5.1 MS-Access Version ........................................................................... I–6 I.5.2 MS Excel Version .............................................................................. I–9

APPENDIX J RESEARCH PRIORITIES......................................................................... J–1

J.1 Agricultural Market Research Priorities ........................................................ J–1

J.2 Commercial Market Research Priorities ........................................................ J–4

J.3 Industrial Market Research Priorities ............................................................ J–7

J.4 Residential Market Research Priorities.......................................................... J–9

J.5 Steps Used to Develop Market Research Priorities — Agricultural, Commercial, Industrial Sectors.................................................................... J–11

J.6 Steps Used to Develop Market Research Priorities — Residential Sector ........................................................................................................... J–12

APPENDIX K MAJOR MARKETS OMNIBUS SURVEY DETAILED TABLES...............K–1

RS REPORT SUMMARY

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R REPORT SUMMARY

RS.1 INTRODUCTION

This market baseline research study was conducted to support the Wisconsin Focus on Energy in program planning, implementation, and evaluation. The goals of the study were

• to review and catalog existing information relevant to program design, targeting, and evaluation;

• based on this review, to identify outstanding research needs for program administration and evaluation;

• to conduct new data collection and analysis to address some of these gaps; and

• to identify remaining research needs.

New data-collection and analysis efforts in this study include

• a study of owner/manager decision-making and practices related to energy efficiency in multifamily housing, and

• a study of decision-making and practices related to energy efficiency in the Major Markets area (commercial, industrial, and agricultural sectors).

RS.2 PRODUCTS

In addition to this report, stand-alone products of the study include the following.

• A literature database, cataloging and rating the sources reviewed.

• Fact sheets providing concise summaries of selected topics, based on literature reviewed.

• A white paper on residential research needs, based on the gap analysis and results of the multifamily study.

• Industry profiles characterizing key issues, decision-making, and potential roles of energy efficiency for selected commercial, industrial, and agricultural subsectors, based on the Major Markets study.

• Databases with responses to the Multifamily and Major Markets surveys and in-depth interviews.

SECTION RS REPORT SUMMARY


RS.3 KEY FINDINGS AND RECOMMENDATIONS

RS.3.1 Gap Analysis

Key information needs and recommendations for future research based on the gap analysis include the following.

• In all sectors, more detail on decision-making processes, and distinctions among groups of market actors.

• In the residential sector, systems to measure and track the statewide market share for ENERGY STAR

®-qualified products, such as light bulbs, refrigerators, and clothes washers.

• In the commercial sector, greater distinction among different kinds of building owners, architects, and engineers, as well as a deeper understanding of information flows and sources.

• In the industrial sector, more information on the markets and decision-making for energy-efficiency measures other than motors. An assessment of the effects to date of past roadmapping in the metalcasting and forest products industries is also warranted.

We also recommend ongoing use of the detailed market research prioritization developed by this project, as well as use and ongoing updates of the literature database. The printed and electronic data sets provided with this report should also be mined for further insight into Multifamily and Major Markets customer decision-making and practices.

RS.3.2 Multifamily Study

Market Description

In Wisconsin, about 18,000 individuals and organizations own or manage about 417,000 multifamily units, buildings with four or more units. About a fifth of owners with four or more units control about three-quarters of all Wisconsin multifamily properties. The multifamily market can be characterized in terms of four market segments: small, medium, large owners, and large fee-managed. Decision-making complexity increases from the first to the last of these segments.

Equipment

Heating equipment in the multifamily market consists mostly of gas-fired individual space heating and water-heating systems. Less than half of multifamily units have air-conditioning, and a substantial percentage of the installed air-conditioning systems are window units. About 20 percent of the properties with four or more units have renter-supplied refrigerators, and about three-quarters of buildings with four or more units have central laundry rooms for the tenants.



Energy-Related Decision-Making

Across all of the multifamily segments, major equipment purchases and replacement decisions are based on equipment reliability, expected life of the equipment, and ease of maintenance. These criteria are more important than energy consumption or energy savings. Price is also important. For small appliances, such as refrigerators, stoves, etc., price, size, color, and feature sets are key decision drivers. More than 60 percent of the multifamily owners and managers report having taken some measures to save energy in the last 4 years. Typically, these involve light bulb replacement and, in some cases, fixture replacement. About half of the owners and managers report taking some action to lower space-heating cost and consumption. A third of this group report having taken part in at least one energy-efficiency program, typically a lighting or bulb program.

Key Barriers

Key market barriers to purchasing and installing energy-efficient equipment are low to nonexistent return on their investment, concern over equipment reliability, and lack of capital for higher-cost items. These barriers are strong among some market actors, but not among others. The barriers are not so strong that they cannot be overcome by good program designs, good program marketing, and the use of incentives.

Recommendations

Targeting

• Continue to focus on contractors and suppliers.

• Consider focusing on central laundry equipment.

• Contractors and vendors may be a more effective target than apartment associations.

• It may be necessary to target the whole design community, as opposed to selected members of the community.

• New apartments and apartments being rehabilitated are good targets for the program.

Messages

• Promote reliability, expected life of equipment, and ease of maintenance in addition to savings.

• Study the characteristics of products that are valued by multifamily operators and use those valued characteristics in targeting the community.

• Develop credible and believable evidence for decision-makers about energy savings and the economics of energy savings.

• Consider ways to address the higher cost of efficient equipment.



• Examine what information really makes a difference and provide that selectively in appropriate formats.

Role of Product and Service Providers

• Learn more about when and why contractors recommend efficient equipment.

• Assess whether performance contracting is effective in this market.

Split Incentives

• Address the issue of who is responsible for energy efficiency.

• Program designs should target those who benefit from savings.

• Make information available to renters about efficient appliances.

RS.3.3 Major Markets Study

Key findings from the baseline research in regard to the commercial and industrial markets for energy-efficiency products, services, and programs follow.

Findings

Business Investment Objectives

Most major investments (over $10,000) are made with the express purpose of improving production efficiency; that is, boosting output and revenue with less than proportionate increases in labor and materials.

Capital-Expenditure Decisions

Capital-expenditure decisions are made at the highest levels of business organizations and are often guided by informal methods to evaluate competing investments in financial terms.

Sources of Funding for Capital Investments

Nearly one-half of the firms interviewed in-depth reported funding capital investments out of cash reserves only.

Investments in Energy Efficiency

Omnibus survey respondents representing 28 percent of the Wisconsin business establishments that reported they had made an investment in their facilities of $10,000 or more had a primary objective of reducing energy costs. This percentage was significantly higher among medium-sized and large companies: 39 and 44 percent, respectively.



Organizational Infrastructure

The percentage of Wisconsin businesses with staff explicitly assigned by senior management to manage energy use and costs is relatively low. Omnibus respondents representing only 29 percent of Wisconsin business establishments reported having either a person or group assigned to this function. In almost all cases, energy management was assigned to one individual as opposed to a group or department.

Energy Efficiency in New Investments

Fifty-seven percent of facilities represented in the omnibus survey reported applying energy efficiency as a criterion in selecting equipment for new construction and renovation projects.

Replacement Policies

Only 18 percent of firms represented in the omnibus survey reported having equipment-replacement policies that required the use of efficient models; an additional 21 percent reported replacement policies that gave preference to efficient models. In almost all cases, these policies consisted of informal guidelines as opposed to written specifications.

Recommendations

Business Investment Objectives

Successful implementation will require that program planners and marketers convince commercial and industrial end-users that increased productivity and energy efficiency have practical linkages.

Capital-Expenditure Decisions

Marketing of programs oriented to stimulating interest in big-ticket energy-efficiency projects needs to be targeted high in the customer’s organizational hierarchy if it is to be effective. For smaller companies, proprietors, their relatives, and general managers need to be reached. For larger companies, the approach should be made no lower than the plant manager level.

Sources of Funding for Capital Investments

The offer of subsidized financing (as opposed to rebates) will have relatively little effect as a market intervention.

Frequency of Facilities Investments

Programs designed to influence investments undertaken in the “natural” flow of facility upgrades will have only a relatively small portion of the population to work with each year, at least in the smaller-sized groups.



Market Barriers

The relatively low incidence of typical barriers does not mean that programs should not attempt to address them. In particular, efforts to reduce customers’ perception of risk and increase knowledge of energy-management procedures would be useful. At the same time, program planners must recognize that each of these strategies represents a strong opportunity for only a fraction of customers, even within a given business type and size.

ES EXECUTIVE SUMMARY

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E EXECUTIVE SUMMARY

ES.1 INTRODUCTION

ES.1.1 Background on the Wisconsin Focus on Energy

Wisconsin Focus on Energy is a statewide program operated by the Wisconsin Department of Administration (DOA) to promote energy efficiency. Related objectives are improving environmental quality, enhancing economic development, and supporting electrical system reliability. Programs are administered by a nonprofit Residential Program Administrator to address the residential sector, and by a nonprofit Major Markets Program Administrator to address the commercial, industrial, and agricultural sectors. An Evaluation contractor oversees evaluation for all programs and activities. The administrators are selected by and under contract to DOA.

ES.1.2 Study Goals

This Baseline Market Research study was conducted to support Focus on Energy in program planning, implementation, and evaluation. The goals of the study were




• to identify remaining research needs;

The review of existing information and identification of research needs is referred to as the Gap Analysis. The study was conducted between June and October of 2001, in the early stages of the first-year contracts for program administration and evaluation. The study was, therefore, oriented to address the most immediate needs of the programs and evaluators at an early point in their development. Research priorities were determined based on input from stakeholders, including the program administrators, evaluators, and DOA staff.

ES.1.3 New Data Collection and Analysis

New data-collection and analysis efforts in this study include

SECTION ES EXECUTIVE SUMMARY


• a study of owner/manager decision-making and practices related to energy efficiency in multifamily housing, and

• a study of decision-making and practices related to energy efficiency in the Major Markets area (commercial, industrial, and agricultural sectors).

Both these studies included analysis of some existing data sources as well as collection of new data from both standardized surveys and in-depth interviews. Many substantive findings from the new research are presented in this report. In addition, detailed tables of Major Markets omnibus survey results and the electronic databases of Multifamily and Major Markets survey and interview responses are provided. These printed and electronic data sets represent rich sources that can be mined for further insight on customer decision-making and practices in these areas.

ES.1.4 Products

This report provides results of the new data-collection and analysis efforts conducted, as well as documentation of the study approach. The written stand-alone products listed below are also included as appendices to this report. The literature database is provided in electronic form. A description and guide to the database is included as an appendix. In addition to this report, stand-alone products of the study include the following.

• A literature database, cataloging and rating the sources reviewed in the gap analysis.

• Fact sheets providing concise summaries of selected topics, based on literature reviewed.

• A white paper on residential research needs, based on the gap analysis and results of the multifamily study.

• Industry profiles characterizing key issues, decision-making, and potential roles of energy efficiency for selected commercial, industrial, and agricultural subsectors, based on the Major Markets study.

• Databases of responses to the Multifamily and Major Markets surveys and in-depth interviews.

ES.2 GAP ANALYSIS FINDINGS AND RESEARCH RECOMMENDATIONS

ES.2.1 Information Needs

The gap analysis was driven, in large part, by a prioritization of information needs by both Focus on Energy program and evaluation staff. This prioritization suggested specific, high-priority areas of need in which we searched for existing information:

• In the residential sector, priorities tended to address market activities (such as new single-family construction) and certain technologies (such as windows, appliances, etc.).



• In the commercial and industrial sectors, priorities included more information about decision-making by both end-users and trade allies and the interaction between them.

• In the agricultural sector, priorities centered around the attitudes of rural residents toward their communities (for community-based energy programs) and farmers’ decision-making criteria and use of trade allies in energy-related decisions.

ES.2.2 Existing Literature

A review of about 200 reports and articles related to priority research areas showed that the literature is (unsurprisingly) somewhat dominated by residential-sector topics. Across the board, the existing literature tends to be focused more often on end-users of energy and consumers of products and services. There is substantially less literature on upstream market actors, such as manufacturers, distributors, retailers, builders, contractors, and design professionals. The residential literature covers a fairly broad array of technologies and services. The nonresidential literature is less likely to look at specific end-uses and savings measures, and covers a narrower range of technologies when technology-specific findings are presented.

ES.2.3 Key Gaps and Recommendations

Research gaps occur where there are high-priority information needs that are not met by existing literature or currently planned research. Much of the market research and evaluation work planned for the next 3 years has not been specified in detail, and this makes it difficult to identify research gaps except in broad terms. If the current array of research plans is implemented, the information will do much to eliminate current information gaps, especially the relative lack of knowledge regarding market actors other than end-users of energy. Nonetheless, our analysis suggests that the following gaps should be addressed when feasible, either as part of planned or future research activities.

• Research into attitudes, decision-making processes, and actions of market actors needs to drill deeper than past research has done and put energy issues in the context of other motivating factors when it comes to decision-making that affects energy use.

• Residential research needs to include more tracking of ENERGY STAR®-qualifying

products beyond furnaces and central air conditioners, where market penetration is well-documented.

• Commercial research needs to enhance our understanding of how non-office markets work and distinguish more among different kinds of building owners, architects, and engineers. These latter groups have been well-studied, but treated as homogenous in



much of the past research. Among specific topics, more detail on information needs and information gathering by decision-makers in the commercial sector would be helpful.

• The markets for industrial motors and adjustable speed drives have been studied fairly thoroughly in the past, at the possible expense of other types of energy-saving opportunities and the markets associated with them. Future research should move beyond decisions and markets related to motors.

• The database developed by this project should be made available and updated, so it can serve as a resource to Focus on Energy program and evaluation staff.

• The detailed market research prioritization completed by this project should be consulted and considered by Focus on Energy program and evaluation staff when planning additional market research.

The above are the big-picture gaps. Though the body of this report also looks at potential gaps for more specific research areas, we suspect that much of the real gap analysis will occur as market researchers and evaluators map out their activities in detail. In this sense, the literature database is an important product of this project.

ES.3 MULTIFAMILY STUDY FINDINGS

ES.3.1 Some Population Estimates

• There are approximately 18,000 multifamily owner/operators who own or manage 417,000 housing units in Wisconsin.

• About 16 percent of multifamily units, buildings with four or more units, are owned or managed by operators with 4–10 units (small owner operators). Another 12 percent of units have owner operators who own or manage 11–20 units (medium small owner operators). Twenty-three, twenty-five and twenty-four percent of units are owned or managed by operators with 21–70 units (medium-sized owner operators), 71–230 units (medium large owner operators), and 231+ units (large owner operators), respectively.

• Small owner operators, medium small owner operators, medium-sized owner operators, medium large owner operators, and large owner operators are 62 percent, 19 percent, 14 percent, 4 percent, and less than 1 percent of multifamily owner operators, respectively.

ES.3.2 Owner Segments

We have identified four owner segments.

Small Owner Operator

The operator in the small-owner segment may own from 4 to 50 units or more with one to several small buildings. The operation is usually run as a sideline to other employment or



economic activity. The owners are usually a single individual or a couple. These operators may have someone on-site who looks after the building in exchange for an accommodation on the rent. These operators care for all functions and make all decisions. Because of multiple employment, these operators are typically extremely busy.

Medium Owner Operator

The operator in the medium owner-operator segment may have from 50 to 100+ units in buildings that may range in size from fourplexes to buildings/complexes that have 50 to 100 units. The size of these operations is sufficiently large so that the owner is able to make a living from the rental operation. The owner may have two or three employees, typically persons who may take care of maintenance matters. The operator in this segment may manage multifamily units for other owners or may search out investors to invest in properties. Typically, units have on-site managers who deal with issues in the building for an accommodation on the rent.

Large Owner Operator

The large owner-operator segment typically owns or manages from several hundred to several thousand units in multiple larger buildings and complexes. These operators have investors in their company; for example, large retirement funds. There are usually multiple layers of staff ranging from the CEO to assistant managers. On-site staff are typically professionals. There is usually a manager, an assistant manager, and leasing staff. There may be on-site maintenance or floating maintenance crews. The on-site manager is responsible for decisions involving amounts of money less than $1,000 or $2,000. Senior property managers manage several properties and are responsible for major decisions and for making proposals for changes to properties. Proposals must compete with other internal proposals for changes to property and proposals for capital expenditures in other lines of business. Senior property managers have a fair amount of autonomy. They may receive direction and guidance from higher-level managers. These companies are usually involved in multiple lines of business.

Large Fee-Managed

The large fee-managed segment is very similar in structure to the large owner-operator segment. The key difference is that senior property managers in these organizations usually report directly to the owner or owners of the properties. They have a great deal of autonomy. Owners rely on these managers to guide them in their decision-making. Managers make proposals for changes to the buildings that are accepted or rejected by the owners. Clients of these companies include large insurance companies and pension plans who hold property and need someone to manage the property.

ES.3.3 Equipment Characteristics

• The dominant heating fuel used in multifamily housing is natural gas.



• Sixty percent of premises with four or more units have individual water heaters and 68 percent are individually heated.

• Less than half of the premises in this study had air-conditioning. Window air-conditioning predominates.

• About 20 percent of renters in premises with four or more units supply their own refrigerators.

• About two-thirds of multifamily operators provide a laundry room. About one-fifth of the units have laundries in the unit.

ES.3.4 Decision-Making

• In the small owner-operator segment, owners make the decisions. The same is true in the medium-sized segments.

• In the large owner-managed and fee-managed segments, the senior property managers are the key decision-makers in collaboration with owners. For smaller purchases, the senior property managers have the final say. For decisions involving large amounts of capital, senior property managers develop proposals which compete for funds within large owner-management establishments and are agreed to by the owner in the fee-managed system.

• In the large owner-management and fee-managed segments, the priority for capital is for those things that will maintain and enhance the value of the property. The value of the property is assessed in terms of the ability to attract and maintain renters and to maintain or increase the rents.

• On-site managers and maintenance managers inform decision-making, but do not drive decision-making.

ES.3.5 Equipment-Related Decisions

• Multifamily operators nearly uniformly say that reliability, expected life of the equipment, and ease of maintenance use are the key criteria they apply in making equipment selections.

• Reliability and lifetime are important because the cost of replacing a piece of equipment can easily exceed the cost of purchasing the equipment.

• Price is also important in equipment choices.

• In Wisconsin, three-quarters of the multifamily operators say they purchase appliances from retail outlets, such as Sears and Home Depot. Around 20 percent purchase equipment from large distributors and wholesalers. Decisions about appliances tend to be made on-the-spot.

• Price, size, color, and feature sets are key drivers in purchase decisions.



ES.3.6 Energy-Efficient Actions Taken

• Sixty percent of the survey respondents report that they have installed energy-efficient lighting in their facilities. Much of this activity involved replacing bulbs in existing fixtures. About 5 percent of the respondents reported replacing fixtures.

• Thirty-five percent of the multifamily operators reported they installed efficient lighting in exterior locations. Energy and cost savings motivated the changes.

• Half of the multifamily operators reported making energy-efficiency improvements to heating and cooling systems in some of their units. About half were motivated for energy-efficiency reasons. Many of the remainder incorporated energy efficiency when doing replacements in response to equipment failures or aging.

• About 10 percent of the multifamily operators reported changes to domestic water boilers and laundry equipment.

• One-third of the multifamily operators reported that they have participated in one or more energy-efficiency programs.

ES.3.7 Barriers

• Overall, multifamily operators reported their concerns about low or nonexistent return on investment was the most important barrier to energy-efficiency investments. This concern is two-fold. One is that in some situations the owner is not incentivized; for example, when the owner purchases an efficient refrigerator but the tenant pays the electric bill. A second is that energy-savings claims are suspect.

• Other important barriers include concerns about equipment reliability, lack of capital, and the high cost of efficient equipment in relation to energy-efficient equipment.

• None of the beliefs about barriers appear to be so strongly held that they are insurmountable.

ES.3.8 Performance Contracting

• About one-sixth of the operators were very interested in performance contracting, and another third were interested. Some of the people we talked with in the qualitative interviews were interested, but wary.

• Prior research indicates that vendors of performance contracting services do not see the multifamily sector as a good prospective market for these services.

• Only a few of the multifamily owners have been approached by vendors offering services through performance contracts.

• Related strategies to reduce cash-flow and capital barriers might be useful in some subsectors of the multifamily market; for example, in targeting larger, older buildings with central boilers in situations where the property is fee-managed. Such strategies may



be explored to see if they can be cost-effective either as a program option or ultimately for delivery by the private sector.

ES.3.9 Recommendations

Based on the findings above, the following opportunities can be identified for programs addressing multifamily housing.

Continue to Focus on Contractors and Suppliers

The data in this study imply a need to maintain an emphasis on contractors and suppliers for supplying efficient unit-level heating and water-heating equipment to multifamily owners. In light of the fact that tenants often pay energy costs, it is unclear if owners and heating contractors will install less-efficient heating equipment in rental units to reduce costs. This is an issue that may need to be examined.

Supply Information to Renters About Efficient Appliances

Because some renters supply their own refrigerators, there may be value in targeting renters with information about efficient refrigerators. Likewise, there is some potential value in targeting smaller multifamily operators with information about efficient washing machines. Emphasizing the water-saving benefits of efficient washers in addition to the energy-saving benefits might increase the appeal of efficient equipment.

Consider Focusing on Central Laundry Equipment

There is some potential for targeting owners with central laundry equipment. The target audience would be both the owners and equipment suppliers.

Contractors and Vendors May Be More Effectively Targeted than Apartment Associations

Typically, owners and managers do not belong to apartment associations, nor do they appear to network extensively with each other. Utilizing apartment associations may not be as expeditious a path for marketing multifamily operators as working through contractors and vendors.

It May be Necessary to Target the Whole Design Community

If program managers want to target people who influence design, they need to target building professionals quite broadly because there is no clear subgroup of design professionals that deal relatively exclusively with multifamily housing.



New Apartments and Apartments Being Rehabilitated Still Have Some Market Potential

Energy efficiency is penetrating a part of the multifamily market that is rehabilitating and constructing new buildings and units. There is still substantial room for further penetration of energy-efficiency products and services in new and renovated buildings.

Promote Reliability, Expected Life of Equipment, and Ease of Maintenance in Addition to Savings

Energy programs typically focus on energy and cost savings when promoting energy-efficient equipment. Our data suggest that managers may also want to promote reliability, expected life of the equipment, and ease of maintenance.

Study What Products are Valued by Multifamily Operators

Decision-makers use a variety of criteria in making equipment choices. Price is important, and rebates and buydowns can clearly help the penetration of efficient equipment. However, it is also important to make certain that efficient models are available with the size, color, and feature sets that are desired by multifamily operators. A multifamily operator may be more interested in an efficient refrigerator if it has valued characteristics other than efficiency. We may want to study what valued products are in the multifamily environment and then promote efficient products that have these characteristics.

Credible and Believable Evidence is Needed on Energy Savings and the Economics of Energy Savings

Especially in the larger firms, managers regularly evaluate economic trade-offs of various options. Promoting energy efficiency requires developing credible and believable evidence tailored to each case.

Consider Ways to Address the Higher Cost of Efficient Equipment

The higher cost of efficient equipment in relation to standard equipment can be addressed in a variety of ways. One way is to directly address the cost of equipment by working with manufacturers on manufacturing processes. Creating volume sales can lead to price reductions. Both of these strategies probably require coordination with national and regional organizations. Efficient-equipment buydowns are an option. Buydowns have the advantage of increasing the buying power of the program. Rebates are yet another approach.

Program Designs Should Target Those Who Benefit from Savings

Multifamily program designers need to understand the split-beneficiaries of the savings associated with the common areas, where the owner-manager pays the bills, and the efficiency of



the equipment in the units in which the tenant pays the bills. Program designers may want to consider making different program options available to the multifamily owner/manager, depending on who pays the utility bills. There may be a need for different incentives and program participation options for these two conditions. However, these types of program designs add significant complexity to the marketing function as a result of helping owners and managers understand when an option is available and when it is not. This may make the program a harder sell.

Examine Whether Information Really Makes a Difference

We need to learn more about what information multifamily operators use, when they use it, how they use it, and how the information that multifamily operators need might differ from the information that already exists. Multifamily operators use relatively small amounts of information gleaned from trusted sources. We shouldn’t assume that providing more information will necessarily increase the penetration of efficient equipment.

Learn More About When and Why Contractors Recommend Efficient Equipment

We probably need to know much more about how, how often, and why contractors make recommendations for efficient equipment. This information could help to shape an effective contractor program.

Address the Issue of Who is Responsible for Energy Efficiency

There are a number of owners/managers who believe that energy efficiency is a tenant conservation issue rather than an efficiency problem with its roots in the building shell, the equipment, and the operation and maintenance of the building. Program managers may need to address this view in order to gain the adoption of energy-efficient equipment.

Assess Whether Performance Contracting will be Effective in this Market

Performance contracting may be able to play a role in this sector, but if it does, it will probably be used mostly by a small number of larger players. The larger players expressed interest, but also wariness. There are currently private-sector firms who may be able to meet the needs of the larger players without creating a program.

ES.4 KEY FINDINGS AND RECOMMENDATIONS FOR MAJOR MARKETS PROGRAMS

Key findings from the baseline research in regard to the commercial and industrial markets for energy-efficiency products, services, and programs follow.



A summary of the key findings from the baseline research in regard to the commercial and industrial markets for energy-efficiency products, services, and programs is provided in this section. Detailed findings and discussion follows in the remainder of this chapter.

ES.4.1 Indicators of Baseline Market Conditions

The Omnibus survey contained numerous items designed to generate indicators of baseline levels of awareness, knowledge, and adoption of energy-efficiency measures, as well as development of management resources and procedures to support energy-efficiency efforts. The paragraphs below present findings for selected indicators.

• Levels and objectives of facility-related investments. Overall, respondents representing 14 percent of all commercial, industrial, and agricultural facilities in Wisconsin that reported making investments of $10,000 or more in their facilities during the 2 years prior to the survey. The most frequently mentioned objectives for facility investment among commercial customers were to increase floor space and customer/staff comfort. Among industrial respondents, the most frequently mentioned investment objectives were to replace failing equipment and to reconfigure existing space for new uses.

Implications for program design and marketing. These results suggest that programs designed to influence investments undertaken in the “natural” flow of facility upgrades will have only a relatively small portion of the population to work with in a given year, especially in the smaller-size groups. Energetic and effective program marketing will, therefore, be critical to overall success.

• Investments in energy efficiency. Among all customers that reported making facility investments in the prior 2 years, 28 percent reported that at least one of the investments had energy cost reduction as a primary objective. This percentage was significantly higher among medium-sized and large companies: 39 and 44 percent, respectively.

• Organizational infrastructure. The percentage of Wisconsin businesses with staff explicitly assigned by senior management to manage energy use and costs is relatively low. Omnibus respondents representing only 29 percent of Wisconsin business establishments reported having either a person or group assigned to this function. In almost all cases, energy management was assigned to one individual as opposed to a group or department.

• Energy efficiency in new investments. Fifty-seven percent of facilities represented in the Omnibus survey reported applying energy efficiency as a criterion in selecting equipment for new construction and renovation projects.

• Replacement policies. Only 18 percent of firms represented in the Omnibus survey reported having equipment-replacement policies that required the use of efficient models; an additional 21 percent reported replacement policies that gave preference to efficient models. In almost all cases, these policies consisted of informal guidelines as opposed to written specifications.

• Awareness of renewable energy measures. Reported awareness for most renewable technologies across Wisconsin commercial and industrial customers seems to be at the



modest 25–40 percent range with little variation by subsector. These include photovoltaics (26 percent), daylighting (22 percent), transpired solar (23 percent), passive solar (41 percent), biomass (15 percent), and fuel cells (39 percent).

• Market barriers. Generally, a low percentage (20–40 percent) of customers reported experiencing the barriers to energy-efficiency investments most frequently identified by market analysts and program evaluators. The percentage of Omnibus respondents who reported that they agreed or strongly agreed that they experienced various barriers is as follows:

j Lack of knowledge of non-energy benefits of energy-efficiency improvements: 12 percent.

j Insufficient time and ability to manage hassles of becoming informed about energy-efficiency opportunities: 22 percent.

j Concern about overstatement of energy-savings claims: 41 percent.

j Lack of financing for energy-efficiency improvements considered worthwhile: 34 percent.

There was little variation in the reported severity of barriers by customer size or subsegment.

Implications for program design and marketing. Given the wide range of topics that the Omnibus survey needed to address and the complexity of factors that influence investment decisions, we caution readers not to interpret the findings on market barriers to mean that such barriers are unimportant. Moreover, the research process did not support the development of a full inventory of market barriers. Rather, we had to concentrate on the barriers most frequently identified in other studies. The relatively low reported incidence of typical barriers among Wisconsin businesses does not mean that programs should not attempt to address them. In particular, efforts to reduce customers’ perceptions of risk and increase knowledge of energy-management procedures will be useful. Program strategies to address these objectives might include:

j Preparation of case studies detailing the costs and benefits of energy-efficiency projects in Wisconsin.

j Promotion of performance contracting as a risk reduction and project financing mechanism.

j Development of a variety of project financing mechanisms that can be matched to a firm’s preferences for risk and access to existing financing sources.

At the same time, program planners must recognize that each of these strategies represents a strong opportunity for only a fraction of customers, even within a given business type and size.



ES.4.2 Business Investment Decision-Making

The key findings from the in-depth and Omnibus surveys in regard to general business investment decision-making objectives and practices, as they relate to energy efficiency are as follows.

• Business investment objectives. Most major investments (over $10,000) are made with the express purpose of improving production efficiency; that is, boosting output and revenue with less than proportionate increases in labor and materials. Of the recent 59 investments identified and discussed by respondents to the in-depth survey, 37 were to increase productivity. Nine were made to reduce production costs. Of these, eight involved energy efficiency.

Implications for program design and marketing. Business decision-makers clearly make a distinction between investments to increase production efficiency and those made primarily to reduce costs in existing processes. They value increased efficiency more than reduced costs and categorize energy-efficiency investments with the latter objective. Successful implementation of the strategy will require that program planners and marketers convince commercial and industrial end-users that increased productivity and energy efficiency have practical linkages. At the moment, business decision leaders do not “naturally” seem to consider energy-efficiency investments as investments in overall production efficiency.

• Capital expenditure decisions. Capital expenditure decisions are made at the highest levels of business organizations and are often guided by informal methods to evaluate competing investments in financial terms. The key findings in regard to capital investment decision-making were as follows.

j Fifty-nine of the 78 respondents to the in-depth survey used a formal capital budgeting process, implemented annually or, in some cases, more frequently.

j Thresholds for consideration of an item in the capital budget process were generally quite low. One-third submitted all capital expenditures of $1,000 or less to the budgeting process; few had minimum thresholds above $10,000.

j While management teams participated in gathering information for capital expenditure decisions, authority was highly centralized in CEOs, Boards of Directors, and the occasional high corporate official.

j Between one-third and one-half of organizations use formal financial evaluation methods to rank and assess capital investments.1 Others use simple payback calculations or, in many cases, no formal analyses that take account of relative costs and benefits of different projects.

Implications for program design and marketing. These findings suggest that marketing of programs oriented to stimulating interest in big-ticket energy-efficiency

1 The in-depth and Omnibus surveys differed significantly on this result, most likely due to differences in the

way the items were administered and the responses coded.



projects needs to be targeted high in the customer’s organizational hierarchy if it is to be effective. For smaller companies, proprietors, their relatives, and general managers need to be reached. For larger companies, the approach should be made no lower than the plant manager level.

• Sources of funding for capital investments. Nearly one-half of the firms interviewed in depth reported funding capital investments out of cash reserves only. Other respondents reported using various combinations of cash, working capital lines, and asset-based borrowing. Only 21 percent of respondents to the Omnibus survey reported that lack of financing was a serious barrier to investments in energy efficiency.

Implications for program design and marketing. These findings suggest that it will be useful to offer financial incentives for efficient equipment and designs in a number of formats, including rebates, reduced interest loans, and subsidies to performance contracts. This will be necessary to match the wide range of approaches that firms currently use for project financing.

1 INTRODUCTION

ma:project:wdoa0001:reports:final baseline:1_introduction 1–1 Wisconsin Department of Administration

1 INTRODUCTION

1.1 BACKGROUND

1.1.1 Objectives

The Wisconsin Focus on Energy

Wisconsin Focus on Energy is a state-sponsored program to promote energy efficiency across all sectors in the state. Other objectives of the program are enhancement of environmental quality, economic development, and electrical system reliability. The Focus on Energy program policy emphasizes market transformation as a program strategy. This strategy seeks to make lasting changes in the markets for energy-efficiency products by changing understanding and decision-making processes and practices. Both consumers and providers of energy-related products and services are targeted by the programs. Focus on Energy is managed by the Wisconsin Department of Administration (DOA). The work is conducted by third-party administrators under contract to DOA. These administrators include

• Residential,

• Major Markets (commercial, industrial, schools, government, and agricultural), and

• Renewables.

In addition, there are administrative contracts that support Focus on Energy in each of the following areas:

• Marketing,

• Evaluation,

• Environmental Research and Development, and

• Compliance Agent.

Market Baseline Study Objectives

The purpose of this market baseline study is to develop information that is useful to both program administrators and program evaluators. Administrators will use the information to develop and refine program strategies. Evaluators will use the information to establish benchmarks against which market transformation progress can be assessed. Needs of the Residential and Major Markets program areas were identified from direct input from the program administrators. The Renewables program administrator was not selected at the

SECTION 1 INTRODUCTION


time this study was undertaken; information needs in this area were identified by DOA staff responsible for the program. Evaluation needs were identified by members of the evaluation contract team. Marketing and Environmental Research and Development issues were not explicitly identified. Goals of the study were




• to identify remaining research needs.

The review of existing information and identification of research needs is referred to as the Gap Analysis. This analysis includes the review of literature, identification of preliminary information needs, and recommendations for future research. Like the scope of Focus on Energy itself, the scope of this baseline study is broad: All market segments in all parts of the state are potentially of interest. At the same time, the study had a limited budget and a mandate to provide results within a few months from its start date. Accordingly, the study focused on those areas where information is of greatest interest and value to the programs, and where useful information could be compiled or collected within the resources and timeframe of this project.

1.1.2 Approach and Rationale

This project was conducted on a tight timeline, to provide timely information to help guide program development and establish baseline information for evaluation prior to significant program activity. Despite the need for a quick turnaround on the project, it was also necessary to obtain stakeholder input to determine the most urgent information needs. In addition, review of existing sources was needed to avoid unnecessary effort in responding to those needs. To balance these concerns, the project approach involved three primary stages:

1. Research Plan Development.

2. Primary Data Collection and Literature Review.

3. Analysis and Reporting.

Gap analysis activities spanned all three phases.



Research Plan Development

The research plan development involved several steps:

• stakeholder meetings to understand key information needs;

• high-level gap analysis to identify major gaps in existing information that could meet stakeholder needs;

• development of high-level research plans, identifying primary data collection to address major gaps as well as the focus of the more detailed gap analysis;

• revision and refinement of the high-level plans based on DOA and stakeholder review; and

• development of detailed research plans, including sampling plans and data-collection instruments, also with DOA and stakeholder review.

To determine what market information would be of greatest value, baseline project staff met with program administrators, program evaluators, and DOA program staff. These stakeholders were asked to describe their information needs and, in particular, what information would be of most immediate value in program planning and evaluation. Based on this input, as well as a preliminary assessment of available information, a high-level plan was developed. This plan identified the main areas of focus for the gap analysis and for the primary data collection. The gap analysis focused on information likely to be relevant to Wisconsin and the Wisconsin Focus on Energy programs, taking into account both the current configurations and possible changes over the life of the Focus on Energy program. Primary data collection was directed toward information for which available information sources were limited, and for which there was an urgent need by program administration and/or evaluation. For administrators, urgent need meant that effective program planning in the first program year was dependent on obtaining this information. For evaluators, urgent need meant that the information was critical to establishing a baseline against which program effects could be tracked, and this baseline state was likely to change in the first year as a result of program activity, so that immediate data collection was needed. Additional considerations in developing the high-level plan were the practicality of obtaining useful information within the baseline study constraints and other anticipated data-collection activities that might address the information need.

Gap Analysis

The gap analysis was a structured literature review. Relevant literature were reviewed, classified in terms of subject matter, and rated in terms of value to the study. The classification and ratings are described in Section 2.



The scope of the gap analysis was limited for practical reasons. The focus of the gap analysis was defined in terms of

• the literature sources investigated,

• the reports selected from these sources for review, and

• the information elements from these reports that were cataloged and rated in the literature review.

This focus was determined based on DOA and stakeholder input from the research planning phase of the project. The gap analysis had two primary products:

• a literature database, described briefly in Section 1.2 below, and in more detail in Section 2; and

• recommendations on future research needs, presented at the end of Section 2.

In addition, as described above, preliminary gap analysis contributed to development of the research plans for this study. The gap analysis helped to identify the areas where primary data-collection needs were greatest, and also provided background material used in developing the detailed data-collection methods.

New Research

Development of new data to fill key information gaps was an important objective of this study. Also important was providing new information to program administrators and evaluators in forms that would be most useful to them. Accordingly, while a major portion of the project resources went to fieldwork for new data collection, these data-collection efforts were integrated with distillation of information from existing sources as well as analysis of the new data itself. Priority areas identified within the residential sector focused on market activities (such as new single-family construction) and specific technologies. Priorities in the other sectors tended to feature decision-making and interactions between end-users and trade allies. The detailed research priorities developed are included as Appendix J. This document should be useful in planning future work. Taking into consideration these priorities as well as what information could practically be assembled within the project constraints, two main topics were identified for new research in the project. The first, in the residential sector, focused on multifamily buildings. The second spanned the consumer segments of the Major Markets program area. For each of these topic areas, the new research combined collection of new data with synthesis of data and findings from existing studies.



Primary Data Collection

The primary data-collection activities associated with these efforts were:

• surveys with multifamily property owners and managers;

• in-depth interviews with multifamily property owners and managers;

• a general survey of commercial, industrial, and agricultural establishments; and

• industry-specific in-depth interviews with commercial, industrial, and agricultural businesses and industry observers.

Residential Multifamily Study

In the residential sector, the new research consisted of interviews and a survey with multifamily operators. This study was designed to serve a need expressed by Residential program staff for a better understanding of market structure and decision-making in this area to guide program development. The study focused on decision-making by owners and operators of multifamily property. Residential program evaluators also identified a need for baseline market tracking data on ENERGY STAR

® lighting and appliance sales. However, the timing and budget of this study made initiating such an effort impractical within this project.

Major Markets Study

On the Major Markets side, both program administrators and evaluators saw a need for better information across all segments on organizational decision-making, understanding, and practices related to energy efficiency. Information on both the customer side and the suppliers of products and services was seen as critical. The Major Markets study in this project addressed only the customer or demand side. Collecting information on trade allies is more complex because of the diversity of services that need to be addressed. In addition, the Major Markets programs give greater emphasis to affecting customers. Thus, a trade ally study could more easily be deferred at least by a few months. A program administrators’ need for information is somewhat less urgent on the supply side than on the demand side, and there is less likelihood that the baseline for market effects will be substantially affected by program activity within the first few months of the programs. Because of the general limited information available in the Major Markets area, this study was designed to be broad rather than deep. A more or less uniform approach was taken to obtain information on all segments of the Major Markets area. The results provide a platform for future work targeted to more specific issues in key segments.



1.2 PRODUCTS

Products of this study are designed to make results accessible at varying levels of detail. Copies of all written products, other than interim planning documents, are included with this report. Some of these products are also designed to serve as stand-alone information sources.

1.2.1 Literature Database

The primary product of the gap analysis is an easy-to-use database of literature sources reviewed. This database allows users to find available literature on a particular topic. Along with each source are ratings of the quality of the information provided for each topic. The database is designed so that new information developed or reviewed in the course of program administration and evaluation can be added easily. A bibliography of all documents cataloged in the database is included as Appendix D. A description of the database structure and how to use it is given in Appendix I.

1.2.2 Fact Sheets

Fact sheets summarizing key information for a particular market component were developed for a few areas. These sheets were designed to provide key information at a glance, in a single two-sided sheet. These reports were developed primarily from documents reviewed as part of the gap analysis. Topics were targeted to high-priority information that could be gleaned from the existing literature.

Fact sheets were assembled for the following topic areas:

• Rental Housing in Wisconsin,

• Sustainable Commercial Construction, and

• The Market for Residential Windows.

Copies of the fact sheets are included in Appendix B.

1.2.3 White Paper on Residential Research

A white paper was prepared on the state of knowledge of the residential sector and directions for new research. The white paper consolidates, in one concise document, the current state of understanding of residential energy-efficiency markets, the decisions facing program administrators, and the types of research still needed to help inform those decisions. The white paper is included as Appendix A. Development of a white paper was considered a useful means of consolidating information for the residential sector for several reasons:



• The sector is relatively homogeneous.

• Extensive information is already available for this sector.

• The Residential Focus on Energy programs are generally extensions of previously existing, well-developed programs.

1.2.4 Industry Profiles

Industry profiles were developed for each of several commercial and industrial segments. These profiles are included as Appendix C. For each industry, the profiles identify

• key industry trends,

• issues affecting profitability,

• decision-making structures, and

• roles that energy efficiency can play in improving productivity and profitability.

The industries targeted for these profiles were based on the industry definitions in the Major Markets program area. The approach of developing industry profiles was taken for the Major Markets program area because the customers that make up the sector are very diverse. In addition, the programs are still in a state of flux, so that further information on needs and decision-making by segment can be of substantial use in program development. A summary of key issues identified in the industry profiles is included in the Major Markets study findings in Section 4.

1.2.5 Data Sets

Included as Appendix K to this report is a detailed set of cross-tabulations from the Major Markets omnibus survey. Electronic data bases of survey and interview responses have also been provided for each of the primary data collection efforts, Major Markets and Multifamily surveys and in-depth interviews. These electronic and printed data sets represent rich sources that can be mined for further insight into customer decisionmaking and practices in these markets.

1.3 ORGANIZATION OF THE REPORT

The main findings of the report are presented in the next three sections:

2 Gap Analysis

3 Multifamily Study Findings

4 Major Markets Study Findings.



Recommendations for future research are included at the end of the gap analysis discussion. Other stand-alone products are provided as appendices.

A White Paper on Residential Research Needs

B Fact Sheets

C Major Markets Industry Profiles

D Bibliography

Additional background material is also provided in appendices.

Data Documentation and Survey Instruments E Multifamily CATI survey F Multifamily in-depth interviews G Major Markets omnibus survey H Major Markets in-depth interviews I Literature database guide

Stakeholder Input J Detailed priorities

Detailed Tables of Survey and Interview Responses K Major Markets omnibus survey

2 GAP ANALYSIS

ma:project:wdoa0001:reports:final baseline:2_gap analysis 2–1 Wisconsin Department of Administration

2 GAP ANALYSIS

2.1 GAP ANALYSIS

2.1.1 Background

The term “gap analysis” refers to an effort we undertook to identify what is already known about -efficiency markets, and then compare this to information needs for program

planning, implementation, and evaluation. The purpose of the analysis was to identify immediate research needs, and to ensure that the new data collection for market research and program evaluation fills any gaps in the existing body of knowledge about Wisconsin energy-efficiency markets without duplicating work that has already been done. The analysis was also designed to help make available existing information to stakeholders. The most direct application of this analysis is in near-term data-collection activities, which include market assessment and program evaluation for the Residential and Major Markets programs, as well as new data collection within the baseline project itself. In the longer term, the database on available information developed in this gap analysis is designed to be updated with new information. The database will, therefore, provide a current resource to inform program and evaluation activities, as well as future data-collection efforts. The Baseline Project Team conducted an extensive review of potentially relevant literature. To make this task tractable, we focused our efforts on broad-priority areas that we identified based on feedback from program and evaluation staff and on our own review of planning materials (see “Methods” at the end of this section). We reviewed about 200 individual reports and papers in all, covering most of the publicly available Wisconsin-specific literature and national literature in selected areas. Our basic unit of analysis was a “market research area,” which we defined as a particular combination of

• sector (and subsector);

• market actor;

• technology or service; and

• type of information (i.e., whether the literature described a market, examined interactions among market actors, tracked market indicators, etc.).

We cataloged the reports that we reviewed in these terms and, because most reports covered multiple market research areas, documented about 1,300 individual items in all. We also rated each research area in terms of its applicability to Wisconsin markets, the freshness of the data,

SECTION 2 GAP ANALYSIS


and the reliability and thoroughness of the results. These individual ratings were combined into an overall 0–5 score for each item. One caveat about our literature review is that it covers only publicly available market research and program evaluation studies; many studies and program evaluations conducted by Wisconsin utilities between about 1985 and 1995 are not available to outsiders. Also, for the most part, we confined our search to typical sources of energy-efficiency-related literature; we did not search general sociological or financial literature, for example.

2.1.2 Findings

The Focus on Energy programs span many combinations of sectors, subsectors, technologies, market actors, and types of information — as did our literature review. The results presented here, therefore, necessarily paint with a broad brush. Our intent here is to provide a general impression of the literature that we reviewed, and point out broad areas of information gaps. In our opinion, the principal value of this exercise lies more in the database we prepared as a companion to this report. The database contains details of all of the reports, research areas, and ratings from our review, and can be searched for information related to specific areas of interest to evaluators, market researchers, and others. A bibliography of the documents cataloged in the database is provided in Appendix D, and a guide to using the database in Appendix I.

Information Needs

Our literature review and analysis of gaps in existing information (both described below) were driven, in large part, by an assessment of information needs by Wisconsin Focus on Energy program and evaluation staff. To ensure our ensuing work addressed those needs, we worked with program and evaluation staff to prioritize information needs within each sector. The highest-priority information needs were found to be:

Agricultural Sector • Rural residents’ attitudes toward their communities and energy-related issues • Farmers’ decision-making processes and criteria (including financial constraints and

criteria) for facility and equipment decisions • Role of trade allies in providing services and equipment to production agriculture

Commercial Sector • Purchasing policies encompassing energy efficiency • External interactions by end-users (customers) • End-user (customer) decision-makers and processes • End-user (customer) information needs • Barriers perceived by end-users (customers) • Trade and professional allies • Energy usage and facility characteristics

Industrial Sector



• End-user (customer) decision-making process • Purchasing policies encompassing energy efficiency • External interactions by end-users (customers) • Technical potential • Trade and professional allies • Effectiveness of roadmapping projects

Residential Sector • Single-family new construction • Single-family existing homes • Multifamily • Appliances and mechanical systems • Lighting • Windows

Further details on the priorities are provided in Appendix J.

Literature Overview

We begin with a general overview of the literature reviewed. Although we specifically searched for literature in the residential, commercial, industrial, and agricultural sectors, as Figure 2-1 shows, the literature is somewhat dominated by information for the residential sector. Though these proportions are influenced by the relative effort we put into searching within each sector, it is clear to us that residential energy use has had more attention paid to it, in general, than the other sectors.

Figure 2-1 Literature by Sector

Across all sectors, the most frequent market actor studied (if the research involved a particular market actor) was the consumer or end-user, which accounts for more than 40 percent of all research reviewed (Figure 2-2). Builders, designers, and contractors represent a non-trivial

Agricultural2%

Commercial27%

Industrial12%

Residential59%

based on 1072 total research areas with rating>0



minority of the literature in the residential and commercial sectors. Literature that was not based on a specific actor represents a fifth of the literature overall, however. At the highest level, this balance suggests that future efforts should concentrate more on other important market actors, such as builders, contractors, and retailers.

Figure 2-2 Market Actors by Sector

The residential literature was more likely to have information related to a specific technology or service than the literature for the other sectors (Figure 2-3). The residential literature also covered a wider array of technologies (Figure 2-4).

Figure 2-3 Specific Technology or Service Covered?

0%

25%

50%

75%

100%

Commercial Industrial Agricultural Residential

Customer/ End-User(includes landlords forResidential)

Builders/Designers/Contractors

Other

Not Actor Specific

0%

25%

50%

75%

100%


Customer/ End-User(includes landlords forResidential)

Builders/Designers/Contractors

Other

Not Actor Specific

0%

25%

50%

75%

100%


Yes

No

0%

25%

50%

75%

100%


Yes

No



Figure 2-4 Technology-Specific Topics

The literature is more balanced across the types of information contained in the reports, as Table 2-1 shows. All of the sectors had literature that addressed multiple types of information.

Table 2-1 Market Research Areas in Literature Review

by Sector and Type of Information

Type of Information Commercial Industrial Agricultural Residential

Market Description 26% 21% 14% 18%

Market Interactions 21% 13% 9% 23%

Market Tracking Indicators 7% 5% 9% 11%

Attitudes 19% 14% 14% 27%

Barriers 13% 18% 0% 11%

Physical Char. / Energy Use 10% 27% 41% 9%

Other 4% 2% 13% 1%

Total 100% 100% 100% 100%

We rated each topic encountered on a scale of 0–2 in terms of applicability to Wisconsin, freshness of the research, reliability, and thoroughness. We also combined these sub-ratings into an overall 0–5 scale. As Table 2-2 shows, a low percentage of items received a zero score. This may be somewhat misleading; we tended not to review and rate literature that we felt was clearly

Residential

HVAC22%

Appliances12%

Water Heaters17%

Lighting12%

Building Design10%

Windows10%

Refrigerators7%

Insulation3%

Other7%

Commercial

HVAC24%

Lighting14%

Building Design38%

Other24%

Industrial

Motors70%

Other30%

Residential

HVAC22%

Appliances12%

Water Heaters17%

Lighting12%

Building Design10%

Windows10%

Refrigerators7%

Insulation3%

Other7%

Commercial

HVAC24%

Lighting14%

Building Design38%

Other24%

Industrial

Motors70%

Other30%



not of much value to Wisconsin energy-efficiency efforts (most of these are listed in the literature database, however).

Table 2-2 Literature Ratings by Sector and Rating Dimension

Sector Rating Dimension Score

Agricultural Commercial Industrial Residential Overall

Wisconsin Applicability mean 1.73 1.34 1.31 1.56 1.47

score breakouts 0 0% 3% 4% 7% 5%

1 27% 60% 61% 31% 42%

2 73% 37% 35% 62% 52%

Freshness mean 1.27 1.81 1.60 1.87 1.81


1 73% 13% 40% 11% 16%

2 27% 84% 60% 88% 83%

Reliability mean 1.41 1.36 1.48 1.64 1.54


1 59% 58% 39% 36% 43%

2 41% 39% 55% 64% 56%

Thoroughness mean 1.41 1.35 1.29 1.55 1.46


1 59% 54% 59% 42% 47%

2 41% 41% 35% 57% 50%

Overall mean 2.81 2.71 2.52 3.44 3.11


1 9% 2% 4% 1% 2%

2 23% 15% 31% 4% 11%

3 50% 38% 29% 32% 34%

4 14% 29% 10% 32% 28%

5 4% 1% 12% 22% 15%

The residential literature tended to score somewhat higher than the other sectors. Though we took care to establish clear criteria for scoring and to crosscheck one another’s scores, some of this difference may be attributable to inter-rater differences, since different staff members generally handled each sector.

Gaps

On the following pages, we look qualitatively between what we know from the existing literature, what is planned for the near future, and what the potential information gaps are for selected topics related to Focus on Energy program efforts. By our definition, an information



gap exists when there is a need for information, but no literature or planned research to support that need. We must note, though, that evaluation and market research plans are still being formulated; our review is based on draft strategic evaluation plans that cover the next 3 years and on draft market research plans for the current year. The former do not provide much detail about planned activities in some cases, and the latter do not look beyond the current year. The tables that follow are organized by sector and topic. In all, the topics defined below cover about two-thirds of the literature reviewed. Given the nature of the literature — and how our search priorities fell out — it made sense to take somewhat different approaches to organizing the topics between the residential and commercial and industrial sectors. The commercial and industrial (C&I) topics are organized more in terms of particular research questions (such as “Who makes decisions about equipment purchases”?) that are common across a number of segments. The residential topics are organized more by program area.

For each topic, we indicate the number of documents (reports or papers) and research area items we found, and also provide two graphs to give a general sense of the quality of the literature. The top graph shows the distribution of overall-rating scores for each research area; more items with high scores means generally higher-quality literature. The bottom graph shows the mean score in each rating dimension: Wisconsin applicability (W), freshness of the information (F), reliability (R), and thoroughness (T). These summaries do not necessarily give the full picture. A few very useful, high-scoring reports might be obscured by a larger collection of low-scoring literature.



Topic Existing Literature Planned Market

Research (M) and Evaluation (E) Activities

Gaps

Residential Sector

Single-Family New Construction ( 9 reports, 63 items)

• Builder and contractor practices.

• Builder attitudes toward WESH program.

• Characteristics and energy use of new homes.

• Measure program ability to attract and retain builders (E).

• Assessment of savings (M, E).

• Study impact of program advertising on buyer awareness (E).

• Study migration of program standards to general market (E).

• Study lender/realtor effects (E).

• Study effect of program electricity standards on participation (E).

• Study buyer understanding of ratings (M).

• Detailed research on decision-making in new construction.

Single-Family Existing Homes (23 reports, 81 items)

• Characteristics and energy use in existing homes; energy-savings potential.

• Retrofit contractor practices.

• Preliminary information on Wisconsin remodeling market.

• Segmentation of remodeling market (E, M).

• Assessment of program effects on contractor/vendor practices (E).

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T





Gaps

Multifamily (15 documents, 118 items)

• Preliminary information on rental market structure.

• Barriers to improving rental sector efficiency.

• Segmentation of rental market (M, E).

• Characteristics and savings potential for Wisconsin multifamily buildings (M, E).

Appliances and Mechanical Systems (34 documents, 205 items)

• Major appliance purchase rates and purchase decision-making.

• Characteristics of appliances in homes.

• Consumer recognition of ENERGY STAR label.

• Tracking of energy-efficient furnace and CAC market share.

• Establish mechanisms to track ENERGY STAR market shares (E).

• ENERGY STAR market share tracking — are current budgets adequate?

Lighting (12 documents, 49 items)

• Characteristics of high-use lighting in existing homes.

• Lighting purchases and purchase decision-making.

• Awareness of CFLs.

• Barriers to CFL purchases.

• Establish mechanisms to track ENERGY STAR market share (E).

• Lighting market channels.

• ENERGY STAR lighting market share — are current budgets adequate?

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T





Gaps

Windows (7 documents, 34 items)

• Characteristics of windows in new and older Wisconsin homes.

• Consumer recognition of ENERGY STAR label.

• Builder practices regarding windows (qualitative).

• Window market channels.

• Barriers to efficient windows.

• Energy-efficient window market share (M).



Gaps

Commercial Sector

EE Purchasing Policies (2 documents, 2 items)

• Very cursory information about how widespread energy-purchasing policies are — no quantifiable information.

• Adoption or changes to policies that affect energy investments by Focus on Energy participants (E).

• Extent to which customers have energy-saving goals (M-Baseline).

Gaps depend on specifics of evaluation data collection concerning policies that address energy efficiency. Could include:

• Quantitative data on extent of these policies.

• Qualitative data on their content.

• Information on their prevalence among non-participants to the Focus on Energy program.

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T





Gaps

External Interactions by Customers (15 documents, 28 items)

• Numerous reports about trade allies and their roles.

• Generally, only cursory information about how customers and trade allies interact.

• Little Wisconsin-specific information.

• Some research planned on interaction between trade allies and customers (M).

• More in-depth understanding of relationships between customers and trade allies.

• Customers’ degree of trust and types of information received from trade allies.

Identify Customer Decision-Makers and Process (19 documents, 34 items)

• Customers’ decision-making factors for commercial buildings design and equipment choices.

• Some reports about specific subsectors, including government, multi-use buildings, small buildings, hospitals, grocery stores, hotels, schools, and restaurants.

• Some reports about specific technologies or activities, including HVAC, commissioning, and operations and maintenance.

• Relatively good coverage of Wisconsin, including older categori-zation of in-state firms into CLASSIFY segments (can be used to identify likely receptivity to energy-efficient options).

• Reasons for decisions to install or not install energy measures as a result of Focus on Energy participation (E).

• Role of financing in decisions about energy-efficiency measures by Focus on Energy participants (E).

• Changes in customer knowledge, awareness, and attitudes toward energy efficiency by Focus on Energy participants (E).

• Building-owner priorities and motivations, decision-making processes, awareness and attitudes toward energy and non-energy effects of high-performance building design (M).

• Titles of energy decision-makers within customer organizations (M-Baseline).

• More distinction between different types of customers and their decision-making processes and motivations.

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T





Gaps

• Overview of decision-making process, facility-management practices by type of customer organization (M-Baseline).

Customer Information Needs (5 documents, 9 items)

• Few reports address information needs.

• Existing information is a byproduct of other study objectives — usually in the context of inter-actions between customers and trade allies.

• General information sources by energy decision-makers in customer organizations (M-Baseline).

• Broader study of where customers get their energy-related information and perceptions (beyond trade allies).

• Study on customer “wish list” of energy-related information and attributes of trusted information.

Barriers Perceived by Customers (2 documents, 2 items)

• Numerous reports make conclusions about barriers identified by researchers, but few reports discuss barriers perceived by customers.

• Most reports based on technologies and services, including HVAC, windows, sustainable design, green power, commis-sioning, operations and maintenance, motors, daylighting, and refrigeration.

• Some reports are Wisconsin-specific, but not many.

• Barriers from the point

of view of the customer.

• More Wisconsin-specific information to determine whether any of the standard barriers have been reduced.

• More research on how customers think the barriers that hold them back might be overcome.

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T





Gaps

Trade Allies (24 documents, 78 items)

• Many Wisconsin and out-of-state reports address trade allies — usually either their role and interaction with customers or (to a lesser degree) general attitudes toward energy efficiency.

• Some specific technologies and services covered, including sustainable design, HVAC, and lighting.

• Reports are largely qualitative.

• American Institute of Architects survey provides comprehensive look into trends, concerns, structure, training, etc., in architectural firms.

• Attitudes and awareness of energy efficiency among Focus on Energy participants (E).

• Practices related to energy efficiency among Focus on Energy participants (E).

• Trade allies’ priorities, decision-making processes, and awareness and attitudes toward energy and non-energy effects of high-performance building design (M).

Depends on specifics of evaluation and market research activities. Could include:

• More comprehensive understanding of business structures, motivations, activities, and needs of trade allies by type of firm.

• Attitudes and awareness about specific products or services promoted by Focus on Energy programs.

• Quantitative data to serve as a baseline.

(Note: Some research may be available from trade associations to their members.)

Energy Usage and Facility Characteristics (20 documents, 41 items)

• Comprehensive data on facility characteristics, energy consumption, and energy costs available on a regional basis.

• Wisconsin data strongest on equipment in small commercial market.

• Some local forecasts of future construction.

• Presence of energy-using systems and costs by type of facility (M-Baseline).

• Facility and equipment-management practices by type of facility (M-Baseline).

• Wisconsin-specific baseline of facility characteristics and energy-related equipment being installed in new buildings and retrofit projects — segmented by type of decision-maker or building, if possible.

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5



Topic Existing Literature Planned Market Research

(M) and Evaluation (E) Activities

Gaps

Industrial Sector

Customer Decision-Making Process (19 documents, 23 items)

• General customer decision-making processes.

• Industry priorities for some subsectors.

• Classification systems to categorize decision-makers.

• Customer attitudes toward energy efficiency and reliability.

• Limited information on financial decision-making criteria.

(Note: Modest coverage of Wisconsin; most reports specific to a program’s customers or a subsector; motors received the greatest coverage.)

• Reasons for decisions to install or not install energy measures as a result of Focus on Energy participation (E).

• Role of financing in decisions about energy-efficiency measures by Focus on Energy participants (E).

• Changes in customer knowledge, awareness, and attitudes toward energy efficiency by Focus on Energy participants (E).

• Assessment of industry issues in the markets targeted by the Industries of the Future programs (M).

• Titles of energy decision-makers within customer organizations (M-Baseline).

• Overview of decision-making process, facility management practices by type of customer organization (M-Baseline).

• Largely general information; little in-depth description of decision-making process.

• Currently, little coverage for some industries emphasized by Focus on Energy. Evaluation and program market research needs to address these areas.

• Currently, limited information on financial criteria, especially for non-participants. Evaluation and program market research needs to address this area.

EE Purchasing (3 documents, 3 items)

• Very cursory information about how widespread energy-purchasing policies are.

• One conference paper on interest in tools for corporate energy management.

• Adoption or changes to policies that affect energy investments by Focus on Energy participants (E).

• Extent to which customers have energy-saving goals (M-Baseline).

Gaps depend on specifics of evaluation data collection concerning policies that address energy efficiency. Could include:

• Quantitative data on extent of these policies.

• Qualitative data on their content.

• Information on their prevalence among non-participants to the Focus on Energy program.

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T





Gaps

External Interactions by Customers (6 documents, 10 items)

• Interactions between customers and market actors and motors and adjustable-speed drive markets.

• Food processing customer attitudes toward selected energy-related market actors.

• Role of market players in warehouse refrigeration systems.

• Interactions with trade allies by Focus on Energy pilot participants.

• Little coverage of

specific industries.

• Lack of in-depth interactions with trade allies and what customers are looking for in these interactions.

Technical Potential (11 documents, 38 items)

• Estimated technical potential for numerous industries with strongest information for motors, compressed-air systems, foundries, and renewable energy.

• Other reports cover process heat, operations and maintenance, food processing, paper, metals, warehouse refrigeration, chemicals, metals, and glass.

• Mixture of technical potential of specific applications or general potential.

(Note: Technical-potential assessments are mostly national or regional (not Midwest) in scope; few reports specific to Wisconsin.)

• Measures installed or intended to be installed as a result of Focus on Energy program interaction (E).

• Perceived opportunities by customers and trade allies.

• Specific assessments of Wisconsin facilities.

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

Mean Sub-Ratings

0

1

2

W F R T





Gaps

Trade Allies

(6 documents, 11 items)

• Roles and perceptions of trade allies in motors and adjustable-speed drive markets.

• Distributor attitudes and sales behavior toward energy-efficient motors.

• Role of vendors in warehouse refrigeration.

• General identification of market actors who influence customer decisions.

• Trade ally perceptions and interactions with specific energy-efficiency programs.

• Attitudes and awareness of energy efficiency among Focus on Energy participants (E).

• Practices related to energy efficiency among Focus on Energy participants (E).

• Trade allies’ priorities, decision-making processes, and awareness and attitudes toward energy and non-energy effects of high-performance building design (M).

Gaps depend on specifics of evaluation and program market research activities. Could include:

• Roles of trade allies in non-motors markets.

• Practices, attitudes, perceptions, and information sources of trade allies in specific markets targeted by Focus on Energy programs.

Effectiveness of Roadmapping Projects (0 documents, 0 items)

• No information found. • Various process and impact evaluation activities in applicable industries — specifics not included in overall strategic evaluation plan (E).

• Extent of energy effects of industry roadmap-ping efforts.

• Effects of industry roadmapping efforts on corporate choices.

2.1.3 Recommendations

The gap analysis required

• a prioritization of research needs as articulated by program and evaluation staff (included in Appendix J;

• a review of the existing literature; and

• a review of market research and evaluation plans as they existed at the point of our analysis.

Because these plans in particular are not fully fleshed out, it is difficult to make definitive statements about research gaps. Nonetheless, we have some recommendations to make.

Depth Research

First, we see a common need for depth research in some areas. Current data on commercial and industrial firm decision-making, residential new home construction, and residential remodeling all share a common theme: There is existing literature on attitudes and practices, but it tends to

Overall Score

0 1 2 3 4 5

1.33333 1.83333 1.5 1.33333

Mean Sub-Ratings

0

1

2

W F R T

Overall Score

0 1 2 3 4 5

1.33333 1.83333 1.5 1.33333

Mean Sub-Ratings

0

1

2

W F R T



involve a single respondent’s viewpoint, gloss over distinctions within groups of market actors, and focus narrowly on energy-efficiency topics. Decisions in these areas most often involve multiple people who may be motivated by different factors. Moreover, these people are often most concerned with issues that have nothing to do with energy use. We see a broad need to expose more of the messiness of these decision-making processes, acknowledge differences among groups of market actors that have been previously lumped together, and embed energy-efficiency issues within a broader context. Doing so will, we believe, provide insights that will allow for better targeting and marketing of the Focus on Energy programs. We recognize that there is a trade-off between gathering more detailed information about fewer subjects versus less detailed information on more subjects. We discuss this issue with respect to residential information needs in the white paper that accompanies this report.

Residential Market Share Tracking

In the residential sector, systems to measure and track the statewide market share for ENERGY STAR-qualified products, such as light bulbs, refrigerators, and clothes washers, are needed. Program efforts in this area are mature and can be expected to have a measurable effect on the penetration of the products. Except for furnaces and central air conditioners, existing data provide only a limited sense of the market share for energy-efficient products and do not specifically denote the market share for ENERGY STAR-qualified products. The draft strategic evaluation plan for the ENERGY STAR Products program discusses placing a priority on establishing such tracking systems, but it is not clear whether the currently allocated budget is sufficient for the task.

Commercial Sector Market Actor Detail

In the commercial sector, greater detail is needed about specific market segments, as well as greater distinction among different kinds of decision-makers. A fair amount of work has been done to understand the office building segment of the commercial sector, but other segments, like grocery stores, healthcare facilities, and retail stores, have not been studied as thoroughly. The omnibus survey conducted as part of this project lays the groundwork for a better understanding of the non-office subsectors. Similarly, more detail is needed about building owners, architects, and engineers. Past research has treated these groups as homogenous blocks of market actors, but they do not necessarily behave that way. More information about differences within these groups that affect propensities to take energy-saving measures and about ways to identify likely implementers would seem to be helpful to programs. Finally, a deeper understanding of information flows and sources is needed to determine where and how commercial sector market actors get the information they trust, the information on



which they base decisions, and the information that forms the basis for their long-term attitudes and predispositions toward or away from energy-efficient measures.

Industrial Markets and Decision-Making Beyond Motors

In the industrial sector, existing literature tends to focus on motors and adjustable speed drives. More information is needed on the markets and decision-making for other energy-efficiency measures. Further, given the reliance of the energy-intensive industries program on industry roadmapping efforts, an assessment of past roadmapping in the metalcasting and forest products industries is warranted, including an analysis of the effects to date, facilitating factors that helped result in energy-efficient effects, and roadblocks that hindered progress toward energy-efficient effects.

Utilizing and Maintaining the Literature Database

The literature database is a good resource for market researchers, evaluators, and others involved with Focus on Energy efforts. This database should be made freely available, and should be updated periodically as new results come in.

Utilizing the Prioritization Developed

Finally, we recommend that the prioritization of research needs identified above be used in future research planning efforts.

2.2 METHODS

The gap analysis consisted of four main tasks:

• identification of market research priorities,

• a literature search,

• review and ratings of existing literature, and

• an analysis of gaps among high-priority research areas.

The Energy Center of Wisconsin took the lead on the gap analysis with assistance from other members of the Baseline Team, feedback from the Department of Administration, and input from managers of Wisconsin Focus on Energy Residential and Major Markets programs. The scope of the gap analysis included the agricultural, commercial, industrial, and residential sectors.



Identification of Market Research Priorities

We established market research priorities to help guide our review of existing market research. We followed a three-step process to develop these priorities. The three steps were

• development of initial-priority topics;

• review of the initial-priority topics by program leads, evaluation leads, and the Department of Administration;

• revisions in the initial-priority ratings based on feedback from reviewers; and

• synthesis of high-priority topics from each program into broader high-priority research areas.

An example of a priority topic would be “customers’ financial constraints and criteria for capital -priority industrial topic and others like it became part of the priority

research area “customer’s market interaction” for the industrial sector. Initial-priority topics were based on

• market research information needs provided by Wisconsin Focus on Energy program managers in May 2001;

• needs identified by program managers and evaluation leads during in-person and telephone conversations; and

• our own review of program plans to identify additional market research needs.

Literature Search

Our literature search began in June 2001 with a general combining of known sources and repositories of energy-efficiency literature for any reports with an obvious focus on market research and for reports on some specific topics identified by program leads as high priorities. Sources of reports included:

• Energy Center of Wisconsin reports and library;

• Wisconsin Focus on Energy Pilot interim evaluation reports;

• Consortium for Energy Efficiency database of evaluation/market research reports;

• American Council for an Energy-Efficient Economy conference proceedings and reports;

• International Energy Program Evaluation Conference proceedings;

• Northwest Energy Efficiency Alliance;

• Northeast Energy Efficiency Partnerships;

• California DSM Measurement Advisory Committee database of reports;

• Department of Energy publications; and



• Environmental Protection Agency publications.

Once high-priority market research areas emerged from the prioritization process described above, we revisited these same sources. Where applicable and as time allowed, we also contacted targeted leads, such as University of Wisconsin faculty with expertise in rural and agricultural issues, the American Institute of Architects, and the owner of a windows testing laboratory. Altogether, we identified 308 reports for further review.

Literature Review and Ratings

Several Energy Center staff reviewed the 308 market research reports collected through the literature search. All of these reports were entered into the Baseline project’s market research database. Further, we judged 197 of these reports to contain sufficiently valuable content for a full review and rating. Energy Center staff reviewed these reports in more depth and entered specific information about them into the database, including:

• sector (e.g., agricultural, commercial, industrial, residential);

• subsector;

• market actor;

• technology and/or service;

• type of market research information (market description, attitudes, barriers, etc.); and

• a brief description of the kind of information contained for each applicable combination of variables listed above.

A specific combination of the above categories formed what we term a market research area. Most documents we reviewed covered multiple research areas. We cataloged each separately in the database. A total of 1,201 market research areas were identified in this way. We also rated each applicable market research area to show quality and applicability of information to Wisconsin Focus on Energy in terms of

• Wisconsin applicability,

• reliability,

• freshness of the information, and

• thoroughness of coverage.

Each research area received a score between 0 and 2 in each of these dimensions. We then created an overall 0–5 score for each item (based on the sum of the individual scores minus 3). We set the overall score to zero if any individual score was zero.



Appendix I provides more details about the categories we used for defining market research areas and the criteria for scoring.

Analysis of Gaps

After completion of the literature review and rating process, we analyzed the extent to which the highest-priority topics identified during the prioritization process would be met by

• the body of existing literature we identified;

• ongoing market research by the Baseline Team; and

• planned market research activities of the Wisconsin Focus on Energy program and evaluation teams, as specified in their market assessment and evaluation plans, respectively.

3 MULTIFAMILY STUDY

ma:project:wdoa0001:reports:final baseline:3_multifamily_rev 3–1 Wisconsin Department of Administration

3 EMULTIFAMILY STUDY

3.1 BACKGROUND

3.1.1 Objectives

Multifamily Market Baseline Study Objectives

Within the residential administrator’s purview is a suite of programs designed to increase the energy efficiency of dwellings in the multifamily housing market. Historically, program implementers have found it difficult to penetrate this market and to increase the use of energy-efficient practices and technologies. The purpose of this multifamily market baseline study is to help program administrators and evaluators understand who the actors in the market are, how decisions are made, where the best points for intervention might be, and what the potential for energy equipment and practices might be. Administrators can use the information in this baseline to develop and refine program strategies. Evaluators can use the information to establish benchmarks against which the progress of market transformation can be assessed. This study focuses on owners and operators of multifamily housing because it is believed that they are the key to substantially increasing energy efficiency in this market and to reducing energy use and costs for themselves and tenants as well as to substantially increasing tenant comfort. The goals of this study are to:

• Understand the size of the market and describe the various sub-markets

• Identify the key decision-makers and the criteria that they use in making decisions about the properties they own and/or manage

• Understand the physical characteristics of buildings and the kinds and amount of energy-using equipment that are found in the multifamily sector

• Assess the extent to which multifamily operators may already be using energy-efficient technologies and practices

• Identify and assess the importance of barriers that make it difficult for multifamily housing operators to increase the efficiency with which their buildings use energy.

The scope of this study is limited to what could be accomplished with a modest budget in a seven-week time frame beginning in late August 2001. As a result, the study relies heavily on immediately available data and some primary data collection activities and analysis that were designed to provide new information and insight in a timely manner that would be relevant to the goals of implementers and evaluators.

SECTION 3 MULTIFAMILY STUDY


3.1.2 Approach and Rationale

The approach to the multifamily study involved six activities:

• Reviewing the multifamily program plan being proposed by the residential administrator;

• Examining existing studies of the multifamily market in Wisconsin and elsewhere;

• Developing a list of owners of multifamily housing property management firms in Wisconsin to serve as a basis for developing sampling frames;

• Analyzing existing data describing the physical characteristics of multifamily housing;

• Conducting in-depth interviews with 40 to 50 multifamily operators; and

• Completing a survey with a sample of multifamily operators to develop a statistical profile of multifamily operators.

Review the Multifamily Program Plan

The purpose of this task was to identify proposed program activities so that data and information relevant to supporting those activities could be collected. The plans were obtained from the administrator and reviewed. In addition, the plans were discussed with the program implementers and others with knowledge of the multifamily market.

Examine Existing Studies of the Multifamily Market

The purpose of this task was to identify and review existing studies that might provide insight into the structure, functioning, and market potential for energy efficiency in the multifamily market in Wisconsin. A further goal of the effort was to identify the types and kind of information that already exist and to identify areas where additional information is needed. Studies directly relevant to Wisconsin included a 1999 study completed by the Energy Center of Wisconsin, and several studies of the multifamily market conducted by Wisconsin utilities over previous years. Several studies of the multifamily market in California were also reviewed. The review of the studies that were available proved useful in identifying issues to be covered in the interviews and the survey and helped to identify the strengths and weaknesses of various approaches to data collection.

Develop a List of Owners of Multifamily Housing

In order to learn about the multifamily market, it is critical to be able to describe the population of the owners and managers and to be able to sample that population to develop an accurate picture of the market. Various studies have used different approaches to developing lists of owners including the use of telephone directories and random digit dialing to tenants who are then asked for the name of the landlord. Other studies suggest that use of tax assessor rolls produce comprehensive lists with the most information. The tax rolls are just beginning to become available in Wisconsin. Because the actual collection of these lists requires a fair



amount of resources for dealing with tax assessors and the timeframe was short, we obtained lists of owners and operators for selected counties that are being developed by the Wisconsin Apartment Association. There were some limitations in these lists that can be overcome in subsequent studies.

Analyze Existing Data to Develop a Description of the Physical Characteristics of Multifamily Properties

One aspect of this study was to analyze the physical data from audits completed during the Focus on Energy pilot program to gain a better picture of the types and efficiency of equipment in the multifamily sector and the potential for energy-efficiency measures.

Conduct In-Depth Interviews with Selected Multifamily Operators

One of the goals of this study was to collect exploratory data from the full range of owner/operators in the multifamily sector to gain an understanding of the full range of behaviors. These interviews focus specifically on how multifamily operators are organized, who makes decisions, how decisions are made, the criteria used in project decision-making and the selection of products, and barriers to implementing energy-efficiency measures in the multifamily market. Due to the timeframe and resources, the original goal of completing 40 to 50 interviews, some of which were to be completed on-site, was scaled back to completing 29 interviews by telephone. These interviews were completed in parallel with the survey.

Complete Surveys with a Sample of Multifamily Operators

The purpose of the surveys was to obtain a statistically reliable set of selected information about multifamily operators. The type of information collected in the survey includes information about equipment in multifamily buildings, information about efficiency measures that have been completed, systematic ratings of criteria used in product selection, assessment of participation in utility energy-efficiency programs, and information about the size and scope of multifamily organizations. The original goal of this effort was to complete 300 surveys. For reasons that are somewhat unique to this market sector, owner and managers of multifamily properties are very difficult to reach. This coupled with some limitations in the sampling frame made it possible to complete only 100 interviews with the available resources.

3.2 KEY FINDINGS AND RECOMMENDATIONS

Key findings and recommendations from the multifamily study are provided in this section. Detailed findings and the basis for the recommendations follow.



3.2.1 Some Population Estimates

For purposes of this study, the multifamily sector is defined as premises with four or more units per building. This definition is consistent with the current Wisconsin Focus on Energy Multifamily Program. With this definition, the following estimates were developed.

• We estimate that there are 18,154 multifamily operators who own or operate 416,717 housing units in Wisconsin.

• About 16 percent of multifamily units are owned or managed by operators with 4 to 10 units (small owner operators). Another 12 percent of units have owner operators who own or manage 11 to 20 units (medium small owner operators). Twenty-three, twenty-five and twenty-four percent of units are owned or managed by operators with 21 to 70 units (medium-sized owner operators), 71 to 230 units (medium large owner operators), and 231+ units (large owner operators), respectively.

• Small owner operators, medium small owner operators, medium-sized owner operators, medium large owner operators, and large owner operators are 62 percent, 19 percent, 14 percent, 4 percent, and 1 percent of owner operators, respectively.

• The large owner operators, 1 percent of all multifamily operators, own or manage 24 percent of the multifamily housing stock. Nineteen percent of multifamily operators, those who own or manage 21 or more units, own or manage 72 percent of the multifamily housing stock.

3.2.2 Owner Segments

There are four multifamily market segments.

Small Owner

The operator in the small owner segment may own from 4 to 50 units with one to several small buildings. The operation is usually run as a sideline to other employment or economic activity. The owner(s) is/are usually a single individual or a couple. These operators may have someone on site who looks after the building in exchange for an accommodation on the rent. These operators care for all functions and make all decisions. Because of multiple employments, these operators are typically extremely busy and make decisions quickly with information that is at hand.

Medium Owner

The operator in the medium owner segment may have from 50 to several hundred units in buildings that may range in size from fourplexes to buildings/complexes that have 50 to 100 units. The larger operators in this group are of a size that the owner is able to make a living from the rental operation. The owner may have two or three employees, typically persons who may take care of maintenance matters. The operator in this segment may manage multifamily units



for other owners or may search out investors to invest in properties. Typically, units have on-site managers who deal with issues in the building and who may receive remuneration through an accommodation on the rent.

Large Owner Operator

The large owner operator segment typically owns and manages from several hundred to several thousand units in multiple larger buildings and complexes. These operators may have investors in their company; for example, large retirement funds. There are usually multiple layers of staff ranging from the CEO to assistant managers. On-site staff are typically professional and do not live on-site, although some smaller buildings or complexes may have resident managers. There is usually a manager, an assistant manager, and leasing staff. There may be on-site maintenance or floating maintenance crews depending on the number of units that are owned or managed in an area. Typically, the on-site manager is responsible for decisions involving amounts of money less in the range of $1,000 to $2,000, although we have encountered on-site managers with decision limits as high as $7,500. Senior property managers are the key decision-makers for larger expenditures. Senior property managers manage several properties and are responsible for major decisions and for making proposals for changes to properties. Proposals must compete with other internal proposals for changes to property and proposals for capital expenditures in other lines of business. Senior property managers have a fair amount of autonomy. They may receive direction and guidance from higher-level managers. These companies are usually involved in multiple lines of business.

Large Fee-Managed

The large fee-managed segment is very similar in structure to the large owner operator segment. These firms primarily manage property for others but some own and manage their own property as well. The key difference is that senior property managers in these organizations usually report directly to the owner or owners of a property as well as to a senior manager within the firm. They have a great deal of autonomy. Owners rely on these managers to guide them in their decision-making. Managers make proposals for changes to the buildings that are accepted or rejected by the owners. Clients of these companies include large insurance companies and pension plans who hold property and need someone to manage the property.

3.2.3 Equipment Characteristics

In the survey, respondents were asked about equipment for a specific premises that they own or manage.

• Respondents report that the dominant heating fuel used on the premises for which they supplied information is natural gas.

• About 75 percent of the respondents report that the units in the premises are individually heated and have individual water heaters.



• Less than half of the owner/operators report that the units in the premises have air-conditioning. Window units predominate.

• About 20 percent of respondents for premises with four or more units report that renters of units supply their own refrigerators. The percentage is much higher in premises with three or fewer units.

• About two-thirds of operators provide a laundry room at the premises. About one-fifth of respondents report that units in their premises have in-unit laundries.

3.2.4 Decision-Making

• In the small owner/operator segment, owners make the decisions. The same is true in the medium-sized segments.

• In the large owner-managed and fee-managed segments, the senior property managers are the key decision-makers in collaboration with owners. For smaller purchases, the senior property managers have the final say. For decisions involving large amounts of capital, senior property managers develop proposals that compete for funds within large owner-management establishments and are agreed to by the owner in the fee-managed system.

• In the large owner-management and fee-managed segments, the priority for capital is for those things that will maintain and enhance the value of the property. The value of the property is assessed in terms of the ability to attract and maintain renters and to maintain or increase the rents.

• On-site managers and maintenance managers inform decision-making but do not drive decision-making.

3.2.5 Equipment-Related Decisions

• Multifamily operators nearly uniformly say that reliability, expected life of the equipment, and ease of maintenance are the key criteria they apply in making equipment selections.

• Reliability and lifetime are important because the cost of replacing a piece of equipment can easily exceed the cost of purchasing the equipment.

• Price is also important in equipment choices.

• In Wisconsin, three-quarters of the multifamily operators say they purchase appliances at retail outlets, such as Sears and Home Depot. Around 20 percent purchase equipment from large distributors and wholesalers. Decisions about appliances tend to be made on-the-spot.

• Price, size, color, and feature sets that are attractive to renters are key drivers in purchase decisions.



3.2.6 Energy-Efficient Actions Taken

• Sixty percent of the survey respondents report that they have installed energy-efficient lighting in their facilities. Much of this activity involved replacing bulbs in existing fixtures. About 5 percent of the respondents reported replacing fixtures.

• Thirty-five percent of the multifamily operators reported installing efficient lighting in exterior locations. Energy and cost savings motivated the changes.

• Half of the multifamily operators reported making energy-efficiency improvements to heating and cooling systems in some of their units. About half were motivated for energy-efficiency reasons. Many of the remainder incorporated energy efficiency when doing replacements in response to equipment failures or aging.

• About 10 percent of the multifamily operators reported changes to domestic water boilers and laundry equipment.

• A third of the multifamily operators report that they have participated in one or more energy-efficiency programs.

3.2.7 Barriers

• Overall, multifamily operators reported that concerns about low or non-existent return on investment represents the most important barrier to energy-efficiency investments. This concern is two-fold. One is that the owner is not incentivized; for example, when the owner purchases an efficient refrigerator and the tenant pays the electric bill. A second is that many operators believe that energy-savings claims are suspect.

• Other important barriers include concerns about equipment reliability, lack of capital, and the high cost of efficient equipment in relation to standard equipment.

• None of the beliefs about barriers appear to be so strongly held that they are insurmountable.

3.2.8 Performance Contracting

• About one-sixth of the operators were very interested in performance contracting and another third were interested. Some of the people we talked with in the qualitative interviews were interested, but wary.

• Prior research indicates that vendors of performance contracting services do not see the multifamily sector as a good prospective market for these services.

• Only a few of the multifamily owners have been approached by vendors offering services through performance contracts.

• Related strategies to reduce cash-flow and capital barriers might be useful in some subsectors of the multifamily market; for example, targeting larger older buildings with central boilers in situations where the property is fee-managed. Such strategies may be



explored to see if they can be cost-effective either as a program option or ultimately for delivery by the private sector.

3.2.9 Recommendations

Based on the findings above, the following opportunities can be identified for programs addressing multifamily housing.

Continue to Focus on Contractors and Suppliers

Our data imply a need to maintain an emphasis with contractors and suppliers for supplying efficient unit-level heating and water-heating equipment to multifamily owners. In light of the fact that tenants often pay energy costs, it is unclear if owners and heating contractors install less efficient heating equipment in rental units to reduce costs. This is an issue that needs further examination.

Supply Information to Renters About Efficient Appliances

Because at least some renters in multifamily units supply their own refrigerators, there may be some value in targeting multifamily renters with information about efficient refrigerators. Likewise, there is some potential value in targeting smaller multifamily operators with information about efficient washing machines. Emphasizing the water-saving benefits of efficient washers in addition to the energy-saving benefits might increase the appeal of efficient equipment.

Consider Focusing on Central Laundry Equipment

There is some potential for targeting owners with central laundry equipment. The target audience would be both the owners and equipment suppliers.

Contractors and Vendors may be More Effectively Targeted than Apartment Associations

Typically, owners and managers do not belong to apartment associations, nor do they appear to network extensively with each other. Approaching apartment associations may not be as expeditious a path to multifamily operators as working through contractors and vendors.

It May be Necessary to Target the Whole Design Community

If program managers want to target people who influence design, they need to target building professionals quite broadly because there is no clear subgroup of design professionals that deal exclusively with multifamily housing.



New Apartments and Apartments Being Rehabilitated Still Have Some Market Potential

Energy efficiency is penetrating the part of the multifamily market involved with rehabilitating and constructing new buildings and units. However, there is still substantial room for additional penetration of energy-efficiency products, practices, and services.

Promote Reliability, Expected Life of Equipment, and Ease of Maintenance in Addition to Savings

Energy programs typically focus on the energy and cost savings when promoting energy-efficient equipment. Our data suggest that program managers may also want to promote reliability, expected life of the equipment, and ease of maintenance.

Study What Products Are Valued by Multifamily Operators

Decision-makers use a variety of criteria in making equipment choices. Price is important, and rebates and buydowns can clearly help the penetration of efficient equipment. However, it is also important to make certain that efficient models are available with the size, color, and feature sets that are desired by multifamily operators. A multifamily operator will be more interested in an efficient refrigerator if it has valued characteristics other than efficiency. It would be useful to study the characteristics of valued products in the multifamily environment and then promote efficient products that have these characteristics.

Credible and Believable Evidence is Needed on Energy Savings and the Economics of Energy Savings

Especially in the larger firms, managers regularly evaluate economic trade-offs of various opportunities. Promoting energy efficiency requires developing credible and believable evidence tailored to each case.

Consider Ways to Address the Higher Cost of Efficient Equipment

The higher cost of efficient equipment in relation to standard equipment can be addressed in a variety of ways. One way is to directly address the cost of equipment by working with manufacturers on manufacturing processes. Creating volume sales can lead to price reductions. Both of these strategies probably require coordination with national and regional organizations. Efficient equipment buydowns are an option. Buydowns have the advantage of increasing the buying power of the program. Rebates are yet another approach.

Program Designs Should Target Those Who Benefit from Savings

Multifamily program designers need to understand who benefits from the savings that are likely to accrue to the owner in common areas and savings from equipment in units which may accrue



where the owner/manager pays the bills, and the efficiency of the equipment in the units in which the tenant pays the bills. Program designers may want to design program options that address the tenant or the multifamily owner/manager depending on who pays the utility bills. There may be a need for different incentives and program participation options. Separate designs add significant complexity to the marketing function as a result of helping owners and managers understand when an option is available and when it is not.

Examine Whether Information Really Makes a Difference

We need to learn more about what information multifamily operators use, when they use it, how they use it, and how the information that multifamily operators need might differ from the information that already exists. We should not assume that providing more information will necessarily make a difference. The problem may be one finding ways to provide a small amount of information through the right channel at the moment when it is most needed.

Learn More About When and Why Contractors Recommend Efficient Equipment

We probably need to know much more about how, how often, and why contractors make recommendations for efficient equipment. This information could help to shape an effective contractor program.

Address the Issue of Who Is Responsible for Energy Efficiency

There are a number of managers who believe that energy efficiency is a tenant conservation issue rather than an efficiency problem with its roots in the building shell, the equipment, and the operation and maintenance of the building. Program managers may need to address this view in order to gain the adoption of energy-efficient equipment.

Assess Whether Performance Contracting will be Effective in this Market

Performance contracting may be able to play a role in this sector but if it does it will probably be used mostly by the larger players with larger building or complexes with common heating and cooling equipment. The larger players express interest but also wariness of performance contracting. There are currently private sector firms who may be able to meet the needs of the larger players though it’s not clear if these firms have an interest in this market. If such an interest can be established, a program may not be needed. A clearinghouse with information about existing performance contracting companies might be of some value.

3.3 ORGANIZATION OF THE CHAPTER

The next section of this chapter provides some estimates of the size of the overall market and some estimates describing the number of owners and their holdings. The following section on



market segments is a key section. It describes in some detail the organization and organizational factors that influence decision-making for four multifamily operator segments. This section is a key for refining multifamily program efforts. A subsequent section describes what we learned about the equipment that is found in properties owned by multifamily operators. The next section describes the criteria that influence decision-making. A key point is that there are two sets of criteria that come into play. One set of criteria influence the projects that multifamily operators decide to pursue. The second set of criteria influence the choices that are made in terms of equipment and practices. The chapter also discusses the extent to which operators have already taken efficiency actions, prior participation in utility programs, plans for the future, and barriers to taking actions that will promote energy efficiency.

3.4 ESTIMATES OF MULTIFAMILY OPERATORS IN WISCONSIN

For purposes of this study, multifamily housing is defined as buildings with four or more units. However, this study focuses on operators and operator decision-making rather than on buildings. When considering decision-makers, there are owners who manage their own properties, owners who have their properties managed for them by others, and owners who manage their own properties as well as the property of others. Often the key decision-maker is an owner, but the decision-maker is not infrequently a manager or someone who manages properties for an owner. We have tried to be consistent in using the term owner to describe owners and use other terms such as owner/manager, operator, or multifamily operator to describe categories containing both owners and property managers. For the most part, this study is about operators. We have defined three categories of operators. A multifamily operator has at least one building with four or more units but may manage anywhere from four to several thousand units and may own or manage many buildings and large complexes as well as buildings with 1, 2, or 3 units. Unit operators own or manage four to many tens of units made up of some combination of 1-, 2-, or 3-unit buildings. Small landlords are operators who own or manage 3 or fewer units. There is no data source that provides direct information about the size of these three operator populations. We do have data from the Milwaukee tax assessor rolls that allow us to determine the size of these three populations for Milwaukee. The Milwaukee data permit us to identify owners with different size buildings, to trace buildings to management firms, and to roll up all of the buildings by owner/manager. We applied the percentages from Milwaukee to the number of rental units statewide to estimate the size of these populations statewide (Table 3–1). Some might question the use of the Milwaukee data for estimating statewide percentages. We note that the Milwaukee rental units are a significant percentage (almost 20 percent) of the total rental units in Wisconsin. Other large urban areas are likely to have similar distributions of operator types. Rural counties may have a different distribution of types but the total number of units in rural counties is small so they are not likely to significantly change the overall distribution. Because there are probably more larger buildings and larger complexes in Milwaukee, our estimates may be slightly skewed to larger owners and operators. While we would like to be more precise, our goal is to provide ballpark estimates of the number of



operators with which the Focus on Energy program may need to deal. While the actual numbers may differ from these estimates, they give us a fair indication of the size of populations. Applying the Milwaukee distribution to the statewide rental population, we estimate that there are slightly more than 18,000 multifamily operators who have as least one building with four or more units (Table 3–1) in the state of Wisconsin. These 18,000 multifamily operators own or manage approximately 417,000 housing units. In addition, we have identified a group of about 13,000 operators that we call unit operators who own or manage four or more rental units all of which are found in buildings with three or fewer units. These operators own or manage approximately 94,000 units statewide. An example of this type of operator might be an owner of several duplexes that are adjacent to one another or that are scattered throughout a neighborhood. Finally, we estimate that there are 85,000 small landlords who own three or fewer units with a combined total of 147,000 rental units. Examples of this type of operator are persons who rent single-family units or own a duplex. A key point to be drawn from this table is that multifamily operators represent 16 percent of those who own or manage residential rental properties but they own or manage 63 percent of the rental housing stock. There are more than four times as many small landlords who own from one to three units. For policy purposes, it is probably safe to assume that there are 20,000 owners or firms that represent the target audience for the Focus on Energy Multifamily Program.

Table 3–1 Disposition of Rental Properties by Operator Type in Wisconsin

Operator Type Definition of Type

Number of Rental

Operators

Percent of Rental

Operators

Number of Rental

Units

Percent of Rental Units

Multifamily operators

Owner/managers operating one or more buildings with four or more units

18,154 16 417,000 63

Unit operators Owner/managers operating a total of four or more units in buildings with 1–3 units

12,879 11 94,000 14

Small landlords Operators with three or fewer units

85,139 73 147,000 22

Totals 116,173 100 658,000 99

Source: TecMRKT Works’ estimates of operator types based on the tax assessor data from Milwaukee and 2000 Census data

Table 3–2 shows our estimates of the distribution of the number of units owned or managed by multifamily operators. For the sake of description, we have designated owner managers with 4 to 10 units as small multifamily operators, those with 11 to 20 units as small medium multifamily operators, those with 21 to 70 units as medium multifamily operators, those with 71



to 230 units as medium large multifamily operators, and those with 230+ units as large operators. Slightly more than 60 percent of the multifamily operators have between 4 and 10 units. However, these operators own or manage just 16 percent of rental units. Nineteen percent of medium small multifamily operators have 12 percent of rental units. Nineteen percent of operators have 72 percent of the rental units. The largest multifamily operators, 1 percent of all multifamily operators, own or manage about a quarter of all units owned or managed by multifamily operators.

Table 3–2 Estimated Number of Units in Wisconsin Operated by Multifamily Operators

(owner managers with at least one building with four or more units)

Units Owned or Managed by Multifamily Operators

Number of Owners/

Managers

Percent of All

Owners/ Managers

Number of Units

Percent of Units

Small multifamily operators 4 to 10

11,255 62 66,800 16

Medium small multifamily operators 11 to 20

3,449 19 50,000 12

Medium multifamily operators 21 to 70

2,541 14 96,000 23

Medium large operators 71 to 230

726 4 104,200 25

Large multifamily operators 231+ 182 1 100,000 24

Totals 18,153 100 417,000 100

Source: TecMRKT Works’ estimate based on tax assessor and Census 2000 data

We examined the distribution of unit operators in a similar fashion. From Table 3–3 we see that 86 percent of the unit operators own 66 percent of the housing stock owned by unit operators. As one might expect, there are very few medium large and no large unit operators.

Table 3–3 Estimated Number of Owner/Managers and Housing Units

for Unit Operators in Wisconsin

Units Owned or Managed by Multi-unit Operators

Number of Owners/

Managers

Percent of All Owners/ Managers

Number of Units

Percent of Units

Small unit operators 4 to 10 11,076 86.0 62,234 66

Medium small unit operators 11 to 20

1,468 11.4 50,006 22

Medium unit operators 21 to 70 322 2.5 9,430 10

Medium large unit operators 71 to 230

13 0.1 1,885 2

Totals 12,879 100 94,294 100

Source: TecMRKT Works estimates based on Milwaukee tax assessor and 2000 Census data. A unit operator owns or operates four or more units in multiple buildings with three or fewer units.



Table 3–4 shows the average estimated number of units for multifamily operators.

Table 3–4 Average Number of Units for Each Category of Multifamily Operator

By Type of Multifamily Operator

Characteristics Overall Small Medium Small Medium

Medium Large

Large

Average number of housing units per multifamily operator

23 6 14 37 144 549

3.5 OWNER SEGMENTS

Who makes decisions about properties is dependent on a number of factors. One of these factors is the size of holdings. As the number of units increase, owner/managers typically rely on others to help in the decision-making. An owner with 10 units usually does all of the decision-making. An owner with 1,000 units may delegate the detailed day-to-day decision-making for groups of buildings or complexes to subordinates. Thus, as the size of holdings increase, owners may become removed from the specifics of decision-making. Another factor that influences decision-making is how owners choose to manage their property. Some owners do not want the responsibilities of day-to-property management so they hire a management company and delegate their responsibilities. For example, owners with smallholdings of multifamily units may not want the hassles of managing a property and may turn it over to someone else. There are numerous individuals, groups of individuals and institutions who like the stability and tax consequences of property investments but do not want to manage real estate. These individuals hire professional managers to oversee their property. The differences in the number of units and the choice of how to manage property have consequences for who makes decisions, the amount of time and expertise that are involved in decision-making, and the criterion variables that are factored into decisions. Given this, we believe that there are at least four different operator segments in the multifamily market, the small operator segment, the medium operator segment, the large operator segment, and the fee-managed operator segment. We believe that these segments represent different target audiences that will need to be addressed with different content, different programs, and different marketing strategies. The small operator segment roughly corresponds to multifamily operators with 70 or fewer units and perhaps some with larger numbers of units. The medium segment includes many of the multifamily operators with 70 to 230 units but may include some operators with more or fewer units. The two largest segments correspond to operators with more than 230 units but may include some operators with fewer units. The distinguishing feature between the two largest segments is the degree to which multifamily operators fee-manage property. As we learn more



about the multifamily segment, we should be able to refine our understanding of these segments and how they differ from each other.

3.5.1 The Small Operator Segment

This segment is made up of owners with between four and perhaps 50 or more units. The units may be located in one or more buildings. Sometimes, owners of units in this range will have several small properties with one to 10 units in them and/or perhaps one building with a larger number of units. This segment is typically composed of people who have other employment and who own and manage rental units on the side. With this number of units, the income from the properties is probably not sufficient to allow people to support themselves full time. Based on the qualitative interviews, we believe that quite a few owners in this segment are blue collar or persons with craft skills. These people may have gotten into the multifamily business as an extension of their trade. Typically, owners in this segment have the skills to complete their own maintenance and do so. They use contractors as a last resort when the job is outside their skill set or too large, too time consuming, or too involved for them to tackle. In many instances, couples operate as a team to manage the business. One member of the team may do the bookkeeping and leasing and the other the operations and maintenance tasks or some combination of these activities. In other instances, just one person may operate the whole business. The small multifamily operations are usually run from the owner’s home or, in the case of a tradesperson owning their own business, from a business establishment. In many instances, the residential telephone serves as the business telephone. Because these owners hold other employment, they are often difficult to contact during normal business hours. There is heavy reliance upon answering machines. These owners are best reached after business hours and probably through the mail or some mechanism that is not direct one-to-one contact. The combination of outside employment and managing the multifamily property means that these individuals are extremely busy. Owners in this segment are focused on the day-to-day details of managing the business and keeping their units leased and maintained. They do not have, and therefore do not spend, a great deal of time searching for information or exploring options. They respond to equipment problems or physical issues associated with their building(s) swiftly, taking the most straightforward path to problem resolution. This frequently means one-for-one replacement and minimizing the amount of time spent considering options. In this segment, and for that matter in other segments, there is not likely to be on-site personnel when the number of units in a building is small, in the range of four to ten units. Beyond this number of units, owners may have a part-time or in some cases a full-time on-site representative. The representative is often a renter who receives consideration on the rent for showing the



property, doing some light maintenance such as keeping common areas clean or mowing the yard, completing minor repairs, being available when tenants have problems, calling the owner when issues arise that need the owner’s attention, and sometimes collecting receivables. For this segment, the key decision-maker is the owner.

3.5.2 The Mid-Sized Operator Segment

Based on data from the qualitative interviews, the number of units owned or managed by operators in this segment starts somewhere between 40 and 100 and may range as high as 300 to 500 units, perhaps as high as a thousand units. In the mid-sized operator segment, the owner is typically involved full-time with property management. More importantly, what most distinguishes this operator from the small operator is the use of some paid staff. Although we do not have certain evidence, we suspect that the smallest mid-sized operators typically hire maintenance personnel first. There is probably some point between 50 and 100 units when maintenance becomes too great an issue for the owner operating alone. The owner continues managing the properties but cedes some of the maintenance activity to a paid staff person. In some instances, this may be done by providing a consideration for rent. Alternatively, the owner may contract some maintenance rather than hiring staff. The important point is that there is now an additional person or persons contributing to decision-making. The nature of the buildings in this segment is different than in the small owner segment. Whereas the small operator segment may have multiple one to ten unit buildings, and perhaps one or two larger than that, the medium-sized operator is likely to have one or more buildings, or perhaps even a multifamily complex in the range of 20 to 150 units. Like other operators, medium-sized operators use on-site renters as managers until the number of units in a building or several buildings in a complex reach a point where the building and the management of the building needs constant attention. For the larger-sized buildings or complexes, the operator will hire a professional manager or a family member may become a full time professional manager. At modest building/complex sizes, there may be a single site manager who covers nearly all functions such as budget, receivables, leasing, and tenant relations. As building/complex sizes increase, the functions of the staff begin to diversify into management, leasing and maintenance. Up to this point, the owner typically retains much of the detailed decision-making authority. As the size and number of sites and buildings increase, you begin to see intermediate levels of managers who are responsible for multiple buildings or multiple complexes. It is at this point that the owner tends to relinquish authority and control to senior property managers. Thus, rather than being directly involved in much detailed decision-making about specific buildings or complexes, and perhaps maintenance, the owner begins to become more hands off and begins to focus more on the financial and management aspects of the operation.



In talking with many mid-sized operators, we have observed, although not with any statistical rigor, that many are family firms or firms that have grown-up around one or two individuals who represent themselves, and friends and acquaintances who are investors. Some of the larger firms in this group appear to be family firms where there has been a succession of generations or many years to accumulate properties. This may be indicative of the length of time it takes to accumulate wealth and build a very substantial portfolio of property. The larger firms appear to have been fairly aggressive in their financial dealings. We have also spoken to operators in this group whose portfolio appears to be in decline. These are people who built a fairly substantial portfolio of properties who have chosen to slowly get out of the business. Whether operators are in ascent or decline can significantly color how they make decisions and whether they are interested in issues such as energy efficiency.

3.5.3 The Large Operator Segment

The large operator segment is comprised of firms with 300 to 500 units to several thousands of units. The number of units in the lower-end of this range can fluctuate and there may be firms with upwards of 250 units who fit the characteristics of this category and firms with up to a thousand units who are more like the mid-sized operator. Some of these operators may have a few thousand units, for example, we talked with a senior property manager with a firm with 3100 units mostly in the Midwest. We know that nationally some of the largest firms may have more than 200,000 units. These very large firms have holdings throughout the country and typically have large holdings on the east and west coasts as well as in Texas and the Southwest. Their geographically widespread holdings represent a form of diversification that affords some protection from downturns in regional economies. Some of the smaller firms in this group may be regionally based, for example, in the Midwest. We found examples of both types of firms during our qualitative interviews. National firms own a number of the high-rise buildings in downtown Milwaukee with more than 100 housing units. National firms own a number of rental properties with large numbers of units southwest of the Beltline in Madison. In general, it appears that the larger owner-management firms target higher end markets, although this is not always the case. These firms may specialize, for example, in high-rise downtown properties, low-rise suburban multifamily housing, or properties to attract seniors, but most have a mix of multifamily property types. The regional and national firms almost always have multiple lines of business. It is not unusual for such firms to be engaged in real estate development that may include the development of multifamily housing and commercial and residential property. The development divisions may focus on buying and upgrading existing properties or building properties out of the ground or both. Some of these firms have real-estate operations, for example Grubb and Ellis, which match tenants with commercial properties. Other complementary lines of business include commercial office and retail space holdings, particularly strip malls or malls. We spoke with a Milwaukee property manager who had responsibility for a residential complex and an adjacent shopping



mall. Most of the firms have property management divisions that operate multifamily properties for others. The organization of these large firms is complex. At the top, there is a board, a president and/or CEO. There are generally several vice-presidents usually aligned with the different operating divisions, for example, property acquisition, property development, construction, multifamily housing operation, commercial property, etc.

There is also a fair amount of vertical structure. Within a multifamily housing operating division there may be regional directors or vice presidents who are responsible for properties in a fixed geographical area. There may be one or two layers of senior property managers beneath the regional directors depending on the number and size of properties within a defined geographical area. One of these layers of senior property managers is typically responsible for several properties within more local geographical areas, for example, within the Milwaukee metropolitan area or for an area from Northwest Illinois to Green Bay. The size of the area is dependent on the number of units and the properties that are owned and managed. The exact structure may vary depending on circumstances. One of the persons we interviewed was located on-site and acted as a site manager for a particular property and also as a senior property manager with oversight for two additional properties. At the property level, depending on the number of units, buildings, location and shape, there is usually a site or property manager, perhaps an assistant property manager, a leasing manager and some number of leasing agents. Also, there is usually a maintenance supervisor and maintenance staff. In high-rise buildings, you may find front desk staff, security personnel or a door person, and perhaps a concierge and cleaning staff. The property manager is responsible for developing budgets, processing receivables, supervising staff, tenant relations, advertising, developing proposals, etc. Leasing managers and staff are responsible for leasing space and tenant relations. The maintenance manager at larger properties is usually someone with some training and/or experience who is capable of repairing and maintaining most of the equipment found on-site. The maintenance staff are typically less well-trained helpers for the maintenance manager. Because high-rise buildings typically have more systems and perhaps more complex systems, we suspect that the maintenance supervisors in those buildings may have more experience and training than maintenance supervisors for other types of settings. There is some lack of consistency in the pattern of relations between the site manager and the maintenance supervisor. In some organizations, the maintenance supervisor reports directly to the site manager. In other cases, the maintenance supervisor may report to someone in facilities maintenance higher in the organization and coordinate with the site manager. Which of these



arrangements may accrue is likely affected by factors such as the number of properties in close proximity to each other. Although site managers may have some discretion in decision-making they do not have a great deal of autonomy in decision-making in these large firms. Usually, there is an upset limit, such as $1,500 to $2,000, at which point a site manager passes the decision-making to a senior property manager for approvals. One of the site managers we interviewed had a decision limit of $7,500. The types of decisions that on-site managers make are usually quite circumscribed. For instance, they may authorize a refrigerator replacement but they are not likely to make a general change in the style, model, or efficiency rating of a refrigerator without authorization from someone higher in the organization. A lot of the discretion and authority for major decisions resides with the senior property managers or is initiated by them and then moved up the chain of command. It is the senior property managers who make the decisions and initiate proposals for changes to buildings, although site managers certainly work with senior property managers and may be the initiators of the ideas. Generally, a maintenance manager makes a decision about what may need to be fixed or replaced. Depending on the relationship with the site manager, the maintenance manager may proceed with replacements subject to predefined approval limits or understandings about what types of replacements may be made. A maintenance supervisor typically will not be making decisions about changes in the models of appliances that may be installed. A senior property manager might make such decisions depending on how much autonomy the senior property manager has in dealing with properties. Some of the large firms purchase from national contracts or buy through contracts from local vendors. Some of the senior property managers with whom we talked indicated that they buy from local vendors based on price. When major changes are contemplated in buildings, for example, changing the façade or remodeling kitchens or baths, senior property managers develop proposals for capital funds that are presented to upper management. Upper management evaluates the proposals and makes decisions from among groups of proposals about what to fund. Proposals are likely to be funded if it can be shown that the changes will help to keep a building competitive (in other words occupied), and concomitantly rental values high. Some of the larger firms may have in-house architectural and engineering staff who guide capital projects. The people with whom we talked indicated that they did not use in-house expertise but went instead to local architects, engineering firms, and contractors. This probably reflects the diversified nature of these firms and the fact that in-house staff and construction expertise are focused on development projects and somewhat removed from day-to-day operations of buildings at the local level. Some of these firms may have technology standards that the senior property managers are required to follow. In other contexts, we have spoken with managers who have talked about this. These standards may limit what property managers can do. In some instances these firms have a technology manager who evaluates technologies and dictates what can be used. It may be



possible to influence such technology managers but they may have to be approached by regional and national organizations rather than a state level entity because the standards may apply to thousands of properties. The picture that emerges then is that the key decision-makers for the large operators are the senior property managers. They are the ones who initiate projects and they are the persons who have to convince the firm to invest its capital in certain enterprises. Their livelihoods are dependent on their ability to show a profit for the buildings they manage. They do respond to incentives and they are looking for ways to increase the profitability and margins for their properties. Generally, on-site managers have some latitude to make decisions but there are limits to the changes they can make without approval from a senior property manager or an owner.

3.5.4 The Large Fee-Management Segment

There are a number of firms that specialize in multifamily property management. These firms manage large numbers of units and buildings on a fee basis. Instead of managing the investment for a company, these firms are managing the properties for a diverse array of owners. The ownership structures may involve a single owner or a group of investors who have purchased a building. Major institutional investors, such as retirement funds, use property management firms. Often institutional investors will work with a single firm to manage all of their investments in a given area. Depending on the size of the firm and the number of properties that they manage, the management structure more or less mimics the structure of the large-scale owner-management segment. Here again, the senior property manager is a key player in the decision process. The senior property manager develops budgets and revenue projections that are agreed to with the owner. As long as the costs stay within budgets and revenue projections are met, the senior property manager has a great deal of autonomy in dealing with the building. For example, one of our informants has instituted a semiannual check of all faucets in her buildings. This results in a significant reduction in water costs. This is not something requested by the owners. This is something that she does as part of her management efforts and is suggestive of how she attempts to manage common area costs. A fundamental difference between owner-managed properties and fee-managed properties is how trade-offs are made for capital projects. For fee-managed properties, the senior property manager develops proposals but then must convince the owner to forgo cash flow for the period needed to cover the costs of the project. Here the competition is not among projects for buildings, but whatever other investments, projects or uses the owner(s) may have for the money. The senior property manager must convince the owner that there is a return on investment in terms of reduced costs or sustained revenues and the owner must decide that the short term disruption to cash flow has value. Partially this is a problem of helping the owner to plan ahead for the changes in cash flow.



3.6 CHARACTERISTICS OF ENERGY-USING EQUIPMENT

One of the goals of the baseline study was to obtain some idea of the types of equipment that is found in multifamily housing. In this section we review what we learned from the survey of multifamily operators about equipment in selected multifamily premises and from an analysis of the data collected by CEE through their efforts primarily during the Focus on Energy Pilot Program.

3.6.1 Results from the Survey

Table 3–5 shows the number of units owned or managed by the survey respondents. About 40 percent of the respondents own 4 to 10 units. Ten percent of the survey respondents own or manage 71 or more units.

Table 3–5 Sample Sizes for the Interviews by Number of Units Owned or Managed

Number of Units Owned or Managed by Survey

Respondents Number of Completes

4 to 10 40

11 to 20 24

21 to 70 26

71 to 230 8

231+ 2

Total 100

Each respondent was asked a set of questions about a randomly chosen building or premises that they own or manage. Table 3–6 shows the distribution of number of units at the premises for which specific questions were asked.

Table 3–6 Sample Sizes for the Interviews by Number of Units Owned or Managed

Number of Units in Premises About Which Questions

Were Asked Number of

Respondents

1 to 3 47

4 to 10 37

11 to 20 9

21 to 70 2

71 + 2

Unknown 3

Total 100



Because we are mainly interested in premises with more than four units, we examined the characteristics of the premises by separating the premises into those premises with three or fewer units and those with four or more units. The results are shown in Table 3–7.

Table 3–7 Selected Premises Characteristics by Number of Units in the Premises (Percent)

Fewer Than Four Units

Four or More Units All Premises

Heating fuel

Electricity 10 5

Natural gas 97 88 93

Oil 2 2 2

Heating

Central source 15 28 22

Individual units 81 68 74

Other 4 4 4

Water heating

Electricity 12 6

Natural gas 98 88 93

Liquid propane 2 1

Water heating

Central source 15 34 25

Individual units 81 60 70

Other 4 6 5

Percent with air-conditioning

None 75 50 62

Some 19 24 22

All 6 26 16

Type of air-conditioning, if present1

Window units only 68 48 54

Central units 17 32 27

Both 17 18 16

Other 4 3

Owner/operator supplied refrigerator 38 80 60

Dishwasher 2 14 8

In unit clothes washer 17 24 21

Central laundry 59 76 68

N 47 50

1 For type of air conditioner, the n’s for three or fewer units and four or more units are 12 and 25, respectively.

In the survey, respondents were asked about the equipment associated with a specific premises that they own or manage. For the premises reported on by the survey respondents, natural gas is the predominant heating fuel. Ninety-three percent of all respondents reported that their



premises use it. The smaller units are almost entirely heated by natural gas (98 percent), while the premises with four or more units are also predominately (88 percent) heated with natural gas. Electricity was used as the heating fuel in about 10 percent of the premises with four or more units but not at all in the premises with fewer than four units. The majority of the respondents (74 percent) reported that the premises are individually rather than centrally heated. Sixty-eight percent of those with four or more units reported that units were individually heated rather than heated from a common source. About a fifth of premises have central boilers. Central sources are least common in the smaller premises and more common in larger premises. The pattern for water-heating equipment is almost identical to that for space heating. The dominant fuel is natural gas and individual units predominate over central premises water heating. These data imply a need to maintain an emphasis with contractors and suppliers for supplying efficient unit-level heating and water-heating equipment to multifamily owners. In light of the fact that tenants often pay energy costs, it is unclear if owners and heating contractors will install efficient heating equipment in rental units to reduce costs. This is an issue that might be usefully examined. A central source heating program such as the current Express Assessment effort may be effective in dealing with central units. It is unclear what if anything needs to be done to influence individual unit heating equipment. Fewer than 40 percent of the owners report that their premises have air-conditioning. Air-conditioning is more likely to be found in four or more unit buildings (50 percent). When air-conditioning is present, respondents report that it is likely to be window air-conditioning, especially if the building has fewer than four units. Many owners report that tenants supply some appliances. About 40 percent of respondents report that tenants in their premises provide their own refrigerators and stoves. This is most likely to occur in the premises with fewer than four units, but it occurs about 20 percent of the time in premises with four or more units. About 8 percent of the respondents report that units in their premises come equipped with dishwashers and 20 percent report that units in their premises have in-unit clothes washers and dryers. Respondents with premises with more than four units are more likely to report in-unit clothes washers and dryers. These findings suggest that there may be some value in targeting multifamily renters with information about efficient refrigerators. Likewise, there is some potential value in targeting multifamily operators with information about apartment-sized efficient washing machines. Emphasizing the water saving benefits of efficient washers in addition to the energy-saving benefits might increase the appeal of efficient equipment for multifamily operators because most operators pay the water bills.



About two-thirds of all multifamily operators say that they provide a laundry room in their premises. Three-quarters of the operators with more than four units have a central laundry facility. Although they were asked, about half of the respondents who indicated that they have laundry rooms did not provide information about ownership of the equipment. Of those who did, the largest proportion (23 percent) indicated that they owned or leased the equipment and took all of the proceeds. This was especially true of respondents reporting on premises with four or more units where 40 percent or more said that they took all of the proceeds. Of those reporting about a quarter of the respondents with premises with three or fewer units indicated that they provided space for a laundry route operator. This was true for only 14 percent of respondents reporting on premises with four or more units.

3.6.2 Results from the CEE Assessments

As part of the Focus on Energy Program Pilot Program, the Center for Energy and the Environment (CEE) implemented an assessment program and retrofits in existing multifamily buildings (four or more units or complexes with multiple buildings) primarily in the Fox Valley. In doing this, the CEE collected data about buildings and made recommendations for energy-efficiency improvements to the buildings. This section briefly examines some of the data that are available to us from the CEE database to see what it might tell us about the potential for increasing energy efficiency in multifamily buildings.

The Buildings in the CEE Multifamily Building Assessment Database

In order to understand the analysis of the recommendations, it is important to understand the types of properties and buildings that are being assessed. The version of the database that we have (circa October 10, 2001) contains information about 117 properties owned or operated by 59 companies. The 117 properties have a total of 418 buildings with 6,285 rental units among them. Table 3–8 displays information about the size of the properties for which assessments were completed. The size of properties ranged from small properties with four to ten units to two properties with more than 200 units. The larger properties tend to be comprised of multiple buildings with smaller numbers of units, although there are a few larger buildings as can be determined by examining the range of the number of buildings per property or the size of buildings as identified in Table 3–9. The CEE’s goal was to get a good cross section of properties and buildings. The properties that were recruited were the result of cold calls in which CEE staff went to a site, contacted the site manager, and then worked their way up the management chain until they reached a decision-maker who could make the decision to complete an assessment. According to the CEE, many of these properties are owned and managed from Milwaukee or out-of-state. In the later stages of the pilot, some of the owner/property managers invited the CEE to return and do assessments for other properties that they own or manage. The initial assessments led to additional assessments.



Table 3–8 Size of Properties, Number of Properties,

Range of Number of Buildings per Property, and Average Number of Buildings per Property

Size of Property Number of Properties

Range of the Number of Buildings per

Property

Average Number of Buildings per

Property

201+ 2 23 to 31 27

151 to 200 4 1 to 18 5.75

101 to 150 9 1 to 26 9.6

71 to 100 15 1 to 8 3.2

51 to 70 10 1 to 7 3.1

41 to 50 8 1 to 6 3.9

21 to 40 39 1 to 5 2.1

11 to 20 26

4 to 10 3 1 1

Unknown 1

117

Source: CEE database

According to the CEE, managers who were approached to have an assessment tended to pick properties for assessments with common metering and common services because changes in these properties would be most beneficial to their firm. This means that properties that had individually metered units are less well represented in this group of buildings. This could be one reason why these buildings have more common heating than in the sample. This is a self-selected population. It is not a random sample and, for the moment, it is only representative of the buildings in this population. Having said this, the information from this study is useful in understanding the types of efficiency measures that may be implemented in similar buildings and it can give us an understanding of measures and their paybacks. When we have a better description of the range of multifamily buildings in Wisconsin, the findings from this population might be usefully generalized to some subset of buildings in the larger population. Table 3–9 provides a breakdown of the buildings in terms of the number of units. Almost half of the buildings in this population have four to ten units (Table 3–9). However, only 23 percent of the units in this population are in buildings with four to ten units. In other words, there are many buildings with small numbers of units but most of the units are in larger buildings. The modal percentage for building size is 35 percent and is for buildings with 11 to 20 units.



Table 3–9 The Percentage of Buildings and Units by the

Number of Units in the Building

Size Category of the Building

Percent of Buildings in the

Category Percent of Units in

the Category

4 to 10 units 44 23

11 to 20 units 37 35

21 to 40 units 6 11

41 to 70 units 3 13

71 to 197 units 3 18

Unknown 7 0

Total 100 100

N 418 6,285


The median year constructed of the 418 buildings is 1985 (Table 3–10). The oldest building was built in 1880 and the newest in 2000. Sixty-two percent of these buildings are 20 years of age or less. The age is unknown for about 10 percent of the buildings.

Table 3–10 Age of the Buildings

Year Built

Percent of Buildings in the

Category

Pre-1960 2

1960 to 1969 4

1970 to 1979 23

1980 to 1989 39

1990 to 1995 11

1996 to 1999 9

2000 3

Unknown 9

Total 100

N 418


The median size of the units in these buildings is about 870 square feet (Table 3–11). More than half of the units are between 800 and 999 square feet.



Table 3–11 Percent of Buildings by Size of Units

Average square Footage per Unit

Percent of Buildings

400 to 499 1

500 to 599 1

600 to 699 5

700 to 799 2

800to 899 25

900 to 999 23

1000 to 1099 14

1100 to 1199 9

1200 to 1299 4

1300 to 1399 2

1400 to 1499 0

1500 to 1599 0

1600 to 1699 1

1700 and up 0

Unknown 13

Total 100

N 418


We examined the types of heating systems that are found in these buildings (Table 3–12). Three-quarters of the heating systems are multi-zone hot water systems that use natural gas for fuel. Less than 1 percent is central forced air. About 20 percent of units are individually heated. About 65 percent of the individually heated units or 13 percent of all units in the population are heated with individual electric baseboard units. Another 20 percent of the individual units are forced air electric. In other words, if a unit is individually heated, it is likely to be heated with electricity, but the majority of units in this population are centrally heated with natural gas as the fuel. We also examined whether units had air-conditioning and the type of air-conditioning (Table 3–13). Because we had only an indicator of whether a building had air-conditioning and not whether all units in a building had air-conditioning, we assumed that all units had air-conditioning if the building was indicated to have air-conditioning. CEE staff indicate that this is a reasonable assumption. Based on this, nearly 75 percent of units have window air-conditioning. About 16 percent of units had no air-conditioning. When central air-conditioning is present, it is most often provided by individual split systems rather than a central building system. The individual split systems are found in buildings with large numbers of units. Thus, individual split systems are found in 17 percent of the units but just 6 percent of the buildings.



Table 3–12 Percent of Units and Total Square Footage by Type of Heating System and Fuel

Type of Heating Percent of

Units

Subtotal Percent of

Units Percent

Square Feet Subtotal

Square Feet

Central multi-zone water natural gas 76 74

Central steam-water multi-zone natural gas

<1 -

Central steam gas 2 1

Central forced air gas <1 <1

Total percent central heating 78 75

Individual unit baseboard electric 13 15

Individual unit forced air electric 5 7

Individual forced air gas 3 4

Individual gravity gas 1 <1

Individual Hot water single zone gas <1 <1

Total percent individual heating 21 25

Don’t know 1

Total 100 100 100 100

N 6,285 5,391,470


Table 3–13 Presence of Air-Conditioning

Air-Conditioning Percent of Units Percent of Buildings

Window units 73 78

Individual split systems 17 6

Central seasonal units 4 <1

None 7 16

Total 101 100

N 418 6,285


The story with respect to water heating is somewhat interesting (Table 3–14). About a third of units have individual electric water-heating units. The remaining two-thirds have central water-heating systems that are mainly fueled with natural gas. One implication of this is that for at least two-thirds of the units it is the owner/manager who would receive incentives from reducing energy use for service water heating. A second point is that there may be technical opportunities, although not necessarily market potential, for technology alternatives to electric resistance water heating. Another observation is that many units with electric water heating are in buildings that have gas heat. Although conversion to gas fueled individual units is probably not practical or economic for these units, this finding does raise the issue of what fuel might best be used for



individual water heating in new multifamily construction and whether or how to address that issue from a programmatic perspective.

Table 3–14 Type of Service Water Heating

Type of Service Water Heating Number of

Units Percent of Units

Individual service water heater

Individual tank electric 2,085 33

Individual gas tank with recirculating loop 20 0

Individual tank gas fired 16 0

Central service water heater

Central tank gas with a recirculating loop 1,934 31

Central tank gas 1,628 26

Central service hot water gas fired boiler with circulating loop

261 4

Central service gas boiler with recirculating loop

105 2

Central electric tank with recirculating loop 92 1

Central service gas boiler 68 1

Central electric tank 28 0

No data available 48 1

6,285 99


An Analysis of Efficiency Potentials

We analyzed and summarized the recommendations that the CEE made to owners/managers to increase the energy efficiency of each of the buildings in this population (See Table 3–15). The purpose of this analysis is to identify the types of recommendations that are being made and to get some understanding of the savings and simple paybacks that may be associated with the recommendations to gain a larger perspective on what might be possible in the multifamily sector. It is important to keep in mind that this analysis is based on the population of buildings that have already been served by the CEE. These numbers are likely to be a reasonable representation of what can be expected in similar buildings, although the findings may be limited by geography because most of these buildings are located in the Fox Valley. Customs and practice might differ elsewhere in the state. The recommendations are summarized by categories that have been developed by the CEE. The categories are displayed in column one of Table 3–15. For most of the categories, there are from one to three basic recommendations per category. In two or three instances there are several. In order to help the reader understand the categories, they are described below.



Combustion air/vent — Many of these recommendations are to clear away blockages of combustion air access points and air vents. A modest number of these recommendations are to enlarge combustion air openings. A relatively small number of these recommendations involve replacing or installing fans or blowers and monitoring the operation of the blowers. Many of these recommendations are safety related with modest energy implications.

Controls — A substantial number of these recommendations involve installing a time clock to

manage service water-heater recirculation loops. An additional number of these recommendations deal with boiler controls including resetting or commissioning them. Several recommendations in this group involved managing hallway heating by adding controls or managing existing controls more effectively.

Boiler control (outdoor temperature) — All of these recommendations involve installing an

outdoor reset and cutout control that lowers the boiler water temperature in mild weather and shuts down the heating system (including pumps) in warm weather.

Fuel switching — The preponderance of these recommendations involve switching electric

dryers to natural gas. There are also a few recommendations for fuel switching for other types of appliances in situations where that may make sense.

High service water hot water temperature — These recommendations focus on reducing

service hot water temperatures incrementally until tenants complain. In a few instances, there are recommendations for equipment additions that would make it possible to lower the temperatures or control them more closely.

Insulation — Most of these recommendations are to insulate various piping systems. There is a

smattering of recommendations to insulate exterior walls, attics, or roofs. Possible implications of this finding are that the exterior walls and roofs of the buildings in this population may be reasonably well-insulated, or that insulating walls is not cost effective.

Lights — There are three categories of recommendations in this group. Roughly a quarter of the

recommendations are to switch from incandescent to LED exit lighting. About a third recommended adopting T-8 technologies to replace existing fluorescent technologies. Many of the remainder are to use compact fluorescents to replace incandescent bulbs.

New equipment — Almost all of these recommendations are to replace boilers that fail or are

being replaced because they are near the end of their lifetime with high-efficiency boilers. Operations and maintenance — These recommendations are mainly to seal gaps and cracks,

add door sweeps and weather stripping, and replace failed valves and other items. Vents —This category includes an array of problems such as reconnecting vents that are

disconnected, replacing inoperative fans, checking vent dampers, and having assessments of the adequacy of ventilation in various areas of buildings done.



Washing machines — Almost all of these recommendations deal with replacing vertical axis with horizontal axis washing machines when existing machines are replaced. In about 10 percent of the cases, the recommendation was to inquire of a laundry service about replacing vertical axis machines with horizontal axis machines. Assuming that this recommendation was consistently offered in cases where a laundry service is used, this implies that about 10 percent of buildings with a central laundry use a laundry service.

Table 3–15 Summary of Energy-Efficiency Recommendations, Savings, and Payback

Recommendation Category

Number of Buildings

Percent of Buildings

Rank of Buildings

Average Annual

Savings per Building

Rank of Annual Savings

Simple Payback in Years

Rank of Simple

Payback

Combustion air/vent 150 36 6 $1 12 0.1 1

High service hot water temperature

138 33 7 $40 9 0.2 2

Vent dampers 106 25 9 $80 7 0.4 3

O&M 348 83 1 $13 11 0.5 4

New equipment 247 59 3 $190 4 1.6 5

Controls 72 17 10 $136 6 1.9 6

Fuel switching 24 6 11 $951 1 2.4 7

Insulation 190 45 5 $74 8 3.1 8

Boiler control (outdoor temperature)

219 52 4 $233 3 3.4 9

Washing machines 245 59 2 $313 2 3.5 10

Lights 114 27 8 $141 5 4.0 11

Moisture 11 3 12 $15 10


Columns two and three of Table 3–15 indicate the number of buildings and the percent of the 418 buildings for which each type of measure was recommended. The percent of buildings is an indicator of the “hit” rate or occurrence rate that one might have in similar buildings with similar characteristics. It is useful in assessing the potential for program opportunities for measures for buildings of the type and age in this sample. Column four is the rank of the percent of buildings. A rank of one means that the recommendation was the most frequent recommendation. Column five shows the average annual estimated savings per building for the measures in each category and column six displays the rank of the savings. Note that these estimates are per building and not per unit of technology. Columns seven and eight show the simple payback and the rank of the simple payback. The simple payback is the total cost of the measures or the marginal cost of the efficient measures



relative to standard measures divided by the annual savings. Put slightly differently, simple payback is the number of years required to pay for the cost of the measures. The results of Table 3–15 have been ordered by payback but savings or rate of occurrence could equally well be used to order them. Combustion air measures, resetting service water temperatures, vent dampers, and some of the operations and maintenance measures have paybacks of less than a year. The combustion air and operations and maintenance measures show low dollar savings but short payback times, while the savings from vent dampers and resetting service water temperatures show modest levels of dollar savings but equally good paybacks. The measures with the shortest paybacks are measures that usually require a small amount of labor but no installation of equipment. For example, cleaning the combustion air vents is usually a matter of moving objects or cleaning an air vent. High service water temperatures is a matter of resetting the temperature setpoint. Measures with a 1- to 2-year payback include introducing controls to manage service water temperatures and replacing boilers with more efficient boilers at the replacement time (new equipment). The controls for managing service water temperatures and new boilers show very good annual dollar savings. Based on some of the things that we heard in the interviews, owners and managers may be somewhat wary of a measure such as managing service water temperature because of potential tenant issues. This is an issue that can be explored when the actual implementation of measures is explored. Replacing electric with gas dryers results in high savings with about a 2.5-year payback. Measures with paybacks between 3 and 4 years include insulating piping, adding boiler controls that sense changes in external temperatures and set firing schedules accordingly, replacing vertical with horizontal axis washing machines at replacement time, and replacing light bulbs with more efficient bulbs, for example, T-8s and compact fluorescents. If multifamily operators are expecting a 25 percent return on investment, then most of the measures in this list qualify. If the expected return on investment is 35 percent or more, then pipe insulation, weather-sensitive boiler controls, washing machines, and lighting become marginal. The operations and maintenance measures, the new equipment measures, the weather-sensing boiler controls, and the washing machine measures are recommended more than half of the time. This is in contrast to recommendations for fuel switching, service water-heater controls, vent dampers, and lighting which are recommended a quarter of the time or less. If these findings hold across other buildings, program managers may want to initially focus their information and marketing materials in areas with the highest potential. Maintenance staff can complete some of the measures with the shortest paybacks if the maintenance staff has the requisite information and the motivation to take action. The evidence



we have from the survey and the interviews suggest that operations staff are already heavily burdened. There is an issue as to whether these short payback tasks can be completed by existing staff within the requirements of their jobs. It is not clear that operators are willing to commit other resources. Also there is the issue of how and to whom one might provide information that would be effective in inducing operators and their maintenance personnel to act. The paybacks for more efficient boilers and horizontal axis washing machines are predicated on replacing less efficient equipment with more efficient equipment at the end of equipment lifetimes. The paybacks for these technologies are sufficiently long to encourage early change-out. The problem then is one of how to get operators to retain information about savings potential, recall that they have that information when it is time to make the decision, and then act on information. Program managers may want to consider how their activities might increase the likelihood that this will happen. This is an area that may deserve further investigation as a way of assisting program managers in developing effective program strategies.

3.7 HOW EQUIPMENT AND ENERGY-RELATED DECISIONS ARE MADE

According to the survey, most respondents report that they rely most heavily on vendors and contractors for information, about 46 percent and 43 percent, respectively. However, the medium large operators are less likely to use these sources and more likely to use information from maintenance staff, utilities, and manufacturers. This is consistent with an interpretation that maintenance staff in larger facilities may have more training and that managers in larger operations may be more closely allied to other professionals. One of the things that we have observed several times in different studies is that multifamily operators have few professional affiliations and do not tend to read professional publications. The smaller operators appear to be somewhat isolated from each other. Very few report peer interactions or industry networking. Also, as we have pointed out, they do not have a great deal of time to devote to participation in operator organizations. At this point we should be careful not to make too much of this finding because of the small number of cases in this study. However, if the finding should be borne out through later research, an important implication is that approaching associations may not be as expeditious a path to multifamily operators as working through contractors and vendors. The small medium and medium-sized operators report slightly elevated use of the Internet or information compared to small and medium large operators. We have learned that multifamily operators do not generally build or rehabilitate properties. Overall, only 19 percent of the multifamily operators report having done this since 1997. Operators with fewer than 11 units are least likely to build or renew property. Not quite a third of the operators with 11 or more units report having done some new construction or rehabilitation in the last 4 years. Larger operators report renewing or building more structures and more units than smaller operators.



This pattern appears likely to continue into the future. Just over a fifth of the operators report that they may build or renew structures in the next 3 years. However, the larger operators are more likely to express uncertainty about what their future in Wisconsin might be. These numbers suggest that there may be modest opportunities to influence the building of new buildings and the renewal of existing buildings, especially among the larger operators. It appears that about half of the multifamily operators do their own construction, a third contract for the construction, and the remainder do some of the work themselves and some contracting. Medium large operators are less likely to report doing the work themselves than smaller operators, but the number of cases on which this finding is based is limited. The multifamily program proposes to target contractors in an attempt to improve the energy efficiency of the multifamily housing stock, but this effort may miss the half of the market that does its own work. Program managers may want to consider ways to reach the part of the market that does its own work. About 40 percent of multifamily operators use architects when they build or rehabilitate property. Small operators report using in-house staff, which we suspect means the owner, for design work. The remainder of the design work is more or less evenly split among developers, management firms, and design/build contractors. There is no real pronounced pattern with respect to who does the design work. If program managers want to target people who influence design, they are going to have to target building professionals quite broadly. In general, owners make the decisions about equipment when building or rehabilitating properties. However, for medium large multifamily operators, in-house staff, contractors, or consultants are as likely to make the decisions as the owners.

3.8 THE EQUIPMENT IN BUILDINGS

We asked about the types of equipment now being included in individual units as opposed to being provided centrally when building or rehabilitating property. About half of those who have completed a project in the last 4 years or who will be undertaking a project in the next 3 years report including laundry equipment in the individual units. This represents a target of opportunity for program managers. The downside is that there are studies showing that units with individual laundry equipment use more energy for laundry than do units that use central laundry facilities. Roughly 60 percent of the operators doing rehabilitation or new construction report installing water heaters and supplying gas appliances in individual units. Also, about 60 percent report utilizing compact fluorescent lighting. It appears that efficient lighting is making in-roads into new construction, and gas is used for water heating in individual units. Overall, 70 percent of those doing new construction or rehabilitating buildings say that they are including energy-efficiency equipment in individual unit designs. About 48 percent say they are



installing high-efficiency furnaces and a slightly smaller percent (44 percent) say they are installing compact fluorescents. Just under a third say they are using efficient outdoor lighting and about a sixth say that they are installing high-efficiency washing machines and air conditioners. These data suggest that energy efficiency is penetrating the part of the multifamily market that is rehabilitating and constructing new buildings and units. There is still substantial room for further penetration of energy-efficiency products and services.

3.9 THE CRITERIA DECISION-MAKERS USE IN MAKING DECISIONS

The discussion of the criteria that decision-makers use is broken into two parts. The first part of the discussion focuses on the criteria decisions-makers use to decide what projects to pursue. The second part of the discussion has to do with the criteria that are applied in selecting equipment once the decision is made to pursue a project.

3.9.1 The Criteria for Deciding on Projects

One of the themes that comes through very clearly in the interviews and the survey data is that an important motivation for undertaking projects is the need to replace existing systems. Some property owners wait until systems fail to replace them. However, in many of the well-run larger properties, decision-makers try to anticipate system failures and plan replacements before failures occur. We have already noted for larger operators and large fee-management operators that projects are usually initiated on the basis of proposals that compete with other projects for capital or that an owner may agree to fund. At this level, the managers are quite clear about the priorities. Projects generally fall into two categories: those projects that are essential to protect that value of the property and that must therefore be done, for example, a roof replacement, and all other projects. For the larger operators a key criterion as to whether a project will be funded is how the project may influence competitiveness. Our informants report that they are constantly evaluating their properties in terms of how they fare in the market place. They know from prospective tenants who the competitors are and they learn through talking with tenants what amenities are needed to attract and keep tenants. Their key goals are to minimize the unit days of vacancy, to keep demand for their units strong in order to be able to maintain or increase the value of the rent, to retain tenants for reasonable periods of time to minimize turnover costs, and to keep operating and maintenance costs at a minimum in order to maximize return on investment. Thus, the projects that are funded are those projects that can be shown to contribute to these goals. Managers make no bones about the fact that upgraded kitchens, improvements to the lobby, landscaping, and carpet in the hallways will take priority over other projects if it is believed that these improvements will enhance value for owners and tenants.



The managers were very clear that they could do energy-efficiency projects but that such projects must make a positive showing, or at least not a negative showing, at the bottom line. In discussing this with a respondent who fee-manages property, the manager said that she had gotten an owner to do an early upgrade to a central boiler when she was able to show the owner that an efficient boiler with a rationalized distribution system would provide significant savings at the bottom line. This person works with owners of older buildings. She noted that if she were able to calculate the savings she would be able to convince some owners to make the changes if they were to continue owning the property for a reasonable payback period. This same individual had also done a window replacement project in one of the buildings she manages. In this instance, the project was accepted by the owner on the basis that the windows would improve the looks of the exterior of the building and would make it easier to rent the units to prospective tenants. The windows apparently were in very poor condition. She was allowed to use energy-efficient windows as opposed to standard windows on the basis of energy cost savings. She observed that the person who shows the apartments has started to point out to prospective tenants how quiet the apartments are. There are several observations to be made in relation to getting proposals accepted. In these larger settings, the senior property managers must make the proposals. Senior property managers are going to make judgments about proposals and go with proposals that they believe have a good chance of being funded. This means that the senior property manager has to be convinced of the worth of the proposal. In turn, the property manager has to convince an investment committee or an owner that they should fund a proposal. For this, the property manager needs a proposal that clearly and quickly identifies the benefits of the project, especially the financial benefits, and that provides convincing evidence that the benefits are real. Finally, the owner must have capital available or be willing to accept reduced cash flow in order to complete the project. One of our informants pointed out that owners are sometimes deterred by sticker shock. It is less clear what may motivate smaller operators to make changes to buildings. The need to replace equipment is an obvious motivation. The availability and willingness to use capital is certainly another factor. It is less clear how sensitive and responsive the smallest operators may be to the subtleties of the market in terms of the features. This is an area that needs additional research.

These findings suggest some things that may be needed or may be useful to do in order to increase energy efficiency in the larger segments. An important objective is to reach key property managers. In some instances this will be owners, in many others it will be senior property managers, and in some small number of cases it may be on-site managers. Property managers need to be thoroughly convinced that energy-efficiency projects have benefits. A key is to provide them with credible and believable information. Property managers may be more open if it can be shown that the benefits of a project also contribute to their primary goals of making or keeping their property competitive and providing an attractive bottom line. The ability of property managers to gain acceptance for energy-efficiency projects might be enhanced



if they could be assisted in developing succinct presentations that meet the needs of decision-makers. Property managers may also need tools that help them manage capital and cash flows.

3.9.2 Criteria for Equipment in Common Areas

We asked multifamily operators to rate the importance of ten criteria for selecting common area equipment using a 1 to 10 scale where 10 is a most important factor. Overall, we found that reliability, expected life of the equipment, and ease of maintenance were the most important decision factors (See Table 3–16). We found that the price of the equipment is in the middle of the list. Factors such as energy cost when the tenant pays the bill, company purchasing guidelines, and replacement of equipment on a one-for-one basis are nearer the bottom of the list. Medium and medium large operators gave slightly more emphasis to ease of maintenance than to expected life of equipment. The larger operators also rated having prior experience with the equipment highly. Smaller operators rated energy efficiency more highly than larger operators. This latter factor may possibly reflect the fact that smaller properties may have higher energy costs and/or smaller operators may more commonly pay for more of the utility costs.

Table 3–16 Mean Ratings for Decision-Making Criteria for

Equipment in Common Areas by Type of Operator

Criteria Overall Small Small

Medium Medium Medium Large

Reliability 8.8 8.6 8.9 9.1 8.4

Expected life of the equipment

8.5 8.9 8.6 7.8 8.2

Ease of maintenance 8.4 8.4 8.2 8.7 8.7

Energy efficiency 8.0 8.5 7.6 7.7 7.4

Energy cost when company pays the utility cost

8.0 8.0 8.0 8.3 7.4

Price or first cost 7.6 7.5 6.8 8.1 8.1

Prior experience with the equipment

7.5 7.7 7.3 7.5 6.9

Energy cost when tenant pays the utility cost

7.2 7.8 7.1 6.7 6.7

Purchasing using company guidelines

4.7 4.3 4.5 5.4 5.0

Replacing equipment with an identical or nearly identical model

4.6 4.9 4.6 4.0 5.0

In marketing energy efficiency, energy programs typically focus on the energy and cost savings that are to be had from using energy-efficient equipment in order to convince consumers that they should buy the more expensive energy-efficient equipment. These data suggest that this



approach may not be the most effective strategy for the multifamily market. The top three criteria reliability, expected life of the equipment, and ease of maintenance reflect the reality of the cost of fixing things that multifamily operators face. Replacing a light bulb in a hall way requires identifying the type of bulb that is needed, obtaining the bulb from stock, rounding up a ladder or bulb changer to reach the bulb, and then changing the bulb. Changing a 25¢ incandescent bulb can easily cost ten or twenty dollars. If we take these findings at face value, and they are certainly consistent with the findings of other studies that we have completed, these criteria suggest three important things. First, efficiency program managers need to determine the reliability of energy-efficiency products before recommending them. Program managers need to pay attention to reliability as an attribute of their product. Second, programs should provide reliability ratings and perhaps only promote products that are reliable at a minimum. Program managers may want to avoid recommending early versions of products unless their reliability has been tested. Third, program marketing efforts may want to give priority to reliability, lifetime, and ease of maintenance features over savings when promoting energy efficiency.

3.9.3 Criteria for Equipment in Individual Units

We examined the same set of criteria to see if the ratings would change with respect to equipment supplied to individual units. The overall rankings are roughly the same, although the ratings are generally slightly lower (Table 3–17). Price or first cost moved up the list, as did prior experience with equipment. Again, we see that reliability and ease of maintenance are the critical factors. One question of interest is where operators purchase equipment. For a variety of reasons many programs target upstream actors. If one is to do this, one needs to know who the upstream actors are. The survey data show that operators most commonly purchase equipment through a local dealer or an outlet like Best Buy or Home Depot (50 percent). However, the medium large operators appear to be more likely to go to a distributor or wholesaler such as Kennedy-Hahn. Only a small proportion of operators purchase products directly from manufacturers. Thus, if programs are to target upstream actors, they need to be targeting actors such as Sears and Home Depot as well as the larger distributors and wholesalers.

We also asked operators if they work from predetermined price lists or contracts, or if they make on-the-spot selections of equipment. Seventy percent of the survey respondents told us that they make on-the-spot selections. There may be some informal bidding going on as more than one manager told us that they usually buy from the same vendor but that they always check prices, and they will occasionally buy elsewhere to remind a vendor that they have other options.



Table 3–17 Mean Ratings for Decision-Making Criteria for Equipment

in Individual Units, by Type of Operator

Criteria Overall Small Small


Reliability 7.9 7.4 8.0 8.0 9.3

Expected life of the equipment

7.7 7.4 8.2 7.3 8.4

Ease of maintenance 7.6 6.9 8.0 7.8 9.1

Price or first cost 7.1 6.0 7.8 7.7 8.1

Energy efficiency 6.9 7.1 6.9 6.5 6.9

Prior experience with the equipment

6.8 6.5 6.9 6.5 8.0

Energy cost when company pays the utility cost

6.8 6.5 7.4 6.4 7.0

Energy cost when tenant pays the utility cost

5.8 5.8 5.8 5.7 5.9

Replacing equipment with an identical or nearly identical model

4.0 4.2 4.0 3.6 4.6

Purchasing using company guidelines

4.0 4.0 4.3 3.9 3.6

There are some fairly consistent criteria by which operators make choices. In our in-depth interviews, several people told us that price, size, and color are key criteria. In larger buildings and complexes, there is some attempt to keep uniformity of model and size. Ease of tenant use is also a consideration. For example, one manager told us that they upgraded from manual defrost refrigerators because tenants were not maintaining the refrigerators or maintaining them properly and they were having maintenance issues and complaints. Also, managers are very conscious of product features. Several of the managers associated with larger firms pointed out that the multifamily market is competitive and that they install equipment that is similar to what other operators in their market are installing. None of the people that we talked with indicated that they buy from second-hand stores. However, one manager said that they buy scratch and dent equipment from Sears when it is available to keep costs down. Some managers indicate that they may consider appliance energy use after they have taken into account other factors. Many indicate that energy efficiency is not on their radar screen at all. What these data show is that there are a variety of criteria that come into play. Price is important, and rebates and buydowns can clearly help the penetration of efficient equipment. However, it is also important to make certain that efficient models are available with the size, color, and feature sets that are desired by multifamily operators.



3.10 ENERGY-EFFICIENT ACTIONS TAKEN

Of the 100 survey respondents, more than 60 percent indicated that they have already taken one or more actions to save energy at their properties. Similarly, many of the respondents with whom we talked during the interviews indicated that they had implemented some efficiency measures. Respondents report implementing internal lighting measures in hallways, and common areas, external or outdoor lighting in parking lots or on the grounds, installing efficient space heating and water-heating equipment, improving the efficiency of pools, Jacuzzis or spas, and installing energy-efficient laundry equipment, among other actions.

3.10.1 Internal Lighting

Sixty percent of the survey respondents indicated that they have installed energy-efficient internal lighting in their facilities. Fifteen percent report installing measures in each of years 2000 and 2001, and 17 percent indicated that they installed these measures in 1999. Together, almost half of the respondents who have installed efficient lighting (30 percent of all respondents) report having installed efficient lighting in their facilities in the last 3 years (Figure 3–1). The data also indicate that about 40 percent of the operators have not taken actions to improve the efficiency of their interior lighting systems and possibly represent market potential for the statewide program.

Figure 3–1 Year in Which Energy-Efficient Internal Measures were Installed

195019551960196519701975198019851990199520002005

1 11 21 31 41

Number of Respondents

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The majority of these actions involved installing energy-efficient light bulbs and, to a lesser extent, replacing incandescent fixtures and bulbs with higher efficiency fixtures and bulbs. Forty-nine percent of the respondents who made changes (30 percent of all respondents) report using higher efficiency bulbs or tubes when replacing lamps. An additional 6 percent (4 percent



of all respondents) replaced or installed fluorescent fixtures, 7 percent (4 percent of all respondents) said they installed timing devices, and 6 percent (4 percent of all respondents) said that they improved the efficiency of their lighting or fixtures without detailing how this was accomplished. The reasons given for making these changes include improving the energy efficiency of their interior lighting (30 percent), reducing operating costs (23 percent), making a change while replacing failed equipment (18 percent), and replacing aging equipment (5 percent). One respondent reported improving the comfort of the tenants as a reason for making the change.

3.10.2 Outdoor and Parking Area Lighting

When survey respondents were asked if they had installed energy-efficient landscape or parking area lighting, 35 percent of the respondents indicated that they had made these changes to their property. The most commonly mentioned change in external or parking area lighting is the installation of energy-efficient bulbs in lighting fixtures that are already installed and operating. Forty-five percent of the respondents who made a change (16 percent of all respondents) report taking actions that involved installing energy-efficient bulbs in their outdoor fixtures. Thirty-three percent reported installing automatic timing devices that regulate the hours of lighting operation (12 percent of all respondents), and 18 percent indicated that they installed energy-efficient fixtures (6 percent of all respondents). Of the respondents taking actions to increase the efficiency of their external lighting 55 percent have taken these actions within the last 3 years. Seventeen percent reported taking this action in 2001, 21 percent reported taking this action in 2000, and 17 percent report taking this action in 1999 (Figure 3–2).

Figure 3–2 Year in Which Energy-Efficient External and

Parking Lot Measures were Installed

1965

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1975

1980

1985

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2005

1 11 21

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The owners and managers of multifamily properties in Wisconsin report having improved the energy efficiency of their external lighting for a number of reasons. Thirty-eight percent of those who took actions (14 percent of all respondents) report having taken actions to save energy. Seventeen percent of those who took action indicated that they wanted to reduce operating costs and 14 percent report having taken the action because of equipment failures. An additional 4 percent said that they wanted to make the property more marketable, and 3 percent said that they wanted to replace poorly working equipment. Others (less than 2 percent) said that they wanted to replace aging equipment or make safety improvements.

3.10.3 Space Heating and Cooling Equipment

Fifty-four percent of survey respondents report having made energy-efficient improvements to their heating and cooling equipment. Of the respondents who reported taking action, the largest group reported having installed new furnaces in one or more of their units. A total of 46 percent of the respondents who took actions (25 percent of all respondents) said that they had installed a more energy-efficient furnace in the properties. An additional 6 percent (3 percent of all respondents) installed a more efficient boiler. Together, 31 percent of people who upgraded the efficiency of the heating or cooling systems replaced their major heating units with more efficient equipment. Fifteen percent of respondents who took heating or cooling related measures (8 percent of all respondents) installed more efficient water heaters. Six percent installed more efficient air-conditioning equipment (three of all respondents) and 6 percent installed insulation in their units. Other measures reported having been taken by less than 2 percent of respondents include adding pipe-wrap, installing heating control systems and installing storm windows or doors. Only 6 percent of the heating and cooling measures were taken in 2001, with 15 percent of the measures installed in 2000. Nineteen percent of measures were installed in 1999 and 17 percent were installed in 1998. Thirty-seven percent of all energy-efficient heating and cooling measures reported were installed in 1997 or earlier. Figure 3–3 presents the years in which respondents report installing heating- and cooling-related measures in their multifamily properties. Forty-seven percent of the respondents who have taken heating and cooling actions (25 percent of all respondents) have done so to improve the energy efficiency of their facilities. An almost equal percentage reported having taken action because of equipment failures, equipment that was near the end of its lifetime, or poorly working equipment that needed attention. Eleven percent of those taking actions (6 percent of all respondents) indicated that the action was taken to reduce operating costs. Seven percent (4 percent of all respondents) said they took the action to improve the comfort of their tenants, and 2 percent (1 percent of all respondents) took the action to make safety improvements at their properties.



Figure 3–3 Years in Which Respondents Report Installing Heating- and Cooling-Related Measures in Their Multifamily Properties

With respect to internal and external lighting and heating and cooling equipment, it is interesting that more owners reported that energy efficiency was an important value than reported reducing operating cost as an important factor in their decisions. It is also notable that installing efficient equipment when replacing failed and aging equipment was a more common occurrence, as common an occurrence, or almost as common an occurrence, depending on the equipment, as reducing operating costs was a reason in choosing efficiency equipment. This suggests that promotional efforts should include and emphasize the value of efficiency. Perhaps more importantly, promotional materials need to sound multiples themes and avoid the singular or over reliance on cost savings themes. It also suggests that efficiency measures are often installed in conjunction with replacement activities and that it is important to capture the efficiency opportunity when it occurs. Installing equipment at replacement time is clearly consistent with the paybacks identified in the CEE data that was discussed earlier.

3.10.4 Water-Heating Boilers

Eleven percent of the survey respondents indicated that they have taken actions to increase the efficiency of their boiler systems used to heat water for domestic consumption. All of these improvements occurred between 1990 and 2001, with about 28 percent of these actions occurring in 2000 and 2001. Actions taken include replacing boilers with more efficient units, replacing domestic water boilers with standard water heaters, installing insulation to reduce heat loss, and conducting annual boiler tune-ups and on-going maintenance to keep units operating as efficiently as possible. Of the 11 percent who improved the efficiency of their domestic hot water boilers, 36 percent of these (4 percent of all respondents) did so to improve the energy efficiency of their system.

1970

1975

1980

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Eighteen percent (2 percent of all respondents) took the action because of equipment that had failed and needed to be replaced, because of poorly operating equipment, and because they wanted to reduce operating costs.

3.10.5 Swimming Pool, Jacuzzi, or Spa

Only one respondent (1 percent) indicated that they had taken actions to reduce the energy consumption of a swimming pool, Jacuzzi, or spa. This individual installed a “solar pool” on his property and took the action to save money and energy. The measure was installed in 1997.

3.10.6 Laundry Equipment for Residential Use

Nine percent of the survey respondents reported taking actions that increases the energy efficiency of their residential-use laundry facilities. Two individuals reported changing water heaters to higher efficiency units and two individuals installed higher efficiency washers and dryers. One individual installed energy-efficient bulbs in the laundry room, purchased high-efficiency washers and dryers and asked tenants to not use the facility during peak hours. It is not clear what the other four individuals did. The time period for these actions spanned the years 1997 to 2001 with one individual reporting he took action in 1980. Three people reported taking the actions to reduce operating costs and three said that they wanted to save energy in their facilities. One took the action because of equipment failures; one because his current equipment was not working properly, and one said that he wanted to make the property more marketable. The CEE analysis suggests that this is an area of moderate potential in terms of savings and payback. The survey data imply that little has been done in the laundry area. Thus, this appears to be an area that has a fair amount of technical and market potential and is an area to which program planners may want to give some attention.

3.11 PAST PARTICIPATION IN ENERGY PROGRAMS

Eighteen percent of the survey respondents reported that they have participated in one or more energy-efficiency programs offered by the State of Wisconsin, or by one of the utility companies. Among the 18 percent, 6 percent said that they have participated in the “gas company” program, 3 percent said that they participated in the “electric company” program, 1 percent each said that they participated in the “interruptible” program, the “rental assistance” program, and the “Enron” program. This relatively low level of participation may indicate that programs may not have been widely available, that programs may not have been marketed effectively to managers and operators, that operators may not have been aware of the programs, or that market actors may not have perceived the programs to be of sufficient value to warrant their attention and interest. In



the qualitative interviews, at least one respondent talked about the value of advice that the respondent was getting from a utility contact. Unfortunately, that utility contact is no longer available. As the statewide program unfolds, it will be important to track participation in the multifamily program at the same time it will be important to determine which of the factors just described may contribute to interest in and use of the program.

3.12 PLANS FOR THE FUTURE

Forty percent of the survey respondents said that they plan to take energy-efficiency actions in the future. Ten percent said they plan to install energy-efficient furnaces in their properties, and 7 percent plan to install energy-efficient indoor lighting. Six percent said they plan to install higher efficiency boilers, and 5 percent said that they would install energy-efficient storm doors and windows. Five percent said that they plan to install compact fluorescent lighting and 3 percent plan to install high-efficiency water heaters. One percent each plan to install high-efficiency refrigerators and clothes washers.

3.13 BARRIERS TO TAKING ENERGY-EFFICIENT ACTIONS

Survey respondents were presented with a list of nine barriers that may have prevented them from purchasing and installing energy-efficient equipment and were asked to rate, on a 1 to 10 scale, how important the barrier is to their decision-making. A 10 signifies an important barrier while a 1 signifies a barrier of little importance. A value of 5 implies that the barrier is a factor but that it is neither important nor unimportant. Table 3–18 shows the mean importance scores for the barriers. None of the average scores reach an eight. Overall, five of the barriers had an average score between six and seven and four of the barriers had averages between five and six. The distributions for these scores are somewhat unusual. For each of the barriers, the sample divides into three groups. One group sees the barrier as very important, a second group finds it neither important nor unimportant, and a third group finds it unimportant. Between a third and slightly more than a half of the respondents rate each of the barriers as a five or less. This means that there is substantial disagreement about the importance of the barriers. For some, the barriers are just not important, while for others they are significant. There are some differences depending on the size of the operation. Overall, the barriers that are most important are concerns about return on investment, reliability, lack of capital, higher cost of efficient equipment, and potential for lack of savings. The barriers that are least important are knowledge, the lack of contractor recommendations, lack of experience with the equipment, and assigning the responsibility for efficiency to the tenant.



Table 3–18 Mean Importance Scores for Barriers

Mean Score of Barrier*

All Small Small


Low or nonexistent return on investment 6.86 6.31 6.70 7.77 6.90

Concerns about equipment reliability 6.58 6.73 7.00 6.08 6.40

Lack capital 6.57 6.29 7.61 6.19 6.10

Higher cost of energy-efficient equipment 6.40 6.36 6.29 6.81 5.70

Uncertainty about savings 6.33 5.97 6.96 6.88 4.80

Lack knowledge of energy-efficient options 5.50 5.08 6.09 5.60 5.44

Contractors do not recommend 5.40 6.21 5.42 4.81 4.20

Lack of experience with energy-efficient equipment 5.25 5.30 5.88 4.65 5.10

Tenant responsible for energy efficiency 5.14 5.21 5.26 5.62 3.50

N= 100 40 24 26 10

* Note: The scores in this table reflect a 1 to 10 scale with 1 meaning not an important barrier limiting the adoption, and 10 meaning a very important barrier limiting adoption.

Limited Return on the Energy-Efficient Investment Dollar

Overall, respondents reported that the most important barrier to installing energy-efficient equipment is perceived low or nonexistent return on investment. Medium and medium large operators rated it as the number one barrier and it was a close second or third for small or small medium operators. Many actors do not believe there is sufficient return on the energy-efficiency investments to make the investment worthwhile. However, a third of the respondents do not see this as a problem. Program managers may need to attack this perception and should, on the basis of the qualitative interviews, expect those multifamily owners and operators who hold this belief to be a “hard sell.” This does not mean they cannot be sold. Several times during one of the qualitative interviews, one of the operators reiterated the need to be able to calculate savings so that she could make the financial case to the owner for efficient equipment. However, her problem probably goes beyond providing estimates to one of providing credible estimates. The owner probably needs reassurance that the estimated savings will be realized. For example, it may be important to say that the estimation procedure has been used 100 times and that the savings have never been less than some percentage of predicted savings. Evaluating the estimated savings should not be a problem. In the larger firms, managers regularly evaluate economic trade-offs of various options. Thus, the problem is to develop credible and believable evidence tailored to each case. Of course, an alternative approach for addressing the problem of return on investment is to provide financial incentives to acquire energy resources.



Equipment Reliability Concerns

The reliability and perceived reliability of equipment is a barrier to adopting efficient equipment for about 60 percent of the respondents. The remainder do not see it as a barrier. This issue seems to be slightly more important to smaller operators, it is number one on the list for small operators, than to larger ones. This is consistent with the observation that we made earlier about the lack of time, especially among small operators. Some operators believe that efficient equipment is less reliable than standard efficiency equipment. In our qualitative interviews, several operators described spending money on efficient equipment only to have the energy savings eroded through service calls. Program operators may address this barrier by being more selective about the equipment they offer and promote, by encouraging vendors to offer service guarantees or partial service expense reimbursements for costs that arise from failures, by working with manufactures to cover longer-term service costs or product coverage in their warrantees, by using demonstrations, case-studies, and promotional literature to convince owners and managers that reliability is not an issue, and/or by designing other program tactics that help reduce the perception that efficient equipment is less reliable. Program managers can avoid problems in the future by being cautious about promoting new materials and equipment until they have been thoroughly consumer tested in the market.

Lack of Capital for Energy Efficiency

In the qualitative interviews, many of our respondents talked at length about their use of capital. In the survey, the small medium users rated lack of capital as their most important barrier. In general, about 60 percent of the respondents rated this at least a moderately important barrier. In an earlier section, we described the competition for capital in the large owner firms and the need for fee based managers to demonstrate return on investment in order to get the owners they represent to make investments. Capital will migrate to those projects that can demonstrate a link between the expenditure of capital and maintaining and increasing the value of the buildings, the image of the buildings, the rents that can be charged, the potential for displacing expenses, and the ability to retain and attract renters. This issue can be addressed by demonstrating the value of energy efficiency. It can also be addressed through programs that promote financing mechanisms such as equipment buydowns and performance contracting. Performance contracting may only be effective with larger operators with common heating and cooling equipment. It may not be at all effective with smaller operators where the heating and cooling equipment are in individual units.

Higher Cost of Energy-Efficient Equipment

Typically, energy-efficient equipment has cost more than standard efficiency equipment. About 60 percent of operators indicated this issue was of at least moderate importance to them.



However, we should not be overly attentive to price because it is one of several criteria taken into account when making purchases. Again, color, function, ease of use, and, image all influence equipment choices. Program managers can attempt to manipulate costs in direct or indirect ways or they may manipulate the perceived value of other criteria relative to price. For example, a multifamily operator might be more interested in an efficient refrigerator if it has other valued characteristics. Thus, we may want to study what valued products are in the multifamily environment and then promote efficient products that have the characteristics that are valued by operators. Higher costs can be attacked in other ways. One way is to directly address the cost of equipment by working with manufacturers on manufacturing processes. Creating volume sales can lead to price reductions. Both of these strategies probably require coordination with national and regional organizations. Efficient equipment buydowns are an option. Buydowns have the advantage of increasing the buying power of the program. Rebates are yet another approach.

Uncertainty About Savings

To a slightly lesser degree, although still of some importance to 60 percent of this market, is the uncertainty about savings. A third of the respondents rated this as an eight or above on the importance scale. This barrier is associated with questions about the return on their investment, but deals specifically with the question of the predictability of savings from the energy-efficient choice. There are two issues. The first is whether the equipment will actually produce the savings. Responding to this issue probably requires the program manager to have convincing evidence that the savings are real. Owners and managers probably determine this by talking with their peers or contractors. Thus, a useful strategy may be to develop testimonials from owners and to provide feedback about savings (along with information about reliability, see above) to contractors. The second issue is one of who receives the savings. For equipment installed in multifamily units where the tenants pay their own utility bills (the majority of this market), the owners or managers do not receive the savings; instead the savings, if any, go to the tenant. In these cases, the owner is spending more money so that the tenant will have a lower monthly cost. However, for equipment in which the owner/manager pays the energy bills, the actors want to be assured that the savings will be there to off-set the added capital cost. Program designers may want to consider program options available to the multifamily owner/manager depending on who pays the utility bills. There may need to be different incentives and program participation options designed for these two conditions. These types of program designs add significant complexity to the marketing function in getting owners and managers to understand when an option is available and when it is not. For owners



and mangers who pay the bills, the program will want to assure the actor that the savings will indeed be there.

Lack of Knowledge About Energy-Efficient Options

Lack of knowledge is rated near the middle of the scale. Only half of the respondents thought this was a moderately important issue. There are at least three potential reasons for this rating. Energy-efficiency information may not be perceived to be important. Several informants told us that energy efficiency is not an issue with which they are concerned. A second reason may be that multifamily operators may already believe that they have the knowledge they need. As an example, many of the smaller operators may be in the building trades industry and may believe that they already know what to do. A third possibility is that some operators know that they do not have the information they need, but they have confidence that they have information search strategies and resources that can be used to get the information they need when the need it. In the qualitative interviews, multifamily operators talked about information search strategies involving calling people they know or calling vendors and suppliers they trust to get information. This is an educational rather than technical or financial barrier. Care needs to be taken in the design of information programs for the multifamily sector. We do not yet have a very good idea about what information multifamily operators might use or if they would use it at all and how this might differ from information that is already available. It is not clear whether they need ideas or whether they need how to do it information. Perhaps they need product source information or ways to quickly estimate savings. The issue may also be one of making sure that key information is easily found and readily available. There are at least five steps that must be addressed assuming that multifamily operators need information. The first is to identify the information that is needed. The second is to find and organize the needed information. The third is to layer the information so that it meets the needs of the different players in the market. The fourth is to make it easily accessible on demand. The fifth is to make sure that operators know where they can rapidly locate the information when it is needed.

Contractors Do Not Recommend Energy-Efficient Technologies

The average rating for this barrier also fell in the middle of the scale (5.4). About half of the respondents saw this as at least a moderately important problem with the other half indicating it was not a problem. This should probably not be surprising. Multifamily operators regularly consult with vendors and contractors on all manner of subjects. These data imply that operators perceive that contractors are more or less meeting their expectations in supplying information about energy-efficient technologies. This may be because contractors are supplying information, because multifamily operators do not have high expectations about being provided with such information, or that operators do not think to seek such information so it is therefore not seen as an issue.



We do know that there is reluctance on the part of contractors to recommend energy-efficient technologies with which they have had little experience compared to standard well-understood technologies with solid performance histories. This concern is directly centered on the reliability of the technology, which is a concern to the multifamily operator and the contractor. The direct issue here is whether contractors are making recommendations for efficient equipment and if they are not, why not. We also know that contractors assess the potential and circumstances for selling to a particular customer and they make judgments about the equipment and solutions they recommend. We probably need to know much more about how, how often, and why contractors make recommendations for efficient equipment. This information could help to shape an effective contractor program.

Lack of Experience with the Energy-Efficient Equipment

From the literature, we know that experience with a product is an important aspect of the adoption process. Part of the plan for the multifamily program is to conduct showcases in multifamily buildings. On average, respondents report that lack of experience with energy-efficiency equipment is neither important nor unimportant. However, perusal of the data suggests this is an issue where respondents split. About a third of the respondents see experience as very important, a third do not, and the remainder are somewhere in the middle. Further analysis is needed to identify those groups for which experience is important. With this knowledge, program managers might increase the effectiveness of the planned showcases by targeting appropriate content to interested audiences.

Tenant Responsible for Energy Efficiency

This barrier received the lowest average importance score (5.14). What emerges in examining the data is a bifurcation of responses. Half of the respondents rated this an unimportant problem. However, about 30 percent of the respondents indicated that tenants’ responsibility for energy efficiency is an important to very important barrier to implementation. There are a number of managers who believe that energy efficiency is a tenant conservation issue rather than an efficiency problem with its roots in the building shell, the equipment, and the operation and maintenance of the building. Program managers may need to address this view in order to gain the adoption of energy-efficient equipment with some operators.

Other Barriers

Fifteen individuals reported additional barriers to the installation and use of energy-efficient technologies. Nine said that the incremental cost of the equipment was a significant barrier. One individual said that he needed to know the long-term costs of energy-efficient equipment, a concern that is driven by reliability and life cycle cost analysis. These concerns have previously been alluded to.



Other barriers reported by single individuals are the lack of energy-efficiency programs, the time to deal with energy-efficiency issues and decisions, the lack of incentives, and the availability of energy-efficient equipment. In the latter case, the individual reported that he had to obtain efficient equipment from out-of-state. One operator reported that efficient equipment is not needed at his properties. One individual cited the need to install low cost equipment to minimize the cost of damages from destructive tenants as a barrier. If we look across the barriers for each respondent, we can calculate an average barrier score for respondents. If we do that, we see that about 30 percent of the respondents assigned the barriers an average score of 4.6 or less. In other words, this group of respondents mostly did not see these barriers as problematic. Another third of the respondents rate the barriers so that the average score for the barriers is between five and seven. For this third of the sample, some barriers are important and others are not. The last third have an average for the barrier scores of more than seven. For this group, most of the barriers are quite important. This finding raises some fundamental questions about barriers. One such question is whether there are structural barriers in the marketplace that prevent the penetration of energy-efficiency technologies, concepts, and practices. If structural barriers are real, then these findings suggest that some people perceive them and others do not or that they simply ignore them or proceed as if the barriers do not exist. An alternative possibility is that there are no structural barriers in which case these findings suggest that some people perceive barriers where none exist. We know that people act on the basis of their beliefs whether or not the beliefs have a basis in fact. Thus, structural barriers do not necessarily have to be real in order for people to believe that they are real and to therefore act as if they are real. We should also raise the possibility that the perception of barriers is something akin to a personality trait. Some people perceive barriers and others do not. This could possibly be related to what some psychologists have called locus of control. A final possibility is that barriers exist in some parts of the market but not others. This would explain why some people perceive barriers as important and others do not. Unfortunately, we do not have sufficient data to test these alternative explanations. This finding suggests a need to much more carefully evaluate the concept of barriers and how barriers operate.

3.14 PERFORMANCE CONTRACTING IN THE MULTIFAMILY SECTOR

Respondents were asked if third-party energy service companies, such as ESCOs that provide energy products and services in exchange for a share of the savings, have approached them. They were also asked how receptive they are to this type of service and financing mechanisms. Only 6 percent of respondents report that they have been approached by an ESCO (Table 3–19). However, 17 percent of respondents said that they are very interested and another



27 percent indicated a modest level of interest in this concept. Interest in performance contracting increases with the size of the property. Thirty-one percent of the medium-sized and 30 percent of the medium large operators are interested in this concept compared to 12 percent of the smallest operators.

Table 3–19 Receptiveness to ESCO and ESCO-Type Energy Services

Percent of All Respondents

All Small Small


Have already been approached by an ESCO 6 10 0 0 20

Degree of interest in ESCO-type services

Very interested 17 12 4 1 30

Somewhat interested 27 18 38 39 10

Mildly interested 17 22 12 8 30

Not at all interested 38 48 49 20 30

Not sure 1 0 0 4

N= 100 40 24 26 10

These data suggest that some multifamily operators, especially the larger operators, may be interested in innovative methods for obtaining and financing energy services. In the qualitative interviews we found that many respondents have not heard of this concept. The performance contracting approach might be useful in some sectors of the multifamily market, for instance, in targeting larger older buildings with, for example, central boilers in situations where a large firm owns the property or is fee-managed by a large firm. When using performance contracting, the manager does not have to convince the owner or upper management to give up short-term cash flow in order to upgrade equipment. A key problem is to first convince the property manager that performance contracting is a viable business model and then to supply managers with the tools they need to convince the owner. We sensed wariness among some property managers about the concept that seemed to stem from how they would present this to the owner and the owner’s possible response. Another issue is to determine how long the owner might continue to hold the building. Owners with short-term expectations for holding the building are not good candidates for this type of program. If it is mainly the large operators who are interested, there are private vendors who may be able to fulfill their needs. It is not clear whether performance contracting is a viable option for small operators. These findings seem to lead to the need for further exploration of whether a program for performance contracting is needed.



3.15 METHODS

3.15.1 Data Sources

There were four main methods used in developing the findings in this report. The first was the techniques used to construct a list of owners and managers of multifamily properties and the development of a sampling frame. The second method was the use of in-depth interviews with a sample of multifamily housing owners and managers. The third was a survey with a sample of multifamily managers and owners. The last method was the analysis of secondary data from audits conducted as part of the Focus on Energy Pilot Program data obtained from the Center for Energy and the Environment.

Constructing a List of Buildings and Owners

A critical factor in being able to do both marketing and evaluation is the ability to contact the owners and managers of multifamily housing. Currently, there are no good lists of multifamily buildings, owners, and/or managers in Wisconsin. An important goal of this study is to identify better methods for obtaining lists of owners and managers of multifamily properties.

One alternative is to develop a list of owners using the telephone directory. For example, using the Internet Superpages and selecting the categories “apartments” and “State of Wisconsin” produces 2,294 entries. These telephone listings likely represent properties with large numbers of units that have on-site leasing managers or caretakers and/or rental agencies representing multiple property owners. We believe that these entries fail to capture a large number of owners who own 4 to more than 50 units, because they may not have a separate listing for their apartment operations. If these telephone listing represented buildings or complexes with an average of 50 units the total number of units represented by these telephone numbers is approximately 115,000 units. This is roughly a quarter of the of the 418,000 estimate multifamily units in Wisconsin. Further, this number is far short of the estimate of 18,000 multifamily operators in Wisconsin. Thus, while this approach may have its attractions, it probably would allow us to reach a very small faction of multifamily owners. There may be ways of constructing lists from sources similar to Superpages, though we suspect that these lists are likely to be even less comprehensive. Unlike marketers who might find a complete enumeration of all multifamily owners and managers as well as some basic descriptive data useful, evaluators need only a sample of owners and managers. In the absence of lists, one method for obtaining such a sample is to track backwards from tenants to owners and managers. In a 1999 study of renters and owners, a contractor for the Energy Center of Wisconsin used random digit dialing to identify tenants. The tenants were then surveyed and asked to identify the company that owned or managed the building in which they lived. The owners and managers were then contacted and interviewed. As demonstrated by the ECW study, this method works, although it is not clear how representative of all multifamily owners and managers the multifamily owners and managers in the resulting sample are. There are several difficulties.



First, there may be a bias by size in identifying owners and managers by this method. Families that live in duplexes, triplexes or quads are probably more likely to be contacted than other types of tenants. This is because they are more likely to be home during residential calling hours than are tenants who are single and who are likely to live in larger complexes. A second issue is that tenants may not know the name of the landlord or the management. Many smaller and mid-sized buildings have tenant managers who manage a building part-time. Residents may know the resident manager’s telephone number, which may be the manager’s residential telephone line, but not the owner’s. The tenants may make checks payable to an account in the name of the apartment complex but not the name of the owner or the management company. Without looking at their rental agreement, they may be unable to identify the ownership. Even then, the name of the owner/management company may not be readily available. Again, we suspect that tenants in smaller rather than larger buildings/complexes are more likely to know and to have more direct information about the owners/managers. If tenants do provide a name, they may not provide it accurately and they may be unable to provide contact information. This results in a need to do a look-up for the owner/managers. The bottom line on this approach is that there is likely to be substantial attrition of sample in both the identification and look-up process and a bias toward identifying smaller units. Perhaps the best alternative is to use assessor data to build lists of multifamily property owners. Because of legislation passed in the State of Wisconsin, tax assessment data is currently being automated and made available for public access (see http://www.doa.state.wi.us/olis/wlip/ survey2000/index.asp). This data contains information about the location of property, the ownership of the property, the number of units, the size of the building, the age of the building, and the assessed valuation among other things. Our original intention for this study was to obtain assessor data for 10 to 15 selected counties with high concentrations of rental properties. However, we discovered that the Wisconsin Apartment Association (WAA) is developing a mailing list of multifamily owners and had obtained data for 13 of Wisconsin’s most populous counties. Because of the logistics of approaching and obtaining the data from assessors and the extremely short timeline for this project, we determined that we should purchase the WAA data after coordinating with the Wisconsin Energy Conservation Corporation. The data that we obtained from the WAA were the raw data files that they had obtained from their contacts in the counties. The files were in non-standard formats and contained varying amounts of information. Files with the most basic information contained the name and address of multifamily owners. Files with the most complete information identified a specific property; the name, address, and telephone number of the owner; the number of units; the number of units that were subject to property tax; the assessed valuation and the taxable valuation.



We were fortunate that the most complete file was that for Milwaukee on two counts. First, the Milwaukee area is clearly the “800 pound gorilla” with respect to apartment rentals. There were 38,650 entries in this file and this represents a significant number of rental units in the state. Secondly, the data in this file appear to be extraordinarily “clean” in the sense that an owner with multiple properties was listed with the identical spelling of the owner’s name for each property. The addresses for owners/managers showed similar levels of consistency with respect to entry. This care in data entry is extremely rare but may be typical of the requirements for an assessor’s office. The quality of the data is extremely fortuitous because it permitted us to aggregate the number of units and develop a size distribution for Milwaukee City that we were later able to use in our sampling efforts. As we indicated above, the quality of the data received from the WAA was highly variable. We determined that we probably should use the Milwaukee City data as a basis for developing our sampling plan because of the consistency and extent of the data. Also, multifamily units in Milwaukee County are 18 percent of all units statewide and the Milwaukee City units are roughly 82 percent of that number so that the Milwaukee units will strongly influence the statewide outcome. Because we wanted a sample that would allow us to describe the largest as well as the smallest owners and because the largest owners are such a small fraction of all owners, we determined that we should develop a quota sample based on quintiles of ownership of four or more units. A straight random sample would have resulted in a high degree of representation of smaller units and an almost total absence of large units in the sample. In Milwaukee, the percent of rental units owned by an owner who owns three or fewer units is 22 percent of all rental units (Table 3–20). The owners of this 22 percent of units are 73 percent of all owners. Within the group of those who own from one to three units, 85 percent own one or two units. A key question was whether to sum across owner names or across owner addresses. Summing across owner names would allow us to identify the top owners but summing across the owner addresses would lead us to all properties owned and/or managed by the same firm. We chose to sum across addresses. The value of this choice was later confirmed when we identified some large fee-management firms which do not own property. By using the owner’s address to produce the count, we ended with a smaller number of identified entities but the count represented owners and management organizations rather than owners.

In order to do the summation, we created a count of units by the owner address, sorted the distribution by number of units, and then developed a cumulative frequency distribution of ownership for Milwaukee. Any owner/manager with three or fewer units was removed from the sample. The remaining units were assigned to one of five categories, small operators, who when their units are combined account for 20 percent of units but who own the smallest number of units (four to 10 units), small medium operators who own more units but who account for the next 10 percent of units (11 to 20 units), medium-sized operators (21 to 70) units, medium large operators who own larger numbers of units and account for the next fifth of all units (21 to 70 units), and the largest operators who account for the top fifth of the units (Table 3–20).



Table 3–20 Ownership Patterns for Milwaukee (City)

Number of

Owners Percent of

Owners Number of

Units Percent of

Units

Less than 4 units (excluded from the sample)

15,124 73

25,971 22

Small operators 4 to 10 4,078 20 22,749 20

Medium small operator 11 to 20 835 4 12,123 10

Medium operator 21 to 70 558 3 19,450 17

Medium large operator 71 to 230 150 1 18,519 16

Large operator 231+ 37 0 17,360 15

Totals 20,782 101 116,172 100

We then combined the data for Milwaukee with the data from the remaining 12 locales to form the final sampling frame. About two-thirds of the sample points in this frame were from Milwaukee and one-third from the balance of the state. For the sample points outside of Milwaukee, the numbers of units that the operator owned or managed was often missing. These owner/operators were assigned to a category for operators with an unknown number of units. The number of units they owned or managed and their eligibility to participate in the survey was determined during the survey. We randomized the sample frame and then drew a quota sample from each of the categories including the category for those within an unknown number of units for both the interviews and the surveys. These quotas are reported below. Figure 3–4 shows the zip codes with owner/managers represented in the survey sampling frame. Owner/managers do not necessarily live in Wisconsin. We contacted all owners or managers in the sample regardless of whether they were inside or outside the state. Thus, we see some points in Minneapolis, Iowa, etc. Approximately 75 percent of the sample was from Milwaukee and 25 percent from the balance of the state. The fact that Milwaukee percentage exceeded the percentage in the sample frame is a function the availability of telephone numbers. Telephone numbers for the Milwaukee owners were more complete, although not always current. For those respondents for whom we did not have telephone numbers, we did a reverse match on address, a reverse match on address and name, or a directory assistance call. We were able to determine a telephone number for half or more of the respondents for whom we did not have telephone numbers using these techniques.



Figure 3–4 Zip Codes with Owners/Managers Represented in the Sampling Frame



During the survey, each respondent was asked about the number of units they owned or managed. If they reported that they owned three or fewer units, they were thanked and the survey terminated. Otherwise, they were assigned to one of the last five categories in Table 3–20 based on their response. Thus, the sample is composed of both multifamily and unit operators as we defined them earlier. Using the data from which Table 3–20 was generated and knowing that there are at least 658,000 rental units in Wisconsin, we generated estimates of the number of multifamily operators as well as estimates of the number of units in each of the size categories. We did this by identifying all owner/managers in the Milwaukee list with three or fewer units or at least one building with four or more units. We then counted the number of owners and summed the number of units for which they were responsible and percentaged the results. We then applied the resulting percentages to the 658,000 rental housing units statewide to obtain the numbers in Table 3–21, Table 3–2 and Table 3–3. Table 3–21 and Table 3–2 are identical. We estimate that there are roughly 18,153 multifamily operators in the state and that they own or manage 416,717 units. There are about 3,500 operators who own or manage about 72 percent of the multifamily housing in the state. Approximately 200 large operators own and/or manage about 24 percent of the property.

Table 3–21 Estimated Patterns of Multifamily Operations for Wisconsin

Units Owned or Managed by Multifamily Operators

Number of Owners/

Managers

Percent of All

Owners/ Managers

Number of Units

Percent of Units

Small multifamily operators 4 to 10

11,255 62 66,675 16

Medium small multifamily operators 11 to 20

3,449 19 50,006 12

Medium multifamily operators 21 to 70

2,541 14 95,845 23

Medium large operators 71 to 230

726 4 104,179 25

Large multifamily operators 231+ 182 1 100,012 24

Totals 18,153 100 416,717 100

3.15.2 Analysis of Existing Data

In-Depth Interviews

Our original goal was to complete between 40 and 50 in-depth interviews with multifamily housing operators some of which were to be on-site. These interviews were to be used to refine the design for our more quantitative survey of owners and managers.



The limited budget and the short timeframe for this project resulted in three changes to our basic plan. Because of the compressed nature of the project, it became clear that the interviews and the survey of owners and managers were going to have to be completed in the same timeframe. We had intended for the interviews to be quite comprehensive with questions about the specific characteristics of properties and the characteristics of firms in addition to the questions about the structure of multifamily ownership, key decision-makers, and the criteria for decision-making. In the end, we refocused the interviews on those areas where we felt we needed more in-depth information and areas where it would be difficult to elicit useful information from highly structured questions that are typical of surveys. We shortened the interviews by eliminating those parts that we believed would contribute little value above and beyond the information that we would be obtaining in the surveys. The structure of the interview was deliberately open-ended. The interview guide can be found in Appendix F. The content of the interviews, as fielded, included questions about

• a specific property or building that was to be the focus of questions for the interview, including the number of units;

• the age, number of buildings, and staffing for that property;

• staffing at the identified property;

• other properties that the firms might have and their locations;

• the firm in terms of its structure, operation, and other lines of business;

• who makes decisions about maintenance, appliance purchases, capital investments, and the criteria that are used in making these decisions;

• the importance of energy efficiency in decision-making;

• the relative importance of energy in operational budgets;

• the use of utility or state-funded energy-efficiency programs; and

• what might motivate the respondent to improve the energy efficiency of the rental properties.

The interviews were conducted by TecMRKT Works senior staff. Because of time constraints and budget pressures, 29 interviews were actually completed. Also, because of the timeframe and the cost, we dispensed with the on-site interviews and completed all interviews by telephone. Interviews ranged in length from about 15 minutes to about an hour and a half. We used the list of multifamily operators that was developed as the source for the sample. Multifamily owner operators for whom we were sure that there were fewer than four units were removed from the sample. We drew a sample of 243 owners distributed across six categories. The size of the sample frame for each of the categories is shown in Table 3–22.



Table 3–22 Sample Sizes for the In-Depth Interviews by Number of Units Owned or Managed

Number of Units

Number of Owners in the

Sample Number of Completes

4 to 10 50 3

11 to 20 50 6

21 to 70 50 8

71 to 230 30 7

231+ 13 5

Unknown size 50

Total 243 29

There were a number of owner/managers for whom we did not have information about the number of units (category labeled unknown size) owned or managed. At the beginning of each interview we determined the number of units owned and/or managed by the respondent’s firm. If respondents reported owning or managing fewer than four units, we thanked the respondent and concluded the call. Otherwise we categorized them according to the number of units that their firm owned or managed and continued with the call. Multifamily owners and managers are much more difficult to contact than respondents in other commercial and residential sectors, for example, managers of commercial and industrial enterprises. To illustrate the point, the survey for the multifamily study cost about $155 per complete compared to $54 per complete for the commercial and industrial baseline survey. There are two key reasons for this.

• For the multifamily baseline study, we had telephone numbers for between a third and a half of the respondents. We also had a substantial number of wrong and disconnected numbers. Thus, some amount of time was spent seeking directory assistance, although that is a relatively small portion of the total cost of the interview. By contrast the commercial sample came from Dun and Bradstreet where there was a fairly complete list of telephone numbers. We should point out that the lack of telephone numbers is not a problem inherent in the assessor data but a problem inherent in some of the data that we used that was derived by others from assessor data.

• A much more important reason for the cost differential is that many of the owners have between four and 50 to 100 units. Many of these owners have other jobs and they operate their multifamily housing business part-time. The telephone numbers are often home telephone numbers rather than business numbers. Thus, when calling owners with numbers of units in medium-size range, a very high proportion of calls end at an answering machine. This often means multiple callbacks. It is very difficult to get in touch with owners with a middling numbers of units. Owners and managers with larger numbers of properties are much easier to contact because they usually have a fixed



business location other than their home and usually have a receptionist. In many instances when we left a voice message someone from the larger firms returned our call. Further, when we did reach the appropriate party at the larger firm, they were usually willing to participate.

3.15.3 CATI Surveys

Our original goal was to complete approximately 300 surveys with multifamily owners. As pointed out in the previous section, the cost of the multifamily completes was very high. Thus, Opinion Dynamics was able to complete 100 surveys with the research dollars that were available. For the most part, the questions in the survey were of a close-end type with fixed responses. Of course, in many instances, respondents were allowed to contribute responses that were not in the list. The survey contained many questions that were similar to those asked in the interviews. In addition, the survey focused on:

• Questions about the heating and water-heating fuels.

• Whether heating and cooling were centrally supplied or for the individual units.

• What appliances were supplied with the units.

• Whether there were central laundry facilities or laundry equipment in each unit.

• Types of equipment located in the common areas.

• Rating scales for criteria that might be important in selecting equipment.

• Whether any energy-efficient equipment had been installed and reasons for installing it.

• Energy-efficient equipment that might be purchased in the future.

• Ratings of reasons for not making energy-efficient decisions.

We used the list of multifamily operators that was developed as the source for the sample. The initial sampling frame contained a list of 3,023 owners. The number and categories are listed in Table 3–23. The survey was conducted by Opinion Dynamics over a ten-day period in early October of 2001. At the beginning of each survey, Opinion Dynamics interview staff determined the number of units that were owned and/or managed by the respondent’s firm. If respondents reported owning or managing fewer than four units, they were thanked and the call was concluded. Otherwise, the respondent was categorized according to the number of units that they owned or managed in accordance with the five preceding categories.



Table 3–23 Sample Sizes for the CATI Surveys

by Number of Units Owned or Managed

Number of Units Number of Owners

in the Sample Number of Completes

4 to 10 405 40

11 to 20 370 24

21 to 70 374 26

71 to 230 147 8

231+ 27 2

Unknown size 1,700 -

Total 3,023 100

The disposition of the sample is shown in Table 3–24. The key finding from the disposition table is that there are a significant number of telephone related issues for the sample. There were high percentages of disconnected telephones, wrong numbers, and no listings, or no traceable numbers. If we assume a dichotomous variable with exactly 50 percent of the cases in each category, then the error bands around our percentages are ±10 percent with 95 percent level of confidence. The error bands are smaller when a dichotomous variable has a different split, 40/60 or 30/70, although the difference is not great. In these two cases, the estimates are accurate to within ±9.8 and ±9.4 percent.

3.15.4 Analysis of the Assessment Data from the Focus on Energy Pilot

As part of the Focus on Energy Program Pilot Program, the Center for Energy and the Environment (CEE) implemented an assessment program and retrofits in existing multifamily properties primarily in the Fox Valley. In doing this, the CEE collected data about buildings and made recommendations or energy-efficiency improvements in those buildings. The CEE database is an MS Access® database with 123 tables. There are also data entry and query templates, although these were not provided to us. The CEE database is a work in progress. Many of the tables have yet to be populated and it is possible that many of the 123 tables will not be populated for practical or logistical reasons. A key issue in dealing with any database is the quality and consistency of the information that it contains. For the tables describing the location and general characteristics of the buildings, we found a high degree of consistency with respect to the formatting and entry of information. It was relatively easy to analyze this information.



Table 3–24 Disposition of the CATI Sample for those With and Without a Telephone Number

Listing With

Telephone Numbers Listing Without

Telephone Numbers TOTAL

Number Percent Number Percent Number Percent

No answer 77 4 35 2 112 3

Answering machine 36 2 9 1 45 1

Busy 3 0 1 0 4 0

Disconnected phone 355 19 117 7 472 14

Residential 1 0 0 0 1 0

Initial refusal 251 14 109 7 360 10

Computer tone 89 5 27 2 116 3

Language problems 26 1 11 1 37 1

Scheduled a callback 317 17 235 14 552 16

Completed interview 84 5 16 1 100 3

Mid-interview termination 4 0 6 0 10 0

Duplicate phone number 23 1 9 1 32 1

Private line/number blocked 57 3 53 3 110 3

Owns/manages less than 4 rental units 108 6 116 7 224 6

Wrong number 218 12 137 8 355 10

Does not own or manage multifamily units 54 3 155 9 209 6

No listing 50 3 335 20 385 11

No number 86 5 275 17 361 10

1,839 100 1,646 100 3,4851 100

1 During the survey, the sample was split in order to deal with sample points that were missing some key information, such as telephone numbers, etc. When this split was made, sample points that were initially identified as having invalid telephone numbers were included in the new subsample to see if a new telephone number could be found. As a result, 459 of the sample points were counted twice.

For the recommendations part of the database, the CEE is still evolving and developing templates for data entry. There is much less consistency in these data and there were a number of problems that we could not resolve in working with the data and the associated estimates of savings. We note this only because it places some limitations on our ability to analyze the data. The more mature parts of the CEE database are as good as any we have seen with respect to consistency and usability. We should also point out what the database is and what it is not. The database is a description of the properties (buildings) and the recommendations that the CEE and other contractors are making for the properties where assessments are completed. It is not a census of the equipment in these multifamily dwellings. Thus, it can tell us that a lighting change-out is recommended for an interior area and the savings to be expected from implementing that recommendation. It



does not provide a count of the size, kind, and type of bulbs in a building where there are no lighting recommendations. The analysis of the CEE data was completed by using queries in MS Access.

3.15.5 Key Findings from the Data Collection Effort

Based on our experiences in developing a list of multifamily owners and in constructing the survey, we find the following:

• The best method for identifying multifamily owners and managers is probably the tax assessor rolls.

• The assessor data are being placed on the Internet. However, because of privacy concerns, it may only be possible to view information about individual addresses rather than obtain a download of all data from the Internet. Thus, it is probable that someone may have to visit assessor’s offices to make this work.

• Some assessor data, especially data from smaller counties, is not yet on line and may not be for sometime.

• Data must be obtained in a systematic way and should include the following items:

j Name of owner

j Address of owner

j Telephone number of the owner

j Telephone number of the owner’s representative

j Address of the building

j Number of units in the building

j Number of taxed units in the building

j Valuation of the building

j Valuation of the building for tax purposes

j With assessor data, sorting, counting and summing across owner’s address, but not name, will result in being able to identify owner and owner-management type firms. For purposes of contact and target marketing, this is probably preferable to identifying the unique owner. Many owners prefer or require contact through property management firms.

j If we assume that multifamily owners distribute in roughly the same way as multifamily owners do in Milwaukee, we estimate that there are about 18,000 owner/operators who make up the target audience for this program. About 3,500 operators who own or manage 21 or more units represent 72 percent of the multifamily market. This probably over estimates the number of larger units and under estimates the number of smaller units.



j Owners, especially owners who have four to between 50 or 100 units, often have other fulltime employment. This makes contacting these owners by telephone difficult. From a marketing perspective, mailings to these owners may be the most effective method for reaching them.

j The fact that so many of the owners own and manage property on a part-time basis means that they are likely to be extremely busy and this probably means that they have little time to search for information about energy efficiency and even to respond to programs offered to them. We believe this may be one of the key reasons why this market has been so difficult to reach.

4 MAJOR MARKETS STUDY

ma:project:wdoa0001:reports:final baseline:4_mm study 4–1 Wisconsin Department of Administration

4 MAJOR MARKETS STUDY

4.1 BACKGROUND

4.1.1 Objectives

The Major Markets study was designed to provide a broad description of awareness, attitudes, decision-making and practices related to energy efficiency across the customer subsectors in the Major Markets program area. The study was planned to help the program implementers understand the structure of the markets they are targeting, their decision-making and attitudes, and barriers to greater energy efficiency. The study also provides tracking indicators that can be used over time to assess market effects as part of the evaluation.

4.1.2 Priorities

While the Major Markets programs build on experiences from the Wisconsin Focus on Energy Pilot, these programs are still in a state of flux. Program administrators are developing strategies and targeting approaches. A key priority for them is to understand decision-making and practices across the Major Markets sectors and subsectors. Evaluators are interested in establishing baselines on attitudes, understanding, and practices against which market effects can be tracked. Evaluators as well as program administrators also need information on market relationships to assess the qualitative validity of the program theories that are the basis for the Major Markets programs. An additional priority identified by program administrators and evaluators was better understanding of awareness, attitudes, and practices among trade allies. While the importance of collecting trade ally information was recognized by the Baseline Market Research Team, information on end-users was considered of greater urgency. The program’s emphasis at this stage is on end-users. Thus, better information on how to approach end-users is of immediate usefulness. In terms of establishing a baseline for future tracking of market effects, the urgency was less, because program activity was considered less likely to have an immediate effect on trade allies. Furthermore, it appeared impractical to attempt to cover the range of trade ally activity of concern within the timeframe of the baseline study. A trade ally study is planned as one of the first activities of the Major Markets evaluation.

4.1.3 Approach

The Major Markets study consisted of three components:

• an “omnibus” survey fielded to approximately 1,300 commercial, industrial, and agricultural customers;

SECTION 4 MAJOR MARKETS STUDY


• development of industry profiles for selected subsectors, based on secondary research and in-depth interviews with customers and industry associations; and

• development of estimates of energy-savings potential by subsector based on secondary sources.

The omnibus survey was designed to provide information on the following topics:

• organizational configuration: branch, headquarters, or single establishment, and whether or not the organization extends outside Wisconsin;

• whether space is owned or leased;

• who pays energy bills;

• who makes decisions about energy-related equipment;

• awareness levels of existing programs, such as ENERGY STAR® and Wisconsin Focus on

Energy;

• general decision-making practices;

• energy-related decision-making practices;

• energy-efficiency practices;

• attitudes toward energy efficiency;

• identification of barriers to implementing additional energy efficiency; and

• attitudes and awareness of renewable energy technologies.

This survey was supplemented by the in-depth interviews on selected subsectors. These interviews were designed to develop an understanding of the crucial issues facing these industries, apart from energy, and the ways that energy efficiency can help support profitability and productivity in each industry. Background material from national and state sources was compiled to establish a foundation for conducting the interviews and is included with the industry profiles. As general background to frame the Major Markets study, estimates of the amount of energy that could potentially be saved in each subsector were developed from analysis of secondary sources.

4.2 KEY FINDINGS AND RECOMMENDATIONS FOR MAJOR MARKETS PROGRAMS

A summary of the key findings from the baseline research in regard to the commercial and industrial markets for energy-efficiency products, services, and programs is provided in this section. Detailed findings and discussion follows in the remainder of this chapter.



4.2.1 Indicators of Baseline Market Conditions

The Omnibus survey contained numerous items designed to generate indicators of baseline levels of awareness, knowledge, and adoption of energy-efficiency measures, as well as development of management resources and procedures to support energy-efficiency efforts. The paragraphs below present findings for selected indicators.

• Levels and objectives of facility-related investments. Overall, respondents representing 14 percent of all commercial, industrial, and agricultural facilities in Wisconsin that reported making investments of $10,000 or more in their facilities during the 2 years prior to the survey. The most frequently mentioned objectives for facility investment among commercial customers were to increase floor space and customer/staff comfort. Among industrial respondents, the most frequently mentioned investment objectives were to replace failing equipment and to reconfigure existing space for new uses.

Implications for program design and marketing. These results suggest that programs designed to influence investments undertaken in the “natural” flow of facility upgrades will have only a relatively small portion of the population to work with in a given year, especially in the smaller-size groups. Energetic and effective program marketing will, therefore, be critical to overall success.

• Investments in energy efficiency. Among all customers that reported making facility investments in the prior 2 years, 28 percent reported that at least one of the investments had energy cost reduction as a primary objective. This percentage was significantly higher among medium-sized and large companies: 39 and 44 percent, respectively.

• Organizational infrastructure. The percentage of Wisconsin businesses with staff explicitly assigned by senior management to manage energy use and costs is relatively low. Omnibus respondents representing only 29 percent of Wisconsin business establishments reported having either a person or group assigned to this function. In almost all cases, energy management was assigned to one individual as opposed to a group or department.

• Energy efficiency in new investments. Fifty-seven percent of facilities represented in the Omnibus survey reported applying energy efficiency as a criterion in selecting equipment for new construction and renovation projects.

• Replacement policies. Only 18 percent of firms represented in the Omnibus survey reported having equipment-replacement policies that required the use of efficient models; an additional 21 percent reported replacement policies that gave preference to efficient models. In almost all cases, these policies consisted of informal guidelines as opposed to written specifications.

• Awareness of renewable energy measures. Reported awareness for most renewable technologies across Wisconsin commercial and industrial customers seems to be at the modest 25–40 percent range with little variation by subsector. These include photovoltaics (26 percent), daylighting (22 percent), transpired solar (23 percent), passive solar (41 percent), biomass (15 percent), and fuel cells (39 percent).



• Market barriers. Generally, a low percentage (20–40 percent) of customers reported experiencing the barriers to energy-efficiency investments most frequently identified by market analysts and program evaluators. The percentage of Omnibus respondents who reported that they agreed or strongly agreed that they experienced various barriers is as follows:

j Lack of knowledge of non-energy benefits of energy-efficiency improvements: 12 percent.

j Insufficient time and ability to manage hassles of becoming informed about energy-efficiency opportunities: 22 percent.

j Concern about overstatement of energy-savings claims: 41 percent.

j Lack of financing for energy-efficiency improvements considered worthwhile: 34 percent.

There was little variation in the reported severity of barriers by customer size or subsegment.

Implications for program design and marketing. Given the wide range of topics that the Omnibus survey needed to address and the complexity of factors that influence investment decisions, we caution readers not to interpret the findings on market barriers to mean that such barriers are unimportant. Moreover, the research process did not support the development of a full inventory of market barriers. Rather, we had to concentrate on the barriers most frequently identified in other studies. The relatively low reported incidence of typical barriers among Wisconsin businesses does not mean that programs should not attempt to address them. In particular, efforts to reduce customers’ perceptions of risk and increase knowledge of energy-management procedures will be useful. Program strategies to address these objectives might include:

j Preparation of case studies detailing the costs and benefits of energy-efficiency projects in Wisconsin.

j Promotion of performance contracting as a risk reduction and project financing mechanism.

j Development of a variety of project financing mechanisms that can be matched to a firm’s preferences for risk and access to existing financing sources.

At the same time, program planners must recognize that each of these strategies represents a strong opportunity for only a fraction of customers, even within a given business type and size.

4.2.2 Business Investment Decision-Making

Key findings from the in-depth and Omnibus surveys in regard to general business investment decision-making objectives and practices, as they relate to energy efficiency are as follows.



• Business investment objectives. Most major investments (over $10,000) are made with the express purpose of improving production efficiency; that is, boosting output and revenue with less than proportionate increases in labor and materials. Of the recent 59 investments identified and discussed by respondents to the in-depth survey, 37 were to increase productivity. Nine were made to reduce production costs. Of these, 8 involved energy efficiency.

Implications for program design and marketing. Business decision-makers clearly make a distinction between investments to increase production efficiency and those made primarily to reduce costs in existing processes. They value increased production efficiency more than reduced costs and categorize energy-efficiency investments with the latter objective. Successful implementation of a strategy aimed at productivity will require that program planners and marketers convince commercial and industrial end-users that increased productivity and energy efficiency have practical linkages. At the moment, business decision leaders do not “naturally” seem to consider energy-efficiency investments as investments in overall production efficiency.

• Capital expenditure decisions. Capital expenditure decisions are made at the highest levels of business organizations and are often guided by informal methods to evaluate competing investments in financial terms. The key findings in regard to capital investment decision-making were as follows.

j Fifty-nine of the 78 respondents to the in-depth survey used a formal capital budgeting process, implemented annually or, in some cases, more frequently.

j Thresholds for consideration of an item in the capital budget process were generally quite low. One-third submitted all capital expenditures of $1,000 or less to the budgeting process; few had minimum thresholds above $10,000.

j While management teams participated in gathering information for capital expenditure decisions, authority was highly centralized in CEOs, Boards of Directors, and the occasional high corporate official.

j Between one-third and one-half of organizations use formal financial-evaluation methods to rank and assess capital investments.1 Others use simple payback calculations or, in many cases, no formal analyses that take account of relative costs and benefits of different projects.

Implications for program design and marketing. These findings suggest that marketing of programs oriented to stimulating interest in big-ticket energy-efficiency projects needs to be targeted high in the customer’s organizational hierarchy if it is to be effective. For smaller companies, proprietors, their relatives, and general managers need to be reached. For larger companies, the approach should be made no lower than the plant manager level.

1 The in-depth and Omnibus surveys differed significantly on this result, most likely due to differences in the

way the items were administered and the responses coded.



• Sources of funding for capital investments. Nearly one-half of the firms interviewed in-depth reported funding capital investments out of cash reserves only. Other respondents reported using various combinations of cash, working capital lines, and asset-based borrowing. Only 21 percent of respondents to the Omnibus survey reported that lack of financing was a serious barrier to investments in energy efficiency.

Implications for program design and marketing. These findings suggest that it will be useful to offer financial incentives for efficient equipment and designs in a number of formats, including rebates, reduced interest loans, and subsidies to performance contracts. This will be necessary to match the wide range of approaches that firms currently use for project financing.

4.3 DETAILED FINDINGS

4.3.1 Summary Characteristics

Summary characteristics of Major Markets segments were developed both for sampling purposes and to provide perspectives on the composition of each segment. Table 4-1 indicates for each segment studied the total number of establishments, total employment, total sales, and estimated energy use in Wisconsin. Each of these quantities provides a measure of the size of the segment in Wisconsin. Also indicated in the table is the segment definition in terms of SIC codes used in developing these summary statistics. As described in the Methodology Section 4.4, segment definitions used for other parts of the study varied in some cases, for practical reasons.



Table 4-1 Segment Size Characteristics

SIC CodesEstablish-

ments EmployeesSales

(000,000) Electric (GWh)Electric (1012

Btu)

Natural Gas

(1012 Btu) Electric (MWh)

Natural Gas

(106 Btu)

1 Forest Products 24, 26 1,535 78,449 17,551 5,495 18.7 31.5 70.0 4012 Metalcasting 33 231 27,494 4,486 1,865 6.4 59.1 67.8 2,1493 Food Processing 20 829 63,314 21,767 2,320 7.9 32.4 36.6 5115 Printing 27 1,442 52,120 5,725 750 2.6 2.8 14.4 546 Chemicals 28 277 11,984 4,790 996 3.4 17.7 83.1 1,4807 Glass 321, 322, 3296 45 2,195 421 162 0.6 8.4 74.0 3,804

8 General

22, 23, 25, 29, 30, 32 (oth.) 34–39 5,984 302,402 50,497 6,795 23.2 27.3 22.5 90

9 Water/Wastewater 4941, 4952 105 1,745 123TOTAL INDUSTRIAL 10,448 539,703 105,361 18,384 63 179 34.1 332

10 Schools 6,526 199,741 1,913 6.5 4.8 9.6 2411 Government 2,999 139,468 1,293 4.4 1.2 9.3 912 Small Retail 26,907 254,408 50,095 2,707 9.2 7.5 10.6 2913 Office 34,452 467,813 107,374 3,028 10.3 4.1 6.5 914 Health 11,654 216,285 16,110 1,626 5.5 12.4 7.5 5815 Grocery 4,072 75,267 10,071 1,385 4.7 2.1 18.4 2816 Restaurant 10,562 160,402 6,000 1,508 5.1 10.8 9.4 6717 Lodging 3,647 100,703 5,844 800 2.7 7.8 7.9 7818 Other 56,926 414,763 104,748 3,542 12.1 11.4 8.5 27

TOTAL COMMERCIAL 157,745 2,028,850 300,242 17,803 61 62 8.8 3119 Agriculture 27,480 41,225 5,643 1,905 6.5 2.6 46.2 63

TOTAL MAJOR MARKETS 195,673 2,609,778 411,245 38,092 130 244 14.6 93

Energy Use Energy Use Per Employee



The distribution of establishment by employment size level is indicated in Table 4-2. Among Wisconsin Industries of the Future, large establishments (250 or more employees) are in the range of 5 percent of all establishments in each segment. For other segments, large establishments account for closer to 1 percent or less of establishments.

Table 4-2 Distribution of Establishments by Employment Size

The fraction of employment in each size range is indicated in the Table 4-3. Though few in number, large establishments account for on the order of half the activity, as measured by employment, in most of the industrial segments, as well as in the government and health segments.

Segment Small Single Small Multiple Medium Large

25–249 Employees

>249 Employees

1 Forest Products 72% 8% 17% 4%

2 Metalcasting 54% 9% 33% 4%

3 Food Processing 44% 18% 32% 6%

5 Printing 73% 11% 14% 2%

6 Chemicals 46% 18% 32% 4%

7 Glass 69% 9% 16% 7%

8 General 82% 8% 8% 1%

9 Water/Wastewater 60% 23% 17% 0%

10 Schools 50% 16% 33% 1%

11 Government 32% 39% 26% 3%

12 Small retail 74% 20% 6% 0%

13 Office 78% 17% 5% 0%

14 Health 75% 15% 9% 1%

15 Grocery 65% 20% 15% 0%

16 Restaurant 73% 9% 18% 0%

17 Lodging 71% 8% 19% 2%

18 Other 83% 12% 5% 0%

5–24 Employees

>24 Employees

19 Agricultural 91% 1% 8% 1%

1–24 Employees

1–5 Employees



Table 4-3 Distribution of Employment by Employment Size

4.3.2 Energy-Savings Potential

As a starting point for understanding energy efficiency in the Major Markets area, estimates were developed of energy use and savings potential and by segment and end-use. Table 4-4 summarizes the estimates. These estimates correspond roughly to cost-effective achievable savings using a 3-year payback criterion. The estimates were derived from analysis of secondary sources, as described in Section 4.4 below.

SegmentSmall Single

Small Multiple

Medium Large

25–249 Employees

>249 Employees

1 Forest Products 7% 1% 32% 60%

2 Metalcasting 6% 1% 44% 48%

3 Food Processing 4% 2% 38% 55%

5 Printing 14% 3% 36% 47%

6 Chemicals 5% 3% 49% 42%

7 Glass 7% 1% 41% 50%

8 General 21% 4% 34% 41%

9 Water/Wastewater 21% 14% 65% 0%

10 Schools 9% 6% 66% 20%

11 Government 4% 6% 38% 51%

12 Small retail 30% 16% 40% 15%

13 Office 26% 10% 29% 36%

14 Health 15% 4% 21% 60%

15 Grocery 16% 10% 61% 13%

16 Restaurant 30% 7% 52% 12%

17 Lodging 11% 3% 57% 29%

18 Other 35% 10% 35% 19%

5–24 Employees

>24 Employees

19 Agricultural 52% 0% 22% 25%

1–24 Employees

1–5 Employees



Table 4-4 Energy Savings Potential

Segment SIC Codes Total Motor Lighting Cooling

Total Electric Savings

Total Electric Savings (GWh)

% of Segment

Total Total BoilersProcess

HeatGas

Furnace Total Gas Savings

% of Segment

Total

1 Forest Products 24,26 18.75 2.06 0.10 2.16 633 11.5% 31.49 4.18 0.51 0.08 4.77 15.1%2 Metalcasting 33 6.36 0.21 0.02 0.24 69 3.7% 59.09 1.09 2.77 0.19 4.05 6.8%3 Food Processing 20 7.92 0.71 0.06 0.77 226 9.7% 32.38 3.76 0.73 0.13 4.62 14.3%5 Printing 27 2.56 0.15 0.05 0.20 59 7.9% 2.83 0.12 0.07 0.06 0.25 8.8%6 Chemicals 28 3.40 0.39 0.01 0.40 118 11.9% 17.74 1.42 0.39 0.01 1.82 10.2%7 Glass 321,322,3296 0.55 0.04 0.00 0.04 13 8.0% 8.35 0.02 0.12 0.01 0.14 1.7%

8 General 22,23,25,29,30, 32(oth.) 34-39 23.19 1.58 0.37 1.95 570 8.4% 27.26 2.03 1.10 0.59 3.73 13.7%

9 Water/Wastewater 4941,495210 Schools 6.53 0.05 0.82 0.26 1.13 331 17.3% 4.85 0.38 0.07 0.45 9.4%11 Government 4.41 0.04 0.36 0.14 0.54 158 12.2% 1.23 0.07 0.04 0.11 9.0%12 Small Retail 9.24 0.07 1.37 0.32 1.76 515 19.0% 7.46 0.19 0.43 0.62 8.4%13 Office 10.33 0.09 0.84 0.34 1.26 370 12.2% 4.13 0.24 0.13 0.37 9.0%14 Health 5.55 0.06 0.52 0.13 0.72 211 13.0% 12.45 0.57 0.03 0.60 4.8%15 Grocery 4.73 0.21 0.14 0.09 0.43 127 9.2% 2.08 0.06 0.07 0.13 6.4%16 Restaurant 5.15 0.12 0.54 0.19 0.84 248 16.4% 10.82 0.11 0.17 0.28 2.6%17 Lodging 2.73 0.02 0.41 0.10 0.53 156 19.4% 7.81 0.15 0.07 0.22 2.8%18 Other 12.09 0.11 1.56 0.31 1.99 582 16.4% 11.36 0.13 0.15 0.28 2.5%

19 Agriculture 6.50 0.2665 0.27 78 4.1% 2.6

Industrial: Motor savings include machine drive, process cooling and refrigeration.Commercial: Motor savings include refrigeration and ventilationImportant omissions (due to insufficient data): Electric HVAC(Industrial), process heat and electro-chemical processes. Commercial natural gas water heating and cooking uses.

Savings PotentialNatural Gas (TBtu)

Savings PotentialElectric (TBtu)



Segment Definitions

The segment definitions used here are, in some cases, different from the definitions used for defining program eligibility under the Wisconsin Focus on Energy programs. For the industrial segment, this is because most energy-use data are only available at the two-digit SIC code level, while program eligibility is defined more narrowly in some cases. For example, Metalcasting and Chemical use estimates are based on SIC codes 33 and 28, respectively, while the program definition limits eligibility to a subset of these categories. In some situations, where partial subcategory data were available, these limitations could be reasonably circumvented. In the commercial sector, segment definitions are less explicitly defined than in the industrial sector. Energy Information Administration (EIA) definitions are the most widely recognized definitions and these are tailored to Wisconsin Focus on Energy categories where necessary. Industrial segment definitions used for the energy estimates are compared with the program definitions in Table 4-5. Also shown in the table are the definitions used for the omnibus sample frame. The sample-frame definitions are not quite the same as the program definitions because the program details were not available at the time the sample design was developed.

Table 4-5 Industrial Segment Definitions

Commercial segment definitions for energy estimates and the omnibus sample frame are indicated in Table 4-6. Commercial programs are not defined by SIC code. Building-type definitions are taken mainly from EIA’s Commercial Buildings Energy Consumption Survey (CBECS), and mapped to SIC codes for sampling as indicated.

Segment Program Definition Sampling Frame Energy Estimates

1 Forest Products 24, 26 08, 24, 26 24, 26

2 Metalcasting 332, 336 33, 34 33

3 Food Processing 20, 21 20 20

5 Printing 27 27 27

6 Chemicals 281, 282, 286, 287 28, 30 28

7 Glass 321, 322, 323, 3296 321, 322, 323 321, 322, 32968 General 09, 10, 12, 13, 14,

15, 16, 17, 21, 22, 23, 25, 29, 31, 324–329, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 49

22, 23, 25, 29, 30, 32 (not in glass), 34, 36, 37, 38, 39

9 Water/Wastewater 4941, 4952



Table 4-6 Commercial Segment Definitions

4.3.3 Baseline Energy-Efficiency Investment and Facility Management Practices

In this section we present detailed findings concerning the current practices of Wisconsin business enterprises in regard to energy efficiency. We focus on the following sets of practices and indicators.

• Energy-management resources and processes. A number of recent studies have shown that the adoption of energy-efficient products is closely related to the development of energy-management resources and processes (XENERGY 2001a). Baseline indicators in this category include clear management assignment of responsibility for energy management to individuals or staff groups; allocation of budget to energy-management activities; and development of annual energy cost-reduction goals.

• Consideration of energy costs in investment decisions. Here, we use information from the Omnibus Survey to develop indicators of the extent to which establishments in various groups take energy costs explicitly into account in developing improvements to facilities and production equipment. Such indicators include the percentage of firms that use financial statistics such as simple payback or return on investment to value differences in energy consumption associated with alternative designs and equipment models.

SegmentSampling Frame, SIC Codes

Energy Estimates, CBECS Building Type

Energy Estimates, AP-7 Classification

10 Schools 82, 835 Education School, College

11 Government 91, 92, 93, 94, 95, 96, 97, 99

Office Office

12 Small Retail 52, 53, 55, 56, 57, 59 Mercantile and Service Retail

13 Office 47, 48, 60, 61, 62, 63, 64, 65, 67, 81, 861, 862, 863, 865, 869, 87

Office Office

14 Health 801, 802, 803, 804, 806, 808, 809, 832, 833, 836, 839

Health Care Health

15 Grocery 54 Food Sales Grocery

16 Restaurant 58 Food Service Restaurant

17 Lodging 70, 805 Lodging Lodging

18 Other 50, 51, 72, 73, 75, 76, 78, 79, 84, 89, 864, 866, 807

Public Assembly, Public Order and Safety, Religious Worship, Warehouse, Other

Warehouse, Other

Electric energy use — 1994 AP-7 Planning Process, Wisconsin Public Service Commission.

Natural gas energy use, electric and natural gas end-use breakouts — CBECS from Energy InformationAdministration.



• Use of energy-efficient components for replacement of failed equipment. Recent studies have found that commercial and industrial customers are more likely to use energy-efficient equipment in replacement situations if they have corporate policies that apply to such purchases. Key indicators in this group include the percentage of customers that have purchase policies for common energy-using equipment such as lighting and motors, and the percentage of those policies that require or give preference to energy-efficient models. Other indicators include the percentage of facility managers who report the purchase of energy-efficient models or technologies as customary practice.

In the following sections we present Wisconsin Focus on Energy Baseline Study Major Markets Omnibus Survey results on baseline indicators and examine differences between Major Markets segments in the levels of those indicators. We also explore differences between market segments as defined by establishment size. This latter is an important consideration because energy-efficiency program designers often use establishment size as a key factor in deciding which kinds of services and incentives to offer to a particular group of commercial and industrial customers.

Energy-Management Resources and Processes

Table 4-7 displays baseline indicators of the management resources and processes in place to manage energy use and costs in sample facilities by subsector. Some of the key findings from Table 4-7 are as follows.

• Staffing of the energy management assigned. The Omnibus survey contained an item asking whether there was “a person, group, or department in your organization that is assigned by your top management to manage energy use and costs.” Twenty-eight percent of all Omnibus survey respondents reported that there was such an individual or group in their organizations. As expected, this proportion was slightly higher in the energy-intensive industries (Wisconsin Industries of the Future plus water/wastewater facilities) and in public sector commercial facilities. For the energy-intensive industries, the benefits of energy management are high relative to other markets. In the public sector, budget-driven cost center management likely leads to a focus on cost saving opportunities.



Table 4-7 Baseline Indicators of Energy-Management Resources and Processes

Industrial Commercial Agri- All Intensive General Public Private culture Markets

Have person or group with assigned responsibility for energy management.

35%

25%

52%

28%

29%

28%

Average number of persons assigned to energy management (when at least 1).

2

1

3

1

1

1

Energy-management functions performed. Track energy costs at facility level

39%

31%

34%

29%

15%

28%

Track energy costs at process level 31% 22% 34% 13% 17% 16%

Identify energy-efficiency opportunities 44% 40% 50% 31% 31% 34%

Qualify energy-efficiency investments 36% 30% 39% 26% 30% 28%

Have a budget for energy-management activities.

13%

8%

49%

13%

6%

13%

Have energy cost-reduction goals. 39% 39% 46% 26% 35% 31%

• Energy-management functions performed. Table 4-7 also shows the percentage of respondents that reported undertaking specific energy-management functions listed in the left-hand column. The most frequently reported activity was to “identify facility improvements to reduce energy costs” (34 percent). The general trend of the results reported for these questions suggests that it is very unlikely for a facility to carry out any energy-management activities without explicit assignment of responsibility from top management.

• Budgets and goals. The percentage of respondents who reported setting cost-reduction goals was roughly equal to the percentage of respondents who reported having staff with energy-management responsibility. This pattern held for the individual market groups as well as for the sample as a whole. However, only 13 percent of respondents reported having a budget allocated specifically for energy management. The one exception to this latter finding occurred among public sector commercial facilities, one-half of which reported having energy-management budgets.

Reasons for no energy-management efforts. The Omnibus survey sought to determine why companies do not assign staff to energy-management activities. The most frequently reported reason listed overall was that the company was too small to assign such personnel (61 percent.) Other firms noted that energy costs were insufficient to justify these personnel (18 percent) or that they had more important priorities (13 percent).

Consideration of Energy Efficiency in Investment Decisions

Characterization of the universe of facility investments. In this section we provide information from the Omnibus survey concerning the general extent and objectives of facility-related investments that respondents made in their facilities in the 2 years prior to the interview. This information provides context for interpreting the results of questions concerning investment practices related to energy efficiency.



The Omnibus survey contained a large number of questions about the number and nature of capital improvements made in the respondents’ facilities. The sequence began with a question on whether the respondent’s organization had undertaken any “renovations, additions, or remodeling at [the respondent’s] location involving expenditures of $10,000 or more for a single project.” Table 4-8 tabulates the results of that question by facility size and summarizes the results for the remainder of the sequence. A number of interesting results emerge from the table.

• Frequency of facilities improvements. The small facilities in the sample reported undertaking capital improvements relatively infrequently – on average about once every 9 years. Even the medium-sized establishments reported making investment over $10,000 only once every 3 years. This means that programs designed to influence investments undertaken in the “natural” flow of facility upgrades will have only a relatively small portion of the population to work with each year, at least in the smaller size groups.

We should note, however, that small businesses (those with 24 or fewer employees) represent 91 percent of the population of all commercial, industrial, and agricultural establishments. Thus, even though they make facilities investments less often than their larger counterparts, we estimate that they account for 72 percent of all facilities investments over $10,000, and for 50 percent of all such investments undertaken primarily to reduce energy costs.

Table 4-8 Number and Main Objectives of Recent Facilities Improvements

Small 1–24

Employees

Medium 25–249

Employees

Large 250+

Employees

Total

Made facility improvement over $10,000 in past 2 years 12% 35% 59% 14% Average number of projects over $10,000* 4 3 9 4 Primary Investment Objectives: Commercial Customers

1. Increase floorspace. 53% 30% 47% 48% 2. Increase customer/staff comfort 41% 19% 33% 36% 3. Renovate existing space for new use 31% 37% 50% 33%

Mentioned energy efficiency as one objective for projects 14% 26% 40% 17% Primary Investment Objectives: Industrial Customers

1. Replace failing equipment. 28% 21% 31% 27% 2. Renovate existing space for new use 26% 28% 25% 26% 3. Increase floorspace 16% 33% 41% 20%

Mentioned energy efficiency as one objective for projects 1% 13% 22% 4%

*Average among those who made any investments. Source: Wisconsin Focus on Energy Major Markets Omnibus Survey

• Investment objectives. The most frequently-mentioned investment objectives for commercial customers were to increase floorspace (48 percent); to increase customer and



staff comfort (36 percent); and to renovate existing space for a new use (33 percent). Among industrial customers, replacement of failed equipment was the most frequently-mentioned investment objective (27 percent). Renovation of existing space for new uses (26 percent) and increasing floorspace (20 percent) made up the next two most frequent investment objectives. Seventeen percent of commercial customers who had made major investments in the past 2 years reported that increased energy efficiency had been an objective for at least one of those investments. Among industrial customers, the corresponding result was 4 percent. The percentage of customers reporting energy-efficiency objectives for capital investments was strongly associated with size of the establishment, as examination of Table 4-8 makes clear.

To get a more precise sense of the nature of investment in energy efficiency, we questioned Omnibus survey respondents as to whether any of the investments over $10,000 that they had undertaken had the “primary objective of reducing energy costs in the facility.” Table 4-9 tabulates the results of that question and summarizes the results for the remainder of the sequence.

Table 4-9 Number and Main Objectives of Recent Investments in Energy Efficiency

Small 1–24

Employees

Medium 25–249

Employees

Large 250+

Employees

Total

Percent making at least one facility improvement with primary objective to increase energy efficiency. 24% 39% 44% 28%

Energy-efficiency projects as percent of all capital improvement projects over $10,000 9% 26% 22% 13%

Systems Addressed Most Frequently: Commercial Customers (% w/ system present)

Percent with Referenced System that Made EE Improvements to the System

1. Space Heating (58%) 61% 68% 51% 62%

2. Ventilation (55%) 47% 49% 77% 49%

3. Cooling (68%) 43% 49% 65% 45%

4. Lighting (97%) 40% 59% 83% 45%

Systems Addressed Most Frequently: Industrial Customers (% w/ system present)

Percent with Referenced System that Made EE Improvements to the System

1. Process Machinery (19%) 73% 69% 93% 73%

2. Space Heating (47%) 42% 30% 41% 38%

3. Compressed Air Systems (70%) 38% 34% 34% 37%

4. Lighting (88%) 15% 63% 49% 27%

5. Motors (70%) 30% 26% 49% 25%

• Frequency of investment in energy-efficiency projects. Among managers who reported making a large facility investment within the 2 years prior to the survey (14 percent overall; see Table 4-7), 28 percent reported making at least one investment that had a primary objective of reducing energy costs. The percentage of customers making such



investments was considerably higher among medium and large establishments (39 and 44 percent respectively). However, even in the larger size categories the percentage of companies investing specifically to save energy was relatively small.

• Energy projects account for a disproportionate share of total investment projects. Altogether, projects undertaken specifically to save energy accounted for 13 percent of all reported major investment projects, even though respondents representing only 3 percent of commercial and industrial facilities reported making such investments. This suggests that the small cadre of companies that are active in energy efficiency are making multiple investments oriented to that objective.

• Systems Addressed. Generally speaking, the building systems addressed by the energy-efficiency investments account for a large percentage of total energy consumption in the commercial and industrial sectors. Generally, the larger the company, the more likely it is to have addressed a particular kind of system, if present in the facility. However, this pattern breaks down somewhat at the measure level. For example levels of implementation for compressed air and space heating measures appears to be similar across size classes.

Where equipment purchase decisions are made. Most (58 percent) private sector facilities managers report taking a “very active” role in equipment selection decisions. In the public sector, on the other hand, the decision appears to be made much more frequently at a central, departmental level. That is, 40 percent of public sector facility managers overall, and more than 75 percent of government respondents report having no input into equipment selection decisions. Typically, most commercial and industrial customers do not have any personnel or departments specifically assigned to manage energy usage and associated costs. See Table 4-10.

Table 4-10 Role of Facility Managers in Equipment Selection


Role business takes in equipment purchase decisions at this facility

Very active 69% 61% 33% 56% 79% 58%

Somewhat active 9% 10% 14% 15% 0% 13%

Slightly active 10% 15% 12% 6% 3% 8%

Company has no input 11% 14% 40% 23% 18% 21%

Person group or department assigned to manage energy use/costs

Yes, one person 30% 20% 37% 23% 29% 24%

Yes, a group 4% 3% 8% 2% 0% 2%

Yes, a department 1% 2% 7% 3% 0% 2%

No 64% 74% 47% 73% 71% 71%

Importance of energy efficiency in equipment selection. The Omnibus survey results show some variation among commercial and industrial customers in the importance of energy



efficiency in selection of equipment for capital projects. Overall, respondents representing 57 percent of all Wisconsin commercial and industrial establishments reported that they used energy costs as a criterion in selecting capital equipment used in major construction and renovation projects. This percentage varied from 48 percent among private sector commercial customers to 90 percent among farmers. The Omnibus survey contained a question as to whether the respondent’s organization made it a practice to purchase energy-efficient equipment for new capital projects in all cases, in most cases, in some cases, or in no case. The range of results for this question shown in Table 4-11 are entirely too high, given what we know of the market penetration of various industrial and commercial efficiency products. This over-reporting of the use of efficient equipment is common to customer surveys of this type, and is likely caused by some combination wishing to impress the interviewer and honest ignorance of energy-efficient features for various technologies. In any case the results suggest that general industrial and agricultural customers are more consistent about purchasing energy-efficient equipment than either private or public sector commercial customers.

Table 4-11 Indicators of Importance of Energy Efficiency in Investment Decisions


Used energy costs as a criterion in selecting capital equipment in major projects

51% 62% 59% 48% 90% 57%

Used energy-efficient equipment in capital projects:

In all cases 29% 81% 46% 34% 74% 53%

In most cases 51% 9% 22% 50% 26% 32%

In some cases 19% 3% 25% 16% 0% 13%

Use of Efficient Equipment in Replacement Situations

Equipment purchase policies. More than 60 percent of industry respondents claimed that their companies do not have equipment purchase policies. The other 40 percent of companies with such guidelines are evenly divided between those that require purchase of energy-efficient equipment and those that simply state a preference for its acquisition. The vast majority of policies tend to be informal guidelines (70 percent) rather than written specifications. In general these equipment purchase trends did not show much variation by subsector. See Table 4-12 for a summary of findings on this topic.



Table 4-12 Equipment Purchase Policies


Have policy that requires purchase of energy-efficient equipment.

15% 10% 11%

20%

20%

18%

Have policy that states a preference for energy-efficient equipment.

28% 19% 33% 21% 19% 21%

Do not have an equipment purchase policy. 57% 71%

57%

59%

61%

61%

Policy is a set of written rules or specs. 8% 7% 14% 8% 8% 8%

Policy consists of informal guidelines. 71% 67% 39% 76% 52% 70%

Policy is a combination of formal specs and informal guidelines.

21% 18% 37% 16% 32% 19%

Technology-specific replacement practices. The Omnibus examined purchase and replacement policies for lighting, cooling, motors, and process equipment. For most types of equipment, the respondents split fairly evenly into three different approaches: replace failed equipment with components of the same efficiency rating; follow the advice of contractors and vendors; or upgrade to higher efficiency items. The following paragraphs provide detail in regard to individual technologies. See Table 4-13 for a summary of Omnibus survey results on this topic.

• Lighting. The respondents reported relatively low adoption of efficient lighting; when magnetic ballast fixtures fail, only 14 percent of companies overall used an efficient T-8 or electronic ballast replacement. Forty-three percent of respondents replaced the failed fixtures with the same type of equipment and 28 percent went with the recommendation of the contractor. There was some variation here by subsector, however. Forty percent of industrial water/wastewater and government sector respondents claimed to use electronic ballast/T-8 replacements, and about one-third of school respondents claimed to use the high-efficiency models. This low adoption rate overall could reflect a lack of product awareness or it may be the result of high levels of saturation already achieved by electronic ballasts and T-8 bulbs.

• HVAC. Respondents were fairly evenly divided in regard to replacement of failed HVAC equipment. Twenty-nine percent followed the contractor recommendation; 21 percent used a standard-efficiency or low-cost model; 25 percent reported that they substituted a higher cost-efficient product. There are a few notable subsector exceptions to overall trends on heating and cooling products. More than 60 percent of respondents in the industrial wastewater sector, and 42 percent of school participants claimed that they “buy up” to high-efficiency equipment. In general, the data generated by the Omnibus survey appear consistent with national sales data.

• Motors. Motor replacement policy was similarly divided across subsectors between the companies that follow the contractor’s recommendation (30 percent) and those that would pay a premium for high-efficiency models (28 percent). A little less than 20 percent of companies overall suggested that they generally use a standard-efficiency or



low-cost motor replacement (17 percent). The energy-intensive and general industrial firms (39–42 percent) along with schools (100 percent) and commercial retail companies (38 percent) were most likely to pay the premium for an efficient motor replacement. On the other hand, all respondents in the agricultural sector and industrial wastewater participants suggested that they follow the contractor’s advice on motor replacement. This reported use of premium efficiency motors is slightly high; national market estimates put adoption rates in the range of 13–15 percent. It is possible that these numbers are higher in Wisconsin due to heavy utility program promotion.

Table 4-13 Technology-Specific Purchasing Practices


Lighting: Use electronic ballasts and T-8 lamps

24% 24%

35%

11%

4%

14%

Cooling: Pay more for high-efficiency equipment that exceeds government standards.

27% 32% 39% 25% 15% 25%

Motors: Pay more for high-efficiency equipment that exceeds government standards.

39% 42%

19%

16%

0%

28%

Process equipment: Pay more for high-efficiency equipment that exceeds government standards.

28% 35% 13% 2% 0% 19%

Of the 70 percent of survey respondents with process equipment at their facilities, one-third followed the contractor’s recommendation during equipment failures, and the rest are evenly divided between standard-efficiency/low-cost (17 percent) and premium high-efficiency (19 percent) replacements. There were some notable variations in the data among subsectors. All school respondents (100 percent) suggested a willingness to pay the premium necessary to purchase high-efficiency replacements. In addition, all industrial wastewater respondents and companies from the agricultural sector (100 percent) claimed to follow contractor recommendations. Industrial companies were pretty evenly split between standard and efficient equipment replacements, and the public sector was evenly divided between standard/low-cost and contractor decisions. Nearly all private commercial companies with process equipment went with contractor recommendations.

Differences in Energy-Efficiency Practices by Establishment Size

As mentioned above, energy-efficiency program planners and managers often distinguish between large and small commercial and industrial customers in program design and delivery. The working hypothesis is that smaller companies have fewer financial and management resources to devote to energy-efficiency projects than their larger competitors. They also have fewer potential energy-efficiency projects in their facilities and relatively low levels of potential savings. Therefore, small commercial and industrial customers are assumed to have relatively little interest in energy-efficiency programs, particularly if participation calls for investment of



management time and money. Programs for smaller commercial and industrial customers are, thus, generally designed to provide relatively intensive levels of technical and financial assistance to implement a limited range of widely applicable measures. In this section, we compare the patterns of responses from small, medium, and large establishments to questions concerning organizational resources and practices related to energy efficiency. In general, we find that the likelihood of having dedicated staff and budget for energy-efficiency activities increases consistently with the size of the organization. However, the adoption of policies related to the purchase of energy-efficient equipment and reported purchases of energy-efficient equipment do not appear to be associated closely with establishment size. Organizational resources and practices. The percentage of establishments that have an employee responsible for managing energy resources increases consistently with the size of the facility. So too does the probability of carrying out various energy-management functions, of having a budget for energy management, and of setting energy-management goals. This strong, positive correlation between establishment size and staff to address energy management is shown in Table 4-14. Using the chi-square test, the likelihood that the variables shown in Table 4-14 are distributed evenly over the size categories is p<0.001.

Table 4-14 Energy-Management Staffing and Functions by Establishment Size

Establishment Size2 Small Medium Large All

Have person or group with assigned responsibility for energy management.

27% 40% 62% 28%

Average number of persons assigned to energy management.

5 6 21 6

Energy-management functions performed. Track energy costs at facility level

27% 41% 64% 28%

Track energy costs at process level 14% 33% 58% 16%

Identify energy-efficiency opportunities 32% 52% 73% 34%

Qualify energy-efficiency investments 26% 42% 66% 28%

Have a budget for energy-management activities.

10% 34% 44% 13%

Have energy cost-reduction goals. 29% 44% 65% 31%

Use of energy efficiency as a criterion for capital equipment selection. The significant differences among size groups in the level of resources and procedures for energy-efficient investments are not reflected in reported equipment selection and purchasing practices. As Table 4-15 shows, the percentage of firms that report using energy costs as a criterion in selecting equipment for major capital projects varies somewhat with establishment size. However, the

2 For the purposes of the Omnibus survey, Business Size was segmented by third splits using number of

employees as follows: “Small” = <24 employees; “Medium” = 25 249 employees; “Large” = >250 employees.



differences between size groups on these variables are not statistically significant. The same is true of the percentage of firms that claim to have policies that require or give preference to the purchase of energy-efficient equipment.

Table 4-15 Use of Energy Costs in Equipment Selection

Results by Establishment Size

Establishment Size Small Medium Large All

Use energy costs as a criterion in selecting capital equipment on major projects

53% 65% 78% 57%

Used energy-efficient equipment in capital projects

In all cases 59% 43% 32% 53%

In most cases 25% 42% 53% 32%

In some cases 12% 14% 15% 13%

In no instances 4% 2% 0% 3%

Total 100% 100% 100% 100%

Have policy that requires purchase of energy-efficient equipment.

18% 16% 23% 18%

Have policy that states a preference for energy-efficient equipment.

21% 23% 28% 21%

Do not have an equipment purchase policy. 61% 61% 49% 61%

Total 100% 100% 100% 100%

Reported purchase of energy-efficient equipment. When asked about purchases of specific kinds of equipment, medium-sized establishments consistently reported purchasing efficient models more frequently than large firms. The percentage of small firms that reported purchasing efficient equipment was consistently lowest among the size categories. See Table 4-16. The differences among the groups generally were not statistically significant.

Table 4-16 Reported Purchases of Efficient Equipment by Establishment Size

Establishment Size Small Medium Large All

Lighting: Use electronic ballasts and T-8 lamps. 12% 32% 29% 14%

Cooling: Pay more for high-efficiency equipment that exceeds government standards.

24% 37% 36% 25%

Motors: Pay more for high-efficiency equipment that exceeds government standards.

27% 38% 25% 28%

Process equipment: Pay more for high-efficiency equipment that exceeds government standards.

17% 35% 30% 19%

The pattern of small and inconsistent differences in reported purchases of efficient equipment may result from a number of factors. Most importantly, despite the care we exercised in wording



these questions, the respondents may simply have been unaware or unclear about how to identify energy-efficient models in the various equipment categories. This hypothesis would be consistent with the reported levels of adoption of efficient models versus what is known about the penetration of such equipment from manufacturers sales and shipment reports. For example, shipment data suggests that electronic ballasts now account for nearly two-thirds of all unit sales. However, respondents representing only 14 percent of all Wisconsin businesses reported that they regularly purchased electronic ballasts (U.S. Census Bureau 1999). By way of contrast, reported adoption levels for premium efficiency motors and high-efficiency HVAC equipment are between 50 and 100 percent higher than market share estimates based on manufacturer data (XENERGY 2001b). In light of these considerations, and the large differences between size groups in the amount of resources available for funding and managing energy-efficiency investments, we conclude that the differences in actual investments among small, medium, and large companies are likely to be larger than reported. However, the data offer no clarification as to how large these differences are.

4.3.4 Baseline Indicators: Renewable Energy

The Omnibus survey explored the respondents’ awareness of various renewable technologies and the extent to which they had sought out information about them. In addition, it probed sources of information that respondents might utilize to gather additional information about renewable technologies, likelihood of installing them at their own facilities, and barriers they observed in adopting the technologies.

Awareness and Information Search: Commercial and Industrial Customers

Awareness. Table 4-17 summarizes Omnibus survey findings on general industry awareness of several renewable energy technologies and interest in further information about these products for potential use at company facilities. According to the data, awareness for most renewable technologies across Wisconsin commercial and industrial customers seems to be at the modest 25–40 percent range with little variation by subsector. These include photovoltaics (26 percent), daylighting (22 percent), transpired solar (23 percent), passive solar (41 percent), biomass (15 percent), and fuel cells (39 percent). Among these six technologies, the greatest subsector variation could be seen in the biomass, daylighting, fuel cell, and transpired solar technologies. Although the overall industry awareness of biomass technology was at a minimal 15 percent, over 30 percent of companies in the agricultural sector were aware of the technology, which seems reasonable given the origin of biomass fuels. Forty percent of companies in the general industrial sector surveyed had heard of daylighting technology even though overall industry awareness was about 20 percent. In addition, more than 60 percent of industrial wastewater companies claimed familiarity with transpired solar technology, even though the overall awareness level was a modest 23 percent. Finally, more than 60 percent of industrial wastewater respondents were familiar with fuel cells in contrast to general commercial and industrial awareness of less than 40 percent.



There seems to be greater overall awareness of wind power (50 percent), especially among general industrial and agricultural companies. In addition, ground source heat pumps were quite familiar (45 percent) to all subsectors surveyed but particularly to private commercial and agricultural firms. Because wind power accounts for a substantial portion of all electricity generated from renewable energy sources, and large turbines are visible in many farming regions where wind resources are plentiful, it follows that agricultural industry awareness might be strong.

Table 4-17 Renewable Energy Technologies: Awareness and Information Search


Photovoltaics: Aware 30% 33% 29% 24% 19% 26%

Photovoltaics: Sought information 12% 15% 23% 13% 29% 15%

Daylighting: Aware 22% 40% 24% 17% 33% 22%

Daylighting: Sought information 33% 26% 55% 15% 19% 21%

Transpired solar collectors (walls): Aware 18% 26% 20% 23% 25% 23%

Transpired solar collectors (walls): Sought info 15% 8% 12% 15% 23% 14%

Passive Solar: Aware 39% 48% 35% 40% 42% 41%

Passive Solar: Sought information 14% 18% 24% 13% 18% 15%

Ground source heat pump: Aware 40% 42% 35% 47% 49% 45%

Ground source heat pump: Sought information 12% 34% 24% 20% 38% 23%

Biomass fuel: Aware 21% 24% 13% 12% 31% 15%

Biomass fuel: Sought information 16% 17% 12% 6% 40% 14%

Wind Power/On-site: Aware 49% 56% 44% 48% 56% 50%

Wind Power/On-site: Sought Information 14% 12% 14% 9% 20% 11%

Fuel Cells: Aware 37% 43% 31% 39% 38% 39%

Fuel Cells: Sought information 7% 20% 12% 8% 0% 10%

Information search. The Omnibus survey sought to determine if commercial and industrial awareness about these renewable technologies might also include enthusiasm about gaining more information for their possible use at company facilities. The survey used the percent of respondents who reported actively seeking information about a technology as an index of their interest and to sense whether the technology might have some application to their situations. With a few notable exceptions, respondents that indicated an awareness of these renewable technologies were not very likely to seek out additional information about them. In fact, in nearly all cases only one-third or less of respondents indicated that they looked for more information on renewable energy for use at their facilities. The exceptions to this trend included public sector and wastewater industry interest in daylighting and agricultural and wastewater sector curiosity about use of ground source heat pumps and biomass fuels. Fifty-five percent of respondents in the public sector (66 percent among schools and 42 percent in government) and 74 percent of wastewater industry respondents reported seeking out further information about daylighting technology. This high public sector interest might be the result of



substantial promotion of these technologies by various government programs. It could also be a method being looked at to reduce lighting-generated electricity loads in buildings with mostly daytime only occupancy. About 40 percent of agricultural sector respondents and 72 percent of wastewater industry participants claimed that they sought out further information about biomass and ground source heat pumps. As noted earlier, biomass fuels typically originate in the agricultural sector (or from waste products), so interest there is intuitive. However, the remote expanses of the agricultural sector may explain respondent interest in ground source heat pumps, which offer an economical way to heat and cool using electricity where gas service is unavailable. Nearly one-third of agricultural-sector respondents sought further information on photovoltaics, another renewable technology that is attractive and economical when installed in remote, off-grid applications. Wind is also another off-grid technology for remote areas and agricultural sector respondents indicated a strong awareness of it, although interest levels for use in facility applications were fairly low. Sources of Awareness Information on Renewables. Most of the industry respondents sought out information about renewable technologies from trade and technical publications. Other channels included the Internet (15 percent), equipment installers (14 percent), and local utilities (13 percent). A few industries reported taking a more active role in seeking out information. Wastewater industry respondents gathered information from local utilities (62 percent), and energy-intensive companies reported making greater use of the Internet (34 percent; see Table 4-18).

Table 4-18 Sources of Information on Renewable Energy Technologies


Equipment manufacturers 14% 18% 15% 11% 14% 14%

Equipment installers 3% 1% 6% 7% 14% 6%

Local solar associations 6% 1% 11% 6% 0% 4%

Government agencies 0% 8% 16% 13% 0% 10%

Trade and technical publications 34% 27% 44% 54% 43% 44%

Local utilities 12% 17% 21% 15% <1% 13%

Internet 33% 8% 11% 17% 14% 15%

Other 22% 24% 34% 14% 28% 20%

Likelihood of specifying renewable technologies. The Omnibus survey asked the commercial and industrial respondents to gauge the likelihood that they would actually specify and install renewable energy technologies at their facilities. The data show quite a bit of variation by industry subsector on this subject. The energy-intensive and general industrial companies, along with public sector respondents, were pretty evenly divided between all three response categories. On the other hand, private sector commercial and agricultural respondents were firmly in the “medium” likelihood category. Overall, commitment interest levels are highest among energy-



intensive industrial and public sector commercial customers. Practically none of the agricultural respondents reported high interest in installing renewable technologies, despite their generally high awareness of renewable technologies and the particular benefits they offer to agricultural facilities (Table 4-19).

Table 4-19 Likelihood of Specifying Renewable Energy Technologies


High 35% 26% 26% 11% <1% 14%

Medium 28% 27% 36% 49% 71% 45%

Low 31% 16% 35% 11% 14% 14%

None at all 6% 32% 3% 29% 14% 26%

Reasons for lack of interest. The Omnibus survey asked respondents what considerations led to their generally modest interest in renewable energy technologies. The key reason cited by nearly half the survey participants across all sectors was that their “costs are too high.” This belief was strongest among the agricultural sector, public sector, and energy-intensive industrial respondents. All agricultural sector respondents and nearly 70 percent of public and energy-intensive industrial sector respondents held this belief. Energy-intensive and general industrial participants also cited concerns over “lack of purchase and installation knowledge and

-20).

Table 4-20 Reasons for Lack of Interest in Renewable Energy Technologies


Costs are too high 65% 40% 69% 29% 100% 43%

Unfamiliar with technology 9% 1% 15% 5% 0% 4%

Benefits are too low 8% 0% 10% 3% 0% 3%

Doubt performance 5% 0% 4% 1% 0% 1%

Doubt reliability 2% 0% 0% <1% 0% <1%

Don’t know how to purchase & find installers 15% 19% 4% 1% 0% 7%

Decreased facility resale value 0% 20% 0% 3% 0% 7%

Damaged facility appearance 0% 0% 0% 4% 0% 2%

Zoning or code restrictions 0% 0% 0% <1% 0% <1%

Lack of financing options 0% 1% 4% 25% 0% 13%

Other 3% 20% 2% 31% 0% 22%

Survey participants were asked what would need to change with respect to renewable technologies to increase their interest in them for possible future installation at their facilities. Not surprisingly, more than half identified reductions in measure cost as the key change needed to spur their interest in renewable technologies.



4.3.5 Business Decision-Making: Energy Efficiency in the Context of Business Strategy and Investment

In this section, we present detailed information on how Wisconsin’s commercial and industrial customers make investment decisions to advance their overall business strategies, and the extent to which energy-efficiency figures into investment plans. We draw the information presented in this section primarily from the database of responses to the in-depth interviews conducted with proprietors or senior managers at 78 Wisconsin business establishments. We supplement the information from the in-depth interviews with results of selected items from the Wisconsin Focus on Energy Baseline Study Major Markets Omnibus Survey (the Omnibus), as well as information from secondary sources compiled for the Industry Profiles. The remaining parts of this section cover the following topics:

• Description of the respondents;

• General Investment Goals and Objectives;

• Capital Investment Decision Processes;

• Extent and Objectives of Facilities Investments;

• Experience with Energy-Efficiency Investments; and

• Environmental concerns and activities undertaken to address them.

Description of Respondents

XENERGY selected the sample for the in-depth interviews from a combination of trade association sources and comprehensive establishment lists. Details are provided in the Methodology Section 4.4. Position of respondents. In developing the sample for the in-depth survey, XENERGY attempted to identify key individuals at various firms in advance, either by consulting websites and other public information or through referrals from well-informed industry observers. Where no contact information was available, interviewers asked to speak to “the person at this location who has primary responsibility for investment decisions in regard to your organization’s physical facilities.” Table 4-21 shows the distribution of respondents by title. The sample was fairly evenly split between those who have overall responsibility for the business (owners, CEOs, and CFOs) and those who have responsibility for operations (plant managers, chief operating officers, and plant engineers).



Table 4-21 Title of Respondents

Title of Respondent

Owner 16

President or CEO 15

Plant Manager/General Manager 19

Chief Financial Officer 10

Plant Engineer/Engineering Manager 13

Facility Manager/Property Manager 5

Total 78

Distribution of respondents by subsector. Table 4-22 shows the distribution of the sample respondents by subsector. The left-hand column shows the individual industries contained in the broader categories. The sample provides a spread of facilities within Wisconsin’s Industries of the Future, as well as other sectors, such as commercial property management (leased office space) and retail.

Table 4-22 Distribution of In-Depth End-User Interview Respondents by Subsector

Sector and Industry Number in Sample

Agriculture 5 Fabrication Industry: Printing, Metalcasting, Machinery, Automotive, Finished Lumber Products, Printing 23 Process Industry: Food Processing, Chemicals, Forest Products, Paper, Glass, Concrete 18 Health: Hospitals, Nursing Homes 10 Lodging/Dining: Hotels, Restaurants 6 Retail: Grocery, Other 8 Property Management Commercial Real Estate 5 Other: Transportation, Warehouse, Construction 3 Total 78

Distribution of respondents by size. Table 4-23 shows the distribution of in-depth respondents by the number of facilities their organizations occupy in Wisconsin. One-half of the sample organizations have only one facility. An additional 15 percent have two facilities in the state. Table 4-24 shows the distribution of survey respondents by number of employees in Wisconsin. The range of size is broad: from 1 to 5,000 employees in the state. However, the distribution is oriented toward relatively large enterprises: two-thirds of the respondents report having 50 or more employees. By way of contrast, only about 20 percent of Wisconsin establishments have 25 or more employees in the Major Markets sectors. This distribution reflects the sampling approach, which balanced the objective of representativeness with that of seeking out industry leaders who could provide informed responses to the questions posed in the in-depth protocol.



Table 4-23 Distribution of In-Depth End-User Interview Respondents

by Number of Facilities in Wisconsin

Number of Facilities in Wisconsin Number in Sample

1 39

2 12

3–6 13

7–80 13

N/A 2

Total 78

Table 4-24 Distribution of In-Depth End-User Interview Respondents

by Number of Employees in Wisconsin

Number of Employees in Wisconsin Number in Sample

1–9 8

10–49 20

50–199 15

200–999 19

1,000–5,000 11

N/A 5

Total 78

Location of facilities and headquarters in other states. The establishments in the sample generally had operations strongly concentrated in Wisconsin. Roughly two-thirds had employees only in Wisconsin.

General Investment Goals and Objectives

General business strategies. In order to better understand how key business decision-makers viewed energy-efficiency investments and activities, we sought first to elicit information from them on their general business strategies and the ways in which their companies’ investments contributed to those strategies. In the opening item for this question sequence, we asked the respondents to identify which of several basic business strategies was most critical to their organization’s success under current conditions. The choices included: low cost provider; first to market, effective marketing and distribution; establishing and defending a strong market niche.3 Many respondents selected more than one critical strategy and some supplied their own. Table 4-25 shows the distribution of the answers to this question.

3 See, for example, Porter, Michael. 1980. Competitive Strategy. Basic Books, New York.



Table 4-25 Key Strategies for Business Success Identified by Subsector

Agri-

culture Fabric-ation

Process Industry

Health-care

Lodging/ Food Retail

Leased Office Other

Grand Total

Low-cost provider 1 2 3 2 1 2 1 12

First to market 1 1 1 1 4

Effective marketing 1 1 5 4 1 1 1 1 15

Build/defend niche 1 13 6 11 4 2 3 1 34

Niche and low-cost 5 2 1 8

First to market +

marketing 1

1

No answer 2 1 1 4

Total 3 25 12 10 6 4 3 78

Table 4-25 presents some interesting results, particularly when viewed in the context of responses to subsequent questions regarding the nature and objectives of recent investments. The first pattern that emerges is how few establishments mentioned being the low-cost provider as their primary business strategy: 12 out of 78. Only 3 of these establishments are process industries, which make commodities such as concrete and paper. An additional 8 companies mentioned low cost in conjunction with establishing a strong niche or effective marketing. One key subtext of the responses in Table 4-25 is that business leaders tend to focus externally on their markets and customers when they think about “strategy.” Being a low-cost provider enables a company to be profitable in markets where purchase decisions are largely driven by price or where, as in the case of healthcare, unit revenues are fixed by regulation or by limited competition among a few large buyers. All of the other generic strategies named refer explicitly to building customer relationships through product development, marketing, and quality service. Strategic objectives for recent investments. Responses to questions that followed up on characterization of basic business strategy show that business leaders focus primarily on efficiency and cost reduction when developing plans to implement strategy. Specifically, we asked respondents to characterize “major opportunities for companies in your industry to increase profitability,” and then to describe investments they had made in the past 2 years to capture those opportunities. Table 4-26 summarizes respondents’ descriptions of specific investment projects they had undertaken in the past 2 years by objective. Each unit tabulated refers to a specific investment that the respondent described. Eight respondents reported that their companies had made no major investments in the past 2 years.



Table 4-26 Objectives of Recent Investments by Subsector

Agri-

culture Fabric-ation

Process Industry

Health-care

Lodging/ Food Retail

Other

Grand Total

Increase Production Efficiency 2 16 10 2 2 2 2 36Reduce Costs 1 4 2 2 1 10Increased Marketing Efforts 1 1 1 1 3 1 1 9Improve Supply Chain Management 2 1 3Relocation for Cheaper Inputs 1 1 2New Product Development 1 2 3

Expansion 1 1 2

No Answer 2 3 3 2 1 1 1 13

Total 5 23 18 10 6 8 5 3 78

Clearly, the objective of most of the investments made by the respondents in the past 2 years was to increase production efficiency. Typical investments of this type included the purchase of new production equipment or information technology to realize increased production volume, increased quality (reduced waste), and decreased labor input per unit. Ten of the 65 investments described to interviewers were undertaken primarily to reduce costs. Of these, 8 involved energy-efficiency improvements. It is interesting to note that these investments occurred in process industries, healthcare, and lodging facilities. All three of these industry groups are extremely cost-competitive. Moreover, occupancy expenses account for a high percentage of cost (particularly controllable cost) for healthcare and lodging. Of the remaining 19 investments described, 5 (supply chain improvements and relocations to reduce costs) were essentially aimed at reducing costs and increasing efficiency. Thus only 12 of the investments described — those for increased marketing and new product development — had to do with elements of the business to which customers were exposed directly. Implications for program positioning and marketing. The results summarized in Table 4-26 have some interesting implications for positioning and marketing of energy-efficiency programs. First, increased production efficiency is clearly the primary objective of most business investments, particularly investments in physical plant. Second, business decision-makers clearly make a distinction between investments to increase production efficiency and those made primarily to reduce costs in existing processes. They categorize energy-efficiency investments with the latter group. For a number of years, energy-efficiency program designers have stressed that marketing programs and the measures they promote on the basis of cost savings alone has limited effect. Programs such as ENERGY STAR buildings and the U.S. Department of Energy’s BestPractices programs have sought to market a link between energy-efficiency improvements and improved productivity. The results above demonstrate that this is a well-directed strategy,



given customer motivations for the largest portion of fixed capital investments. However, successful implementation of the strategy will require that program planners and marketers convince commercial and industrial end-users that such practical linkages exist. At the moment, business decision leaders do not “naturally” seem to consider energy-efficiency investments as investments in overall production efficiency.

Capital Investment Decision-Making Process

In this section, we present information from the in-depth surveys regarding processes and criteria applied to capital investment decision-making. The key objectives of this line of inquiry were to assess whether there were patterns in the frequency, procedures, personnel involved, and decision rules which could be harnessed in marketing energy-efficiency programs. We begin by examining the respondents’ basic procedures for capital investment decision-making and move on to patterns of participation and decision rules. Use of a formal capital budget process. Table 4-27 summarizes key features of the capital budgeting processes reported by participants in the in-depth survey. The key observations to be drawn from these findings are as follows.

• All but three of the sample organizations with 25 or more employees reported using a formal capital budgeting process to make capital investment decisions. Among companies with fewer than 25 employees, one-fourth used a formal capital budgeting process.

• Among companies with multiple facilities, about 60 percent addressed the requirements for all their facilities through a single capital budgeting process. In only 2 of the 53 cases did the capital budgeting process cover only the respondent’s home facility.

• In 35 of the 59 cases, the capital budget covered improvements to production equipment as well as to buildings and grounds. In 39 of the cases, the capital budget included information technology. In roughly half the cases, vehicles and a broad range of other kinds of relatively small items were also included in the capital budget.

• Forty-seven of the 59 organizations with formal capital budget processes conduct them once annually. The others do it on a more frequent basis — mostly monthly. These are generally the largest organizations, or smaller ones with very modest capital requirements.



Table 4-27 Capital Budget Process Features

Small 1–24

Employees

Medium 25–249

Employees

Large 250+

Employees

Size not

Reported

Total

Have a formal capital budget process Yes 5 24 27 3 59 No 14 2 1 0 17 Facilities Covered (Organizations with >1 facility)

Respondent’s home facility only

2

0

0

0

2

Multiple 1 10 7 0 18

All in organization 2 12 17 2 33

Items covered in addition to real estate

Production Equipment

2

19

21

3

35

Information Technology 6 19 21 3 39

Vehicles and other 3 11 11 3 28

Frequency of Capital Budgeting Process

Annual

3

18

23

3

47

More frequent than annual 5 5 0 10

As Table 4-28 shows, even relatively small expenditures are subjected to evaluation through a capital budget process. About one-third of the respondents reported that they subjected capital items costing $1,000 or less to a budgeting process. Only 19 of 77 reported thresholds of $10,000 or above.

Table 4-28 Threshold for Capital Budget Items

Small 1–49

Employees

Medium 50–499

Employees

Large 500+

Employees

No Size

Reported

Total

No minimum 7 3 6 1 17

$1,000 4 7 8 0 19

$5,000 1 9 6 2 18

$10,000 7 7 5 0 19

Varies depending on project 1 1

Don’t know 3 3

Total 22 26 26 3 77

Investment Decision Organization. The in-depth questionnaire probed the position of the individuals involved in capital investment decisions and their relative influence and authority. Table 4-29 shows the groups reportedly involved in the decisions and the ones identified as



having the ultimate responsibility for the decisions.4 The table shows a pattern of consultative participation by operating managers (including owners in smaller enterprises) in framing the decisions, followed by concentration of actual decision-making authority among very top management and boards of directors. Thus, it appears that any interventions designed to influence capital decisions need to be aimed fairly high in the organizational structure: at owners and general managers in smaller companies; at operating managers, corporate executives, and Boards of Directors in larger companies.

Table 4-29 Parties involved in Capital Investment Decisions

Participate in

Investment Decisions Final Authority for

Investment Decisions

Operating Managers 35 8

Central Corp. Officials 2 12

Owner/Relatives 15 18

CEO 6

Board of Directors 7 14

Depends on item 1

Total 59 59

Evaluation methods applied to capital investment decisions. Both the in-depth and Omibus surveys contained a sequence of items that the decision rules and financial techniques that respondents might apply making capital investment decisions. Table 4-30 shows the results of these questions by company size.

Table 4-30 Evaluation Methods Applied to Potential Capital Investments

Small Medium Large Total

Omnibus In-Depth Omnibus In-Depth Omnibus In-Depth Omnibus In-Depth

No formal method 27% 52% 14% 39% 18% 24% 23% 39%

Depreciation cycle 0% 0% 0% 10% 0% 13% 0% 7%

Simple payback 29% 33% 55% 17% 58% 12% 36% 21%

IRR or ROI 58% 10% 53% 35% 53% 53% 57% 31%

Life cycle costing 0% 5% 0% 0% 0% 0% 0% 2%

Other 7% n/a 6% n/a 4% n/a 7% n/a

The responses from the Omnibus participants were not particularly consistent with those of the in-depth respondents. In particular, the percentage of respondents who reported using Return on

4 Respondents were asked to identify parties to capital investment decisions whether or not their organization

ran a formal capital budgeting process.



Investment (ROI) and Internal Rate of Return (IRR) to evaluate investments was roughly similar across size groups for the Omnibus respondents (53 percent to 58 percent), whereas for the in-depth participants, this percentage ranged from 10 percent for small companies up to 53 percent for larger companies.5 Moreover, the percentage of companies reporting that they had no formal investment evaluation method was significantly higher for the in-depth than for the Omnibus participants. In any case, it appears that somewhere between one-third and one-half of business apply financial analysis techniques that account for the cost of capital and the time value of money, where as the rest do not. The use of IRR and ROI would likely favor the adoption of efficiency investments, since these investment evaluation approaches typically take long-term benefits into account. The discrepancies in findings between the in-depth and Omnibus surveys on this issue may be explained by question administration and coding. The Omnibus question was open ended, and multiple answers were accepted. Interviewers were instructed to prompt respondents if they had trouble coming up with an answer. For the in-depths, responses were recorded verbatim and it was up to the analyst to assign the answer to a one category that reflected the highest level of financial sophistication that the respondent reported. The in-depth interviews also targeted individuals at a higher level in the organization. Thus, it may be that facility managers, for example, are more likely to use formal rules in submitting projects for approval, but higher-level decisions on these projects take into account a range of factors without fixed criteria. Sources of funding for capital investments. A surprisingly large percentage of the in-depth respondents reported that they funded capital improvements out of cash reserves only. For the group as a whole, the 36 percent reported funding capital improvements from cash only, and there was little variation in this result by establishment size. Most of the remaining firms used some combination of cast, asset-based borrowing (leases), and working capital lines to fund investments. Table 4-31 shows the distribution of in-depth respondents by reported sources of funding for capital improvements.

5 Responses for IRR and ROI were grouped together since both measures incorporate notions of cost of capital

and discounting, where as simple payback measures do not.



Table 4-31 Sources of Funding for Capital Investments

Small 1–49

Employees

Medium 50–499

Employees

Large 500+

Employees

Size not

Reported

Total

Cash Only 8 10 10 28

Working Capital Line Only 4 2 6

Asset-based Lending Only 1 1

Cash and Working Capital Line 2 3 3 1 9

Cash and Asset Based 1 4 5

Cash, Working Capital Line, Asset Based 2 6 6 14

Other 1 1 1 3

Don’t know/Refused 1 2 5 4 12

Total 19 26 28 5 78

The findings summarized in Table 4-31 suggest that a large percentage of firms, regardless of size, take a conservative approach to funding of capital investments. For that group, the offer of subsidized financing for energy-efficiency improvements is likely to stimulate little additional investment activity. This finding is consistent with results of the Omnibus survey concerning customer perceptions of barriers to investment. Relatively few believed that lack of financing was a significant barrier to increased investment in energy efficiency. However, for those firms that do find it difficult to fund capital improvements, the offer of financing on advantageous may play a key role in facilitating program participation and implementation of energy-efficiency measures.

4.3.6 Barriers and Opportunities

In this section, we explore a number of factors that have had the effect of either compelling or discouraging respondents from implementing more energy-efficiency measures or participating in energy-efficiency programs. In some cases, the barriers to greater participation were structural — not enough staff or budget devoted to exploring energy-efficiency opportunities. In other cases, the barrier has been attitudinal — low program awareness or a perception of energy-efficiency programs that does not match with existing opportunities. In either case, identifying how and why respondents perceive certain barriers and opportunities is key to targeting the energy needs of participants in certain industries or sectors and improving energy-efficiency program participation. Low or split incentives. As Table 4-32 shows, roughly one-third of the Omnibus survey respondents lease their space. In most cases (ranging from 80 percent to 100 percent tenants who lease their space), they are directly responsible for paying their electricity and fuel bills. There is little variation in this trend across industry subsectors.



Table 4-32 Percentage of Tenants Responsible for Fuel Costs


Own facility 69% 69% 81% 70% 85% 72%

Lease facility 28% 30% 15% 28% 6% 25%

Own a portion; lease the remainder 3% 1% 3% 3% 8% 3%

Tenant responsible for fuel costs Electricity 81% 84% 79% 77% 100%

80%

Natural Gas 81% 89% 86% 76% 100% 80%

Oil 87% 100% 100% 100% 100% 78%

Propane 95% 99% 100% 79% 100% 94%

Purchased Steam 100% 93% * * 94%

Other 100% 100% * 92% 100% 97%

* Fuel cost not attributed to respondent

Table 4-32 shows that the vast majority of industrial and commercial customers are responsible for their own electric and fuel bills, regardless of their tenure situation. For example, only 6 percent of all facility managers are not responsible for their electric bills. However, there may be other barriers and motivations at work in regard to tenure. For example, tenants may be discouraged from paying extra for energy-efficient lease hold improvements due to concerns about staying in a facility long enough to realize the corresponding benefits. Table 4-33 shows selected responses of respondents to a number of items in which they were asked how strongly they agreed with statements that characterize commonly identified barriers and motivations to energy-efficiency investments and opportunities. For each size class, Table 4-33 shows the percentage of respondents who either strongly agreed or strongly disagreed with the statements in the left-hand column. Generally, a relatively low percentage of the respondents reported experiencing these barriers to the degree that they would actually preclude investments. There was little variation in the pattern of response to these items by subsector or by size category.



Table 4-33 Respondent Rating of Barriers to Energy-Efficiency Investments,

by Establishment Size

Small Medium Large

Strongly

Agree

Dis- agree

Agree

Dis- agree

Agree

Dis- agree

I believe my organization has already taken all cost-effective actions to reduce energy costs in this facility.

24%

12%

16%

14%

12%

7%

There are practical benefits that come with energy-efficiency investments, apart from saving money.

48%

4%

43%

4%

44%

0%

It takes too much time and hassle to get enough information to make a good decision about energy-efficiency investments.

11%

37%

7%

34%

6%

41%

I am concerned that the actual bill savings from energy-efficiency investments will be less than what is estimated.

22%

13%

21%

12%

16%

4%

Lack of financing is a barrier to our organization making energy-efficiency investments that we want to make.

22%

32%

16%

29%

12%

26%

Lack of knowledge. We posed two items to probe respondents’ perceptions of their knowledge concerning energy-efficiency opportunities. In the first, we asked respondents to characterize the extent to which they agreed with the statement that they had already carried out all cost-effective energy-efficiency measures in their facility. Given that most facilities offer many such opportunities, we would view strong agreement with this statement as a barrier to further cost-effective investment. Roughly one-quarter of respondents in the small size class (fewer than 25 employees) reported that their organization had already taken all cost-effective energy-efficiency measures. The corresponding figures for the medium-sized and large establishments were somewhat less. We would expect this result given the larger array of cost-effective measures available in bigger facilities and the greater energy-efficiency experience of staff in the larger establishments. The second knowledge-related item probed respondents’ agreement with the statement that there were practical benefits to energy-efficiency investments beyond bill reduction. Our hypothesis is that lack of recognition for these benefits deters investment. Forty-eight percent of respondents strongly agreed with this statement and 20 percent agreed. There was virtually no variation in this result among the size classes. This suggests that lack of knowledge concerning non-energy benefits of efficiency investments is not a barrier to investment for the majority of commercial and industrial customers. Aversion to risk. More than 40 percent of respondents strongly agree or agree that they are concerned that estimated savings for energy-efficiency investments are overestimated. This seems to reflect a fairly realistic assessment of energy-efficiency investments, for which returns



at a given site are affected by a large number of contingencies. Again, there was little variation among the size classes in regard to perceptions of this barrier. Lack of financing. A small but significant portion of customers identify lack of financing as a deterrent to investments in energy-efficiency projects. Overall, 21 percent of them strongly agreed that lack of financing is a barrier to their organizations’ investments in energy efficiency. Over 30 percent do not think it is a barrier at all. Response to this item did vary somewhat by size. However, the variation is not statistically significant.

4.3.7 Energy-Efficiency Programs: Recognition and Participation

Whether or not respondents were aware of specific energy-efficiency programs is summarized in Table 4-34.

Table 4-34 Awareness of Energy-Efficiency Programs

Establishment Size

Small Medium Large All

Aware of Wisconsin programs or resources to promote energy efficiency?

24% 33% 47% 25%

Wisconsin Focus on Energy

Unprompted 7% 21% 24%

9%

Prompted 19% 24% 25% 20%

Climate Wise

Unprompted 1% 2% 6%

1%

Prompted 3% 5% 6% 3%

ENERGY STAR


6%

Prompted 47% 46% 47% 47%

Utility Programs


40%

Prompted * * * *

* Prompted question not asked

Two trends are evident with regard to respondent recognition of energy-efficiency programs: Larger establishments are more aware of programs. As Table 4-34 displays, 47 percent of “Large” businesses report that they are aware of Wisconsin’s energy-efficiency programs or resources, compared with 33 percent of “Medium” businesses and 24 percent of “Small” establishments. Prompted versus unprompted program knowledge. Not surprisingly, the percent of respondents who report that they are aware of a specific energy-efficiency program is notably lower when the



question is open-ended. The divergence is particularly significant with regard to respondents’ awareness of the ENERGY STAR program. Beyond simply being aware of specific programs, we are interested in whether and to what extent respondents participated in energy-efficiency programs. Of those respondents who indicated they were familiar with the Wisconsin Focus on Energy program, the Climate Wise program, the ENERGY STAR program, or a program administered by a utility, the following tables summarize their level of involvement, segmented by subsector.

Table 4-35 Wisconsin Focus on Energy Participation

Industrial Commercial Agri- All Wisconsin Focus On Energy Intensive General Public Private culture Markets

Heard of program though not involved 71% 68% 28% 48% 0% 50%

Have bought equipment 3% 11% 6% 1% 0% 3%

Signed up as a partner or ally 11% 11% 11% 0% 0% 3%

Have participated in one or more activity 15% 22% 22% 16% 0% 17%

Have begun planning energy-efficiency projects

9% 22% 5% 36% 0% 30%

Have completed a project 3% 0% 11% 1% 0% 2%

# of respondents 305 253 251 2,518 0 3,326

4.4 METHODS

4.4.1 Data Sources

The Major Markets study used a variety of data sources. Specific references are listed at the end of this section. For sampling as well as development of some estimates of employment, Dun & Bradstreet records compiled in the iMarket database were used. Employment figures were also taken from the Economic Census. For development of energy indices, sources from previous studies in Wisconsin were used, including a technical potential study conducted by the Wisconsin Center for Demand-Side Research and the Wisconsin Public Service Commission (PSC) Advanced Plan 7 (AP-7). Estimates and definitions from Wisconsin Focus on Energy program plans were also reviewed. The Wisconsin-specific information was supplemented by national indices provided by the CBECS and Manufacturing Energy Consumption Survey (MECS). The industry profiles relied on industry-specific sources found in sweeps of electronic library databases. These sources provide background on the industries, but not necessarily energy-related information. These sources are listed at the end of each of the segment profiles.



One of the early applications of the gap analysis was identification of sources that would be useful in developing data-collection plans. A first broad sweep of the gap analysis helped define the high-level plans that provided the general areas to target. The next level gap analysis identified specific prior studies that could serve as models for data-collection instruments and approaches. Also identified were background documents with relevant information. Due to time limitations, the analysis did not attempt a comprehensive synthesis of this information, but did make selective use of the question batteries and some data elements. The documents are included in the sources listed.

4.4.2 Energy-Savings Potential

The estimates of savings potential were derived from a three-step process:

(1) obtain estimates of total energy use in each sector,

(2) break these estimates out into relevant end-use categories, and

(3) apply an estimated percentage savings to each end-use.

Energy-Use Estimates

Electricity

Total electric energy-use estimates for all non-agriculture segments used here are projections for calendar year 1999 developed by PSC staff as part of the AP-7 planning process in 1994. These projections took into account similar estimates developed by the Wisconsin utilities and the state Division of Energy. The estimates are consistent with projections based on electricity estimates developed to estimate statewide technical potential under a project conducted by the Wisconsin Center for Demand Side Research (now the Energy Center of Wisconsin) in 1988. We also cross-checked the PSC estimates against more recent national data on energy use per employee for each segment multiplied by the number of Wisconsin employees in that segment. In many cases the figures were similar; where they were not, we consider the PSC estimates to be superior. Electric energy-use estimates from the AP-7 planning process are available by two-digit SIC code and commercial categories similar to those used by the EIA. Industry of the Future Forest Product, Food Processing, and Printing segments are defined by two-digit SIC codes. The definitions of Metalcasting and Chemical segments, as mentioned above, are refined beyond the two-digit SIC code. There is insufficient collateral data to refine Wisconsin energy estimates beyond these estimates. The Glass segment definition is also more refined than the two-digit SIC code, but there is sufficient collateral data to refine the glass energy-use estimate. The national percentage of SIC code 32 attributable to the glass subcategories, and those subcategory end-use breakouts, are applied to Wisconsin-specific estimates of SIC 32 energy use. No reasonable estimates of the Water/Wastewater segment energy use have been found.



Commercial sector segment definitions for AP-7 electric energy-use estimates are similar to those used by the EIA. No estimate for government electric energy use was available but estimates of office electric energy use appeared to account for the differential when compared to national estimates. For this table, AP-7 office electric energy-use estimates were split into office and government based on the national ratio of these sectors. Separate AP-7 estimates for college and schools are combined for the Wisconsin Focus on Energy school segment. The “other” category includes electric energy use for warehouses as well as other.

Natural Gas

Natural gas energy-use estimates for non-agricultural sectors are derived from regional and national data from the 1993 MECS and 1995 CBECS. No Wisconsin-specific data are available. Industrial sector estimates are based on the East North Central (ENC) Census division (Wisconsin, Illinois, Indiana, Ohio, Michigan) natural gas energy-use estimates at the two-digit SIC code level. These regional energy totals are scaled to Wisconsin in proportion to employment. For this scaling, energy use per employee is calculated at the Census Division level, dividing the energy total by the segment employment total, from Economic Census data. The usage per employee is then multiplied by the Wisconsin employee numbers to make the estimate Wisconsin-specific. All of the caveats mentioned above regarding industry definition apply here with a further issue raised for the glass industry estimate. Energy-use estimates and Economic Census employee numbers are unavailable for the glass industry subcategories. Thus, glass segment natural gas energy-use estimates reflect the whole SIC 32 group. The scaling to Wisconsin, however, was done with Dun & Bradstreet estimates of employees specific to the subcategory. Commercial sector natural gas energy-use estimates are derived from national data from the EIA. The EIA commercial building definitions are quite similar to Wisconsin Focus on Energy commercial definitions. Office energy-use statistics were used to estimate both office and government segments. Included in the Wisconsin Focus on Energy “other” category were public assembly, public order, religious worship, warehouse, and other. An energy-per-employee estimate is derived using EIA employee numbers and then the Wisconsin estimate is created using Dun & Bradstreet estimates of employees specific to the segment. Dun & Bradstreet data are available by SIC codes. Segment definitions by SIC code for this analysis were fashioned to comply as closely as possible with CBECS segment definitions. An exception was in the retail segment. The CBECS building category “mercantile and service” include retail, wholesale, and service. In this study, we restricted the group to retail.

Agriculture

Agricultural usage comes from the Wisconsin Division of Energy Wisconsin Energy Statistics.



End-Use Estimates

Overall, end-use breakouts were developed for these Wisconsin energy-use estimates by applying breakout percentages derived primarily from EIA national data. The EIA electricity breakouts are reasonably consistent with those developed for the WCDSR technical potential project. Further breakouts were necessary to divide lighting energy use into different technologies for the commercial and industrial sectors, and to divide natural gas heating energy use into different technologies for the commercial sector. The lighting technology characterizations were derived using preliminary results from XENERGY research for the U.S. Department of Energy (DOE; XENERGY 2001c). Natural gas heating energy is split into technologies based on technology saturations from Lawrence Berkeley National Laboratories (LBNL; Osman 1995). The LBNL report gives the proportion of floorspace heated by various fuels and technologies, by commercial building type. Total gas heating was split into technologies in proportion to these saturations. The only information regarding end-use breakouts for agriculture come from the DOE’s motors study (XENERGY 1998) where there is an estimate of the percentage of energy use in agriculture attributable to motors.

Savings Potential Percentages

For each fuel and technology, the savings potential as a percentage of current fuel use was taken from various sources. Multiplying the percent savings potential by the technology-specific end-use energy estimate gives the savings potential in energy units. These estimates are aggregated over technologies to give overall savings potential by end-use. Most of the estimates of savings potential come from Friedmann and Coito (2001). They described the estimates as follows: “The objective of the analysis was to identify energy-savings estimates that were realistically and cost-effectively achievable using currently available technologies. While not always explicitly noted in each reviewed study, a payback period of 3 years or less appeared to be a standard cutoff in determining cost-effectiveness of the various measures.”

Motors

Motor savings are derived differently for industrial, commercial and agriculture segments. Industrial motor savings are derived by applying estimates of savings potential from DOE’s Motor Assessment to machine drive and process cooling and refrigeration end-use breakouts. These savings potentials percentages are specific to the 2-digit SIC code and are based on an extensive breakout of industrial sector motor end-uses.



Commercial motor savings are limited to refrigeration and ventilation. These estimates are based on Friedmann and Coito’s estimates of average efficiency saving potentials for general efficiency measures (5 percent) for both refrigeration and ventilation with an additional 2 percent savings for refrigeration for motor speed control measures and an additional 5 percent saving for ventilation for fan system measures. Agriculture motor savings are derived based on the estimate that nationally 41 percent of agricultural electricity use is motor system energy. This fraction is applied to the Wisconsin DOE estimate of electricity end-use in Wisconsin agriculture with a 10 percent savings potential (5 percent for general efficiency measures and 5 percent from the combination of specific system measures). The savings potential percents by fuel, end-use, and sector or segment are listed in the tables that follow. Sources of these potential percents are described below.

Table 4-36 Motors Savings Potential

SIC Code SIC Description

Percent of Electric

Energy Use

20 Food and Kindred Products 12.4%22 Textile Mill Products 15.0%23 Apparel and Other Textile Products 13.9%24 Lumber and Wood Products 8.8%25 Furniture and Fixtures 12.7%26 Paper and Allied Products 14.0%27 Printing and Publishing 12.3%28 Chemicals and Allied Products 16.1%29 Petroleum and Coal Products 20.4%30 Rubber and Miscellaneous Plastics Products 14.8%31 Leather and Leather Products 11.8%32 Stone, Clay, and Glass Products 15.4%33 Primary Metal Industries 11.9%34 Fabricated Metal Products 15.6%35 Industrial Machinery and Equipment 15.4%36 Electronic and Other Electric Equipment 23.1%37 Transportation Equipment 14.9%38 Instruments and Related Products 13.3%

Commercial SectorCommercial Refrigeration 7.0%Commercial Ventilation 10.0%

Agricultural Sector Agriculture, General Use 10.0%

Sources: DOE, Friedmann and Coito (2001), LBNL, ORNL.

Industrial Sector



Table 4-37 Non-Motors Savings Potential

Lighting

Light savings potential is based on a 72 percent savings for switching from incandescent to compact fluorescents, 14 percent savings for switching from Standard Fluorescent (Standard or EE Magnetic Ballast) to T8s with electronic ballast, and 35 percent savings for switching mercury vapor to high pressure sodium.

Commercial Cooling

A 24 percent savings potential utilized in the Friedmann and Coito paper is applied to commercial cooling electric energy end-use.

Natural Gas

For the natural gas boiler end-use, savings potential percentages from LBNL of 20 percent are applied as a conservative estimate compared to DOE estimates of 30–40 percent savings potential. A conservative 8 percent efficiency potential percentage from Friedmann and Coito, and based on DOE estimates, is applied to industrial process heat natural gas usage. Natural gas usage in furnaces is assumed to be 100 percent of the natural gas usage for the industrial HVAC end-use. A 7 percent savings potential is applied to industrial furnace heat usage. This is based on Oak Ridge National Laboratory (ORNL) estimates of savings potential for commercial buildings. The 7 percent figure represents the most conservative estimate in the report. It is based on application of 2010 furnace standards, a measure that does not appear to be commercial building-specific.

End-Use Breakout

Percent of Electric or Gas Use

Lighting From Incandescent to Compact Fluorescent 72.0%From Standard Fluorescent to T8s 14.0%From Mercury Vapor to High-Pressure Sodium 35.0%

Electric Cooling (Commercial) 24.0%Natural Gas Boiler (Commercial and Industrial) 20.0%Natural Gas Process Heat (Industrial) 8.0%Natural Gas Furnace Heat (Industrial) 7.0%Natural Gas Furnace Heat (Commercial) 15.0%

Sources: Friedmann and Coito (2001), LBNL, ORNL.



Commercial natural gas usage in furnaces is derived using the LBNL breakouts discussed above. A commercial savings potential of 15 percent is applied to commercial gas furnace usage, a combination of the 2010 furnace standards and commercial building code measures.

Comprehensiveness

Efficiency savings are not available for all end-uses. For most segments, the sum of the end-use energy use for which energy-efficiency savings are applied accounts for the majority of energy use. Industrial gas usage for boilers, furnaces and process heat is never less than 80 percent of total gas usage. Industrial electricity use for which efficiency savings are applied ranges from at least 79 percent of total use in Food Processing and Forest Products, to greater than 60 percent of the total in Printing, Chemicals and Glass, to as low as 31 percent in Metalcasting. Significant electricity end-uses for which no savings potential have been applied include process heat, HVAC and electro-chemical processes. Commercial natural gas space heating use contributes to between 18 and 88 percent of natural gas usage. Water heating and cooking uses do have not efficiency potentials applied. Commercial electric usage for lighting, cooling, refrigeration and ventilation account for between 61 and 88 percent of electricity end-uses.

4.4.3 Omnibus Survey

Survey Instrument

The omnibus survey was a mostly closed-ended telephone survey fielded by Computer Assisted Telephone Interview (CATI). The survey took 20 to 25 minutes to complete. In the interests of keeping the survey to this length or less, and to provide questions that most respondents could answer, detailed questions on equipment and technologies present at facilities were not included. A copy of the survey instrument is included as Appendix G.

Sample Design

The unit of analysis in the survey was the establishment. The sample frame was the iMarket database. This database provides information from Dun & Bradstreet listings. The database is close to comprehensive of all establishments nationally. Information available for each establishment includes

• 4-digit SIC code

• location

• number of employees

• organization type: single, branch, or headquarters



• phone number.

Using this information, the sample was stratified by subsector and size (employment range). Small establishments were further divided into single- and multi-establishment organizations.

Subsectors

The purpose of stratifying by subsector was to assure that sufficient data were collected for each of these groups to provide useful information specific to that subsector. The subsectors used as sampling strata were those targeted by Major Markets programs. These subsectors included:

• Each of the Wisconsin Industries of the Future.

• Each of the other two areas targeted by separate Industrial sector programs: Water/Wastewater and General Industrial.

• Each of the areas targeted by separate Commercial sector programs: Schools, Government, Retail.

• Agriculture.

Additional subsectors of the Commercial sector that do not have separate programs but represent large numbers of establishments and are likely to have distinct energy-related concerns were also used as sampling strata. These additional subsectors include Offices, Restaurants, Grocery, Lodging, and Healthcare. The Biotechnology segment was not targeted for separate study in the omnibus survey. This industry is targeted by the Wisconsin Industries of the Future not because of its facility-related energy use, but for its potential to produce renewable resources as well as rural economic development potential. For this reason, information on the issues addressed in the omnibus survey was not of high value for this program segment. There was also no New Construction stratum. This program does not correspond to a specific business. Targeting surveys specifically to new construction would be impractical. Issues for this area may be addressed better in trade ally surveys. The subsector definitions used for sample stratification in terms SIC codes are given above in the discussion of the savings potential study. At the time the samples were selected, the final work plans containing program definitions of their target groups were not yet available. For this reason, some of the sampling stratum definitions do not match those currently used by the programs.

Size

Based on review of the distribution of establishment sizes, size categories for all but the Agricultural sector were defined as

Small: 1 to 24 employees



Medium: 25 to 249 employees Large: 250 or more employees.

The program definition of “small” for the small retail program is under 25,000 square feet. The cut-off at under 25 employees appears to correspond roughly to this definition, based on floorspace per employee data from the CBECS. For Agriculture, the definitions were:

Small: 1 to 4 employees Medium: 5 to 24 employees Large: 25 or more employees.

The target sample allocation is shown in Table 4-38. The target allocations were initially designed to provide a minimum of 70 completed interviews for each subsector, allocated to size/organization strata in proportion to employment. A larger number was targeted for the General Industrial subsector. Because of the limited number of establishments in the medium and large categories, these initial allocations were generally not feasible. Substituting larger numbers of small establishments was judged to be of limited usefulness. Accordingly, a practical target was set for each subsector, based on achieving a 5 percent response rate among larger establishments, and allocating the total sample for the subsector in proportion to employment. This practical target was set as a minimum quota. Efforts were made to exceed these minimum quotas wherever possible. Maximum quotas were also set to avoid allocating sample points unproductively.

Field Work

The survey was fielded over a period of approximately three weeks, beginning September 24, 2001. A total of 1,333 surveys were completed out of a total sample pool of 18,999. Thus, the completion rate was 7 percent. The completions by sampling cell are summarized in Table 4-39.

Analysis

The analysis produced a set of cross-tabulations of estimates based on the completed surveys. The detailed tables are in Appendix K. Estimated population proportions and averages are calculated from the sample responses as the weighted averages of the sample values. The weight for each sample respondent is the ratio of the number of establishments in the population to the number in the sample, for the sampling cell that respondent belongs to. These weights are calculated from the counts in the iMarket frame using the sampling stratum definitions. The analysis was conducted in SAS®. Copies of the analysis data set are provided to DOA in SAS and in Excel®. A description of the data sets is given in Appendix G.



Table 4-38 Target Sample Allocation

Small Small

Type SegmentTotal

Establishments Single Multiple Medium Large Total Single Multiple Medium Large Total

Maximum by

Segment

Industrial

Energy-Intensive1 Forest Products 2,183 9 2 19 4 34 9 2 38 8 57 702 Metalcasting 1,669 8 2 27 4 41 8 2 53 7 70 703 Food Processing 983 7 4 16 3 30 7 4 32 6 49 705 Printing 2,246 16 4 15 2 37 16 4 30 4 54 706 Chemicals 1,069 8 4 17 2 31 8 4 35 4 51 707 Glass 45 2 0 0 0 2 3 0 1 0 4 58 General 37,241 51 9 81 17 158 51 9 81 34 175 2109 Water/Wastewater 105 3 1 1 0 5 6 2 2 0 10 11

Commercial10 Schools 6,526 7 5 53 3 68 7 5 53 7 72 9011 Government 2,999 7 10 38 5 60 7 10 57 10 84 9012 Retail 26,907 24 13 32 3 72 24 13 32 6 75 90

General13 Office 34,452 26 10 29 7 72 26 10 29 15 80 9014 Health 11,654 18 4 25 8 55 18 4 25 16 63 9015 Grocery 4,072 16 10 30 1 57 16 10 59 1 86 9016 Restaurant 10,562 24 6 42 1 73 24 6 42 2 74 9017 Lodging 3,647 11 3 34 3 51 11 3 57 7 78 9018 Other 51,197 28 8 28 7 71 28 8 28 15 79 90

19 Agricultural 27,480 42 0 18 9 69 42 0 18 17 77 90

TOTAL 307 95 505 79 986 311 96 672 159 1,238 1,475

Minimum Quota by Cell Optimistic Target by Cell



Table 4-39 Completed Surveys

Small

Type Segment Single% of

Quota Multiple% of

Quota Medium% of

Quota Large% of

Quota Total% of

QuotaMaximum

by Segment % of Max

IndustrialEnergy-Intensive

01 Forest Products 12 133% 3 150% 44 232% 6 150% 65 191% 70 93%02 Metalcasting 18 225% 3 150% 45 167% 4 100% 70 171% 70 100%03 Food Processing 15 214% 6 150% 35 219% 0 0% 56 187% 70 80%05 Printing 25 156% 4 100% 36 240% 1 50% 66 178% 70 94%06 Chemicals 14 175% 6 150% 43 253% 3 150% 66 213% 70 94%07 Glass 0 0% 2 0 0 2 100% 5 44%08 General 42 82% 19 211% 110 136% 20 118% 191 121% 210 91%09 Water/Wastewater 5 167% 4 400% 1 100% 0 10 200% 11 95%

Commercial10 Schools 13 186% 5 100% 73 138% 1 33% 92 135% 90 102%11 Government 12 171% 13 130% 58 153% 7 140% 90 150% 90 100%12 Retail 29 121% 14 108% 43 134% 0 0% 86 119% 90 96%

General13 Office 28 108% 8 80% 39 134% 3 43% 78 108% 90 87%14 Health 15 83% 4 100% 26 104% 10 125% 55 100% 90 61%15 Grocery 23 144% 12 120% 55 183% 0 0% 90 158% 90 100%16 Restaurant 26 108% 7 117% 57 136% 0 0% 90 123% 90 100%17 Lodging 13 118% 4 133% 70 206% 3 100% 90 176% 90 100%18 Other 32 114% 4 50% 32 114% 7 88% 75 104% 90 83%

19 Agricultural 34 81% 0 18 100% 9 100% 61 88% 90 68%

TOTAL 356 116% 118 124% 785 155% 74 93% 1,333 135% 1,475 90%



4.4.4 In-Depth Interviews

The in-depth interviews were designed to provide a more detailed understanding of the issues and decision-making in selected industries. These interviews were targeted primarily to facility owners and managers. Unlike the omnibus, which targeted a respondent familiar with the energy-using equipment at the establishment, the depth interviews targeted senior officials who could speak to the organizational concerns. These interviews also targeted industry observers who could describe general trends and issues in the industry. Background research on each industry compiled prior to conducting the interviews helped frame the conversations. Most of the subsectors targeted by the omnibus survey were also targeted for depth interviews. Exceptions were schools and government, for which issues and decision-making structures are generally well known, and the “other” commercial subsector. For the office and retail subsectors, the emphasis of the interviews was on owners/managers of leased space, rather than on the managers of the office or retail establishments themselves. Interviews for each subsector began with trade associations identified from the background research. National and state associations were identified from the Encyclopedia of Associations and from Internet searches by topic area. In many cases, the associations provided lists or specific contacts for conducting interviews with end-users. Additional end-user contacts if needed were obtained from a sample drawn from the iMarket database. If these lists were used, attempts were made to identify appropriate senior contacts from websites before making the calls. Targets were sets of 5 end-user interviews for each segment, twice that for the General Industrial segment. When the iMarket establishment lists were used for the sample, targets were 2 large, 2 medium, and 1 small establishment. Respondents identified by associations were more likely to be large establishments. The in-depth interviews were treated as case studies, not as statistical samples. No attempt was made to extrapolate to the subsector population. A file of individual sample responses, excluding contact identifying information, is provided electronically to DOA in Excel.

4.5 REFERENCES

Friedmann, R., and F. Coito. 2001. California Industry and Energy Efficiency: Opportunities and Past Programs. 2001 International Energy Program Evaluation Conference, Salt Lake City, Utah.

Gale Research Company. 2001a. Encyclopedia of Associations, 37th Edition. Detroit, Michigan.

Gale Research Company. 2001b. Encyclopedia of Associations: Regional, State, and Local Organizations, 12th Edition. Detroit, Michigan.

iMarket Inc. 2001. MarketPlace. Waltham, Massachusetts.



Interlaboratory Working Group. 2000. Scenarios for a Clean Energy Future. Oak Ridge National Laboratory ORNL/CON-476 and Lawrence Berkeley National Laboratory LBNL-44029.

LBNL, D. Einstein, E. Worrell, and M. Khrushch. 2001. Steam Systems in Industry: Energy Use and Energy Efficiency Improvement Potentials. Ernest Orlando Lawrence Berkeley National Laboratory, Berkeley, California.

Osman, S. et al. 1995. Technology Data Characterizing Space Conditioning in Commercial Buildings: Application to end-use Forecasting With Commend 4.0. Ernest Orlando Lawrence Berkeley National Laboratory, Berkeley, California.

Quantum Consulting. 1998. Commercial/Industrial Market Effects Baseline Study. Available online at www.calmac.org/publications/19991007PGE0012me.pdf.

U.S. Department of Energy, Energy Information Administration. 1993. Manufacturing Energy Consumption Survey (MECS). Washington, D.C.

U.S. Department of Energy, Energy Information Administration. 1995. Commercial Buildings Energy Consumption Survey (CBECS).

U.S. Census Bureau. 1999. Economic Census, 1997. Available online at http://www.census. gov/epcd/ec97sic/index.html#download.

U.S. Census Bureau. 1999. Current Industrial Reports. Washington, D.C.

Washington State University. 1999. Public Procurement and Energy Efficiency in the Pacific Northwest. Available online at www.nwalliance.org/resources/reports/99036.pdf.

XENERGY Inc. 1998. United States Industrial Motor Systems Market Opportunities Assessment. U.S. Department of Energy, Burlington, Massachusetts.

XENERGY Inc. 2001a. Market Assessment and Evaluation: MotorUp! Premium Motors Program. Northeast Energy Efficiency Partnerships, Inc., Lexington, Massachusetts.

XENERGY Inc. 2001b. XENERGY (2001), Market Assessment for High Efficiency Packaged HVAC Equipment. New York State Energy Research and Development Authority.

XENERGY Inc. 2001c. Preliminary Results of Lighting Market Technology Characterization in the Commercial, Industrial, and Residential Sectors for U.S. DOE. Burlington, Massachusetts.

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