Chipping Away at Supply Channel Challenges

Alice Rosenberg and George ChapmanSeptember 20, 2018New Orleans, LACEE Industry Partners Meeting

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AgendaWelcome and Introductions

Overview of Evolving Program Approaches

Guided Group Discussion• Combined Downstream + Midstream Incentives• Point of Sale Rebates at Retail• Installer Education through Distribution Channel

Content Development for CEE Program Guide

Consensus Positions and Next Steps

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Refine successful practices for designing and deploying programs

Translate consensus findings into a draft program guidance resource for program administrators and industry partners

Objectives

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Program Administrator

Manufacturer

Nonprofit / Research

Other?

Introductions

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CEE Res Water Heating InitiativeCEE Board adopted the revised (and new) CEE Water Heating Initiative on March 16, 2018Full Initiative and Specs are available online:• http://www.cee1.org/content/cee-program-resources

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Specifications Are Not Enough

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Midstream Success Breakdown

Source: ENERGY STAR

Program Administrator• Eliminates rebate breakage and increases participation by

order of magnitude

Manufacturer• Sells more higher profit energy efficient water heaters

Plumber• Receives incentive instantly w/out burdensome paperwork

Homeowner• Obtains efficient water heater during emergency

replacement

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Midstream Successes To Date

Source: ENERGY STAR

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Product specifications for:• Gas Storage Water Heaters

• Gas Tankless Water Heaters

• Heat Pump Water Heaters (NEW)

Optional Connected Criteria

Engagement and Outreach Requirements• Education and Guidance

• Channel Engagement / Midstream Strategies

CEE Res Water Heating Initiative

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Education and Guidance• Consumer Awareness and Education AND

• Contractor Awareness and Education AND

• Contractor Training, Support, Installation Guidance

Channel Engagement / Midstream Strategies• Efforts to Drive Local Stocking and Promotion of

Efficient Equipment OR

• Midstream Program Design Models

Engagement and Outreach

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So How Does That Play Out…?No prioritization or detail in the CEE Residential Water Heating Initiative about how to effectively design and deploy these supply channel engagement requirements

NEXT STEP: Develop CEE Residential Water Heating Program Guidance resource

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Unpacking Success1. Downstream + Midstream Incentives2. Point of Sale Rebates at Retail3. Installer Education through Distributors 4. Other?

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Combined Downstream + Midstream

Jerry Ryan, New Jersey Natural Gas

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Program Guide ConsiderationsVerification and evaluation• Getting credit for the program• Attribution and leakage

Geographic supply chain considerations• Program and distributor service territories

Incentive type• Direct or stocking

Program cooperation (multiple fuels)Customer touch points• Overall satisfaction (i.e., J.D.Power)• Consumer engagement

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Point of Sale Rebate at Retail

Brandon Stepanek, A. O. Smith

Utility Instant Rebates for Water Heaters

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Product knowledge

Sales videos

Sales literature

Lifestyle images

Utility rebates

https://www.hotwater.com/utility-programs/

A. O. Smith ENERGY STAR Portal

Pocket Guide

Product Training

Consumer Brochure/Tear-pads

Counter Display

Dimensions 8.5”x14”

Heat Pump Shells

Distributor Email template

Sales Training/Tools

2018 Instant Rebates for HPWHs

A. O. Smith ESTAR Water Heaters at Lowe’s

Electric Heat Pump

Gas Storage

Condensing Tankless gas

Markdown at Lowe’s

Validated Instant Rebate at Lowe’s

CT: 17 stocking stores, MA: 25 stocking storesCT: $200 mail-in rebate; MA: $750 mail-in rebateData points: Mid-July/Aug ‘17; Sep-Dec ‘17; Jan-Jun ‘18

Units/Store/Week

50G HPWH

Price Elasticity at Lowe’s (Northeast)Retail Markdowns

OR: 14 stocking stores, WA: 35 stocking storesWA: $300 to $800 mail-in rebateData points: Mid-July/Aug ‘17; Sep-Dec ‘17; Jan-Jun ‘18

50G HPWH

Units/Store/Week

Retail MarkdownsPrice Elasticity at Lowe’s (Northeast)

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Lowe’s Store Associate Training

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Bringing Consumers to Lowe’s

• Switch to instant rebates now, it takes time to successfully launch

• Offer markdown and validated instant at wholesale and retail; engage builders and energy raters

• Partner with manufacturer sales agencies to engage distributors, train contractors and store associates

• Advertise…..develop and communicate outreach plan

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In Summary

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Program Guide ConsiderationsRebate breakage • Overall customer experience

First cost• Emergency replacements

Price elasticityIn-store promotion• Consumer education

Customer types• Contractors vs. homeowners

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Installer Education

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Program Guide ConsiderationsAppropriate applications• Type of product/fuel/size for amenity required

Influencing purchasing decisions• Comfort in product performance and installation• Trusted source of information and relationship with customer• Ability to sell the product

Means of reaching this audience• Getting attention of contractors and plumbers• Are these means changing?

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Group DiscussionAre there other types of program guidance features that should be prioritized and included?

• Program components• Best practices• Design elements• Education strategies• Bundled features• Key stakeholders• Other….???

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Next StepsStaff will work with members to draft and publish a CEE Residential Water Heating Program Guide to support the Initiative

Input and consensus positions from today’s meeting will be incorporated into the resource

• Prioritization• Best practices• Roadmapping• Findings

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Contact

George ChapmanSenior Program Manager

617-337-9262gchapman@cee1.org

Natural Gas Contact Electric Contact

Alice RosenbergSenior Program Manager

617-337-9287arosenberg@cee1.org

Additional Slides

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Education and GuidanceConsumer Awareness and EducationProvide consumers with information on the benefits of choosing efficient residential water heating equipment. An effective campaign targets both the emergency and planned replacement markets, and may include the use of brochures, fact sheets, advertisements, or online messaging. Materials can be supplied to consumers through direct contact from the program or through the equipment distribution channel, including both direct retail and contractors and installers

Contractor Awareness and EducationSupply plumbers with information on the consumer benefits of choosing efficient residential water heating equipment. An effective campaign targets both the replacement and new construction markets and may include the use of brochures, in-person education and training sessions, fact sheets, advertisements, or online messaging. Materials can be supplied to contractors and installers through the equipment distribution channel, including through manufacturers, market representatives, wholesalers, and retailers.

Contractor Training, Support, Installation GuidanceProvide plumbers with opportunities that focus on promoting efficient equipment and the principles of installing and selling these systems. Education offerings should refer plumbing contractors to manufacturers for additional guidance on advanced venting and condensate drains required for condensing and heat pump equipment. Programs may either develop their own materials or use resources that already exist, such as training programs provided by manufacturers, distributors, or plumbing organizations. Various stakeholders throughout the supply chain may be available to offer additional support for these efforts.

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Market Actors and Influencers

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The Distribution Chain

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Understanding the Fundamentals

End downstream (mail-in) rebates. • Ineffective: high overhead and marketing costs; contractors/customer

do not like forms and waiting for reimbursement.• Low participation: ETO found only 50% of HPWHs sold received

downstream rebates.Shift rebate to distributor.• Cooperative agreement with distributor to pass along “instant”

discount to contractor.

Source: ENERGY STAR

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Strategies Aimed at MidstreamEfforts to Drive Local Stocking of Efficient EquipmentCreate mechanisms to help encourage retailers, distributors, or wholesalers to stock and sell efficient equipment. By designing programs that directly address stocking practices, members will help ensure that efficient models are readily available in the market and accessible for both planned and emergency replacement purchases.

Midstream Program Design ModelsProvide program offerings or incentives directly to parties in the distribution chain, where many purchasing decisions are influenced. This could include any variety of strategies that encourage trade allies to buy and sell efficient rather than inefficient models. CEE has not engaged in or reviewed any particular implementation or fulfillment strategy, and thus takes no position regarding any specific midstream platform or approach.

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Heat Pump Water Heating Programs Number of Units Rebated Per Number of Electric Customers** Data based only on information available from select member programs