Impact of Incentives: Driving Demand for Efficient Products

Steven Nadel

ACEEE

Incentives

• Commonly used by utilities and states to promote energy-efficient equipment

• Designed to save energy (electricity or natural gas) since energy savings less expensive than new energy supplies.

• Incentive covers part of the extra cost of an efficient product relative to a conventional product

• Some state incentives for wood stoves – see http://www.forgreenheat.org/incentives/state.html

• Very few utility incentives

Incentive Example

Source: Howard Geller, Proceedings of the 1986 ACEEE Summer Study on Energy Efficiency in Buildings

Federal Consumer Tax Incentives

• To consumers for purchase of efficient heating, cooling and water heating equipment, windows and insulation

• To builders for efficient new homes

• To manufacturers for efficient new appliances

HVAC Incentives

• $300 for efficient equipment, expires 12/31/11• 95% AFUE natural gas and oil furnaces and

boilers• SEER 16 central air conditioners• Wood stoves and boilers with a 75%

efficiency

• Only a small minority of central AC and oil/gas heating systems quality – minimizes “free riders”

• Most wood equipment qualifies

Market Transformation for RefrigeratorsInteraction of Standards, Energy Star & Tax Incentives

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

2000 2002 2004 2006 2008 2010 2012 2014

kWh/

year

Standard

EnergyStar

minimum tax credit

maximum tax credit

Market Transformation for Clothes WashersInteraction of Standards, Energy Star & Tax Incentives

0

0.5

1

1.5

2

2.5

3

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Standard - Top Loading

Standard - Front Loading

EnergyStar

minimum tax credit

maximum tax credit

Impact of HVAC Incentives

Source: AHRI 2011

Energy Star Window Market Share

Energy Star Windows Region Metro Area 2010 %

Energy Star 2011 %

Energy Star

North (East) Milwaukee/Madison, WI 98% 99%

North (West) Portland, OR 89% 81% North-Central (East) Washington DC 95% 91% North-Central (West) San Francisco, CA 85% 76% South-Central (East) Atlanta, GA 96% 93% South-Central (West) Tulsa, OK 93% 91% South (East) Jacksonville, FL 87% 80% South (West) Houston, TX 99% 98% Average 93% 89%

Source: ACEEE/ASE of window retailers and installers, May 2011

Conclusions

• Incentive amounts, marketing and ease of use all important

• Federal tax incentives for highly efficient equipment have generally increased market share significantly and have had only modest levels of free riders

• For products in which majority of equipment on the market qualifies, free rider levels are high

• For wood stoves and boilers, if incentives are extended, qualification levels should be tightened substantially to reduce free riders