Maximizing Results from aHigh-Efficiency Furnace Program

Jacqueline Berger, APPRISEElliott Gold, PGWJanuary 28, 2014

Presentation Outline

• PGW Residential Heating Equipment Rebate Program (RHER)• Research Questions• Market Study• Impact Analysis• Summary

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PGW’s Residential Heating Equipment Rebate Program

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RHER Goals

• Promote selection of premium efficiency residential models.• Increase customer’s awareness of energy efficiency

opportunities.• Strengthen PGW’s relationship with customers as a partner in

energy efficiency.• Encourage market actors to provide and promote high efficiency

options.• Align incentives with other programs.• Aid in market transformation towards the highest-efficiency

options.

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RHER Process• Educate customers about RHER.

– CSP, PGW, equipment dealers, and contractor marketing.• Provide information about program eligibility and rebates to customers.

– Includes a marketing document and a program application.• Customers work with contractors and retailers to purchase and install eligible

equipment. • Customers complete the rebate application.

– Proof of purchase required.– Contractor certification that the measure was installed.

• The CSP processes the application– Checks customer and measure eligibility. – Mails a Visa gift card (payments<$500) or check (payments>$500) to the

customer if approved. – Notifies customer if it is not eligible, and the reason for rejection.

• Three percent of rebates receive a post-installation inspection.

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RHER Rebates

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Measure Original Rebate

Revised Rebate

Natural Gas Furnace 94% AFUE $250 $500

Natural Gas Furnace 94% AFUE, ECM Fan $250 $500

Natural Gas Water Boiler 94% AFUE (w/electronic ignition) $1,000 $2,000

Research Questions

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Questions

• What is the market for high-efficiency equipment?• How can PGW best market the program?• What are the incremental costs of high-efficiency furnaces and

boilers?• Have rebates increased penetration of high-efficiency

equipment?• What are the barriers to increased participation?• What are the savings from the installation of high efficiency

furnaces and boilers?

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Market Study

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Participating Contractor Sample

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Contractors Contractors with 2 or more rebates 7/2012 – 2/2013 38Interview Completed 20No Response 9Refused 6Wrong Number 2Language Barrier 1

Maximizing Contractor Response

• Advance letters were sent to the contractors using priority mail.• The advance letters informed the contractors about the purpose of

the survey and a $100 incentive that would be provided if they completed the survey.

• A toll-free number was provided for contractors to call in to complete the survey.

• Up to 17 calls were made to contractors over a 4-week period.• Messages were left three to six times for the contractors.• 20-30 minute telephone interviews were conducted • Interviews were completed between February 19, 2013 and March

18, 2013.

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Participating Customer Sample

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Furnace Rebate

Boiler Rebate Total

Check Issue Date Between 10/1/12 and 12/31/12 77 60 137

Phone Number or Email Address in File 67 57 124Sample Selected 30 29 59Interview Completed 17 15 32No Response 9 3 12Refused 1 8 9No Phone Number 3 3 6

Maximizing Participant Response

• Advance letters were sent to the participants. Emails were also sent to the seven participants who did not have a phone number in the file and whose phone number could not be found in our look-up.

• The advance letters and emails informed the participants about the purpose of the survey and provided a toll-free number for participants to call in to complete the survey.

• Up to nine calls were made to participants over a 2-week period.• Messages were left up to four times for the participants.• 5-20 minute telephone interviews were conducted • Interviews were completed between March 7, 2013 and March 21, 2013.• One interview was completed with a furnace rebate recipient who had no phone

number available, but who responded to our email with her phone number.

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How should PGW focus their marketing efforts?

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Contractor Information Sources

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How Contractor First Learned about RHER # Contractors Supplier 8Internet 3PGW Mailing 3PGW Email 2Customer 1City Displayed Brochure 1Home Show 1Trade Group 1Total 20

Customer Information Sources

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RHER Information Source Furnace Rebate

Boiler Rebate Total

Contractor 10 5 15PGW Website 2 3 5PGW Bill Insert 2 2 4PGW Mailing 1 1 2Realtor 1 0 1PA EnergyWorks Program 1 0 1News Report 0 1 1Family 0 1 1Contractor’s Mailing 0 1 1Don’t Know 0 1 1Total 17 15 32

First Customer Information Sources

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Contractor Offered Information or Participant Asked about Rebate

Furnace Rebate

Boiler Rebate Total

Heard from Contractor 10 5 15Contractor Offered Information 3 2 5Asked Contractor About Rebate 1 6 7Didn’t Discuss with Contractor 2 1 3Don’t know/ No answer 1 1 2Total 17 15 32

How large is the market for high-efficiency furnaces and boilers in

Philadelphia?

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Annual HVAC InstallationsIn Philadelphia Past Year

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Installations in Philadelphia in the Past Year

# Contractors Gas Furnace Gas Boiler

Existing Homes

New Homes

Existing Homes

New Homes

0 0 10 0 17<25 9 9 14 325-49 4 0 3 050-99 4 1 1 0100-199 1 0 1 0≥500 1 0 0 0Don’t Know 1 0 0 0Total 20 20 20 20

High Efficiency Penetration

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Percent of 2012 Installations that were High Efficiency

# Contractors

Gas Furnace Gas Boiler

<10% 2 210% - 24% 6 525% - 49% 2 350% - 74% 4 375% - 99% 4 5100% 1 1Don’t Know 1 1Total 20 20

Do contractors know how to educate customers and market high efficiency

furnaces and boilers?

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Contractor ReportWhen Information Provided

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Situations When Contractor Educates Customer about High Efficiency Option # Contractors

Always 15Majority of the Time 3When it Works in the Home 2Total 20

Contractor ReportFrequency Information Provided

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Percent of Jobs where Contractor Educates Customer about High Efficiency Option

# Contractors

100% 1690%-99% 280%-89% 150% 1Total 20

Contractor ReportInformation Provided to Customers

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Information Provided to Customers About Gas Usage and High Efficiency Equipment

# Contractors Gas Furnaces

# Contractors Gas Boilers

AFUE Rating or Savings Estimate 9 7PGW Website Information/Savings Calculation 5 7Percent Savings/Cost Comparison 5 6Manufacturer Literature and Forecasted Savings 3 4Does Not Mention or Promise Savings 3 3Environmental Benefit 1 1Not much information 1 1

Customer ReportInformation Provided by Contractor

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Information Contractor Provided about Gas Usage and Cost Compared to Other Options

Furnace Rebate

Boiler Rebate Total

Did Not Discuss Much 4 8 12Gas Savings, But not Specific Amount 7 4 11Approximate Percent or Dollar Savings 3 2 5Savings from Switching from Oil to Gas 1 2 3AFUE Percentage Differences 2 0 2Savings Based on Actual Usage 1 0 1

Is the program increasing the frequency of high efficiency sales?

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Contractor ReportHigh Efficiency Sales Change

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High Efficiency Sales Comparison to Before Rebates

# Contractors

Gas Furnace Gas Boiler

Much Increased 5 5Increased 6 7Somewhat Increased 3 3No Change 5 4Don’t Know 1 1Total 20 20

Contractor ReportRole of Rebate in Sales Presentation

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Role of PGW Rebate in Sales Presentation # Contractors Big Role / Very Important 14Helps in Sale 3Depends on Customer 1Small Role 1None 1Total 20

Contractor ReportRebate Influence on Sales

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Extent to Which High Efficiency Sales are Due to PGW’s Rebates # Contractors

Extremely Important (100%) 6Very Important (60%-80%) 3Important (25%-50%) 5Somewhat Important (15%-25%) 2Not Important (<10%) 3Total 20

Customer ReportRebate Importance

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Importance of PGW Rebate in Decision to Purchase High Efficiency

Furnace Rebate

Boiler Rebate Total

Very Important 5 12 17Important 2 2 4Helpful 3 0 3Not Very Important 3 0 3Not At All Important 4 1 5Total 17 15 32

Customer ReportOther Purchase Factors

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Factors that Influenced Decision to Purchase High Efficiency

Furnace Rebate

Boiler Rebate Total

Monthly Costs / Gas Savings 11 11 22Environmental Concerns 4 3 7Installation Issues/Venting/Size 4 3 7Resale Value 1 0 1Condition of Existing Equipment 0 1 1Maintenance 0 1 1EnergyWorks Audit Recommendation 0 1 1

Are rebates set at the right level?

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Contractor and Customer ReportRebate Sufficiency

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Rebate Amount is Sufficient to Encourage Purchase of Higher Efficiency Equipment

# Contractors # Customers

Gas Furnace

Gas Boiler

Gas Furnace

Gas Boiler

Yes 11 15 12 13Sometimes 2 2 -- --No 7 3 5 0Not Sure -- -- 0 2Total 20 20 17 15

Customer ReportHow Long Considering Replacement

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How Long Considering Replacement

Furnace Rebate

Boiler Rebate Total

Heard from contractor 10 5 15Right after heard about rebate 0 1 1< 6 months 1 3 46-11 months 2 2 41-3 years 2 3 58-10 years 1 1 2Don’t Know 1 0 1Total 17 15 32

Contractor ReportIncremental Cost Variability

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Incremental Costs Vary Widely by Home # Contractors

Yes 9No 11Total 20

Contractor ReportHigh Efficiency Furnace Incremental Cost

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Incremental Costs Of High Efficiency Furnaces Compared to Least Expensive

# Contractors

$600-$800 2$1,000-$1,200 3$1,800-$2,500 8$3,000 1$3,500 1$4,000-$5,000 1Don’t Know/Refused 4Total 20

Contractor ReportHigh Efficiency Boiler Incremental Cost

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Incremental Costs Of High Efficiency Boilers Compared to Least Expensive Alternative # Contractors

$600-$700 2$1,500-$2,000 4$3,000 4$4,000 4$5,000 2$4,000-$7,000 1Don’t Know/Refused 3Total 20

Customer ReportHigh Efficiency Incremental Cost

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Incremental Cost of High Efficiency Quote

Furnace Rebate

Boiler Rebate Total

$600 - $1,000 3 0 3$1,001 - $1,500 4 0 4$1,501 - $2,000 3 0 3$2,001 - $3,000 1 1 2$3,001 - $4,000 0 4 4$4,001 - $5,000 0 1 1$6,001 - $7,000 0 1 1Did Not Discuss Alternatives 2 6 8Don’t Know 4 2 6Total 17 15 32

What are the Barriers?

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Contractor ReportHigh Efficiency Barriers

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Reasons Customers do not Install High Efficiency Equipment # Contractors

Cost 15Installation issues 5Does not intend to remain in home 2Not comfortable with new technology 1Landlord renting out home 1Shorter warranty 1

Impact Analysis

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Impact Methodology

• Billing analysis• Determination of fuel switchers• Later participant comparison group• Matched comparison group• Findings by boiler/furnace and pre-usage level

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Annual HVAC InstallationsIn Philadelphia Past Year

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Later Participant Comparison GroupTreatment Group Comparison Group

Net SavingsObs

Usage (ccf) SavingsObs

Usage (ccf) Savings

Pre Post ccf % Pre Post ccf % ccf %

Non Normalized

202 856 713 144 16.8% 169 934 833 101 10.8% 43 5.0%

Degree Day 202 949 783 166 17.5% 169 994 947 48 4.8% 118** 12.5%

PRISM 202 926 773 153 16.5% 169 966 944 22 2.3% 130** 14.1%

Pooled Regression

202 903 751 152 16.8% 169 948 896 52 5.5% 100** 11.0%

PooledMonth Dummy

202 908 756 152 16.7% 169 933 882 51 5.4% 101** 11.1%

Annual HVAC InstallationsIn Philadelphia Past Year

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Matched Comparison GroupTreatment Group Comparison Group

Net SavingsObs

Usage (ccf) SavingsObs

Usage (ccf) Savings

Pre Post ccf % Pre Post ccf % ccf %

Non Normalized

202 856 713 144 16.8% 190 855 824 30 3.6% 113 13.2%

Degree Day 202 949 783 166 17.5% 190 940 882 57 6.1% 108** 11.4%

PRISM 202 926 773 153 16.5% 190 917 897 21 2.3% 132** 14.3%

Pooled Regression

202 903 751 152 16.8% 190 879 851 27 3.1% 124** 13.8%

PooledMonth Dummy

202 908 756 152 16.7% 190 911 883 27 3.0% 124** 13.7%

Annual HVAC InstallationsIn Philadelphia Past Year

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Later Participant Comparison GroupDegree Day Normalization

Treatment Group Comparison GroupNet Savings

ObsUsage (ccf) Savings

ObsUsage (ccf) Savings

Pre Post ccf % Pre Post ccf % ccf %

Furnace 162 882 732 150** 17.0% 122 892 842 50** 5.6% 100** 11.3%

Boiler 40 1,220 990 229** 18.8% 47 1,260 1,219 41 3.2% 189** 15.5%

Key Findings and Recommendations

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Findings

• Contractors do not often provide customer-specific savings estimates• Contractors need more information to effectively educate customers• RHER has impacted installation of high-efficiency furnaces and boilers• Both contractors and customers feel RHER rebate is important in high

efficiency purchase decision• Customers are also likely to cite environmental concerns• Incremental costs are highly variable• Rebate does not usually cover 80% of incremental costs• Venting barriers often present • Savings estimate range from 100-130 ccf (11%-14%)

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Recommendations

• Continuing marketing at supply houses• Improve and update RHER information on PGW website• Investigate whether joint marketing with electric utility is possible• Train contractors on selling high efficiency equipment• Consider incentive that varies based on costs or housing

characteristics• Revise protocol savings formula

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