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 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 Refrigerators Interaction of Standards, Energy Star & Tax Incentives

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

Impact of HVAC Incentives Source: AHRI 2011

Energy Star Window Market Share 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