Staying Power: Creating Lasting Energy Efficiency Through Market Transformation
Jan 27, 2023
The nexus of energy efficiency and climate has never been more dynamic than at this moment.
We know that reducing energy use has a direct relationship to lowering carbon and other greenhouse gas (GHG) emissions fueling climate change. Recently, federal- and state-level investments in efficiency and clean energy technologies offer significant opportunities to supercharge energy-saving programs and market interventions that will reduce expenses for consumers and businesses and provide health and comfort benefits. But how do we make those changes last?
Market transformation is the strategic process of intervening in a market to create lasting change. Instead of achieving quick energy savings by incentivizing customers or procuring and delivering products directly, the goal of market transformation programs is to work within the market ecosystem to create sustained change—making energy-efficient products and practices the norm.
As a company, Resource Innovation’s market transformation efforts started in 2018, but our team has been engaged in this work for decades, including the earliest days of these programs. Over the years we’ve designed, implemented, administered, and evaluated market transformation initiatives for clients in the U.S. and Canada. Along the way, we’ve encountered successes, learned lessons, and gained unique insights. The programs have varied and evolved, but the goal has always remained the same—to increase the share of energy-efficient products and services in a given market and secure deep and lasting change.
Market transformation initiatives work well as part of a comprehensive portfolio for energy efficiency programs. A great example of this is energy-efficient lighting. From our work, we know first-hand that LED lighting upgrades can make a huge difference in decreasing energy consumption and energy bills. The simple act of changing light bulbs on a large scale affects air pollution and public health, as well as electricity bills and the transition to a clean energy economy. However, this information alone is not always enough to motivate end users.
To help break down barriers such as limited supply of products, high cost, lack of knowledge or training, and consumer awareness, a coordinated effort is needed. The most successful lighting programs involve all the market actors – manufacturers, distributors, retailers, utilities, and other energy efficiency program administrators:
- Manufacturers need to focus on quality and design, as well as cost and energy savings so that products meet customers’ expectations.
- Manufacturers and distributors need to have products readily available for retailers to stock on their shelves.
- Utilities and other energy efficiency administrators must provide education on the products, as well as point-of-sale rebates and/or instant incentives to help buy down the cost so that LEDs become more affordable for end-users. In many cases, upstream incentives can be provided to manufacturers, distributors, and retailers to encourage participation.
Working together synergistically, these initiatives lead to broad-scale adoption and a decrease in product costs. LED lighting has now grown to the point where it has become standard practice across the country, phasing out more energy-intensive alternatives.
Market transformation can help accelerate the rate of innovation adoption. Therefore, market transformation practices and initiatives should not be limited to just energy efficiency programs. The increased adoption of electric vehicles, the growing interest in carbon reduction, and the developing focus on bringing equitable outcomes to our customers are just some of the programs that we can execute to help increase adoption and create lasting change.
Keys to Success
Overall success of market transformation initiatives requires quality in design and implementation. Over the years we have learned a few keys to success, including:
- Acquiring a deep understanding of the market actors and structure
- Identifying barriers and opportunities for the products and services
- Establishing activities to remove or reduce barriers that limit desired outcomes
- Ensuring strategies are transparent and accessible to all stakeholders at all stages of development
- Actively leveraging opportunities as they develop in real-time
It is important that programs are flexible and able to adjust to local market dynamics and various utility needs. Removing or reducing market barriers can take time and investment. It is also important to recognize that the desired outcomes may not be fully realized for 5-10 years, or longer in some cases.
California on Our Minds
California has set a bold path for energy efficiency innovation with a decision to fund market transformation initiatives that will bring lasting market changes in favor of equitable and cost-effective energy efficiency. Recently, Resource Innovations was awarded the contract as the state's first-ever Market Transformation Administrator (CalMTA) and will partner with a team of experts in program development, evaluation, and equity. Read more about this effort here.
Learn more about our MT capabilities at: resource-innovations.com/utility-services/market-transformation