Background / Rationale
Heating and air conditioning accounts for more than 25% of the primary energy consumed in commercial buildings in the United States. HVAC equipment purchases are big ticket items ($5K – $200k+ for commercial sector), and the payback period for purchases of high efficiency HVAC is approximately 4 to 6 years. Since HVAC units last 15+ years, consumers recoup upfront costs and pocket significant savings over the life of the equipment.
There are a relatively small number of manufacturers and distributors compared to a large number of contractors who install the equipment and end users who own and run the equipment. Moreover, because the majority (~95%)of HVAC products flow through these channels, the upstream program model serves a smaller, better defined and well-informed customer group (distributors) while effectively changing the types of products that flow through to the customers.
These upstream programs enable utilities to achieve significantly greater impacts compared to traditional program models while accelerating the commercialization of advanced HVAC equipment by offering prescriptive incentives.
Thus, by targeting distributor market actors we are able to:
- Provide better customer service
- Streamline/simplify processes and reduce confusion
- Accelerate market transformation
Justification for Targeting Distributors
The upstream HVAC programs we implement provide tiered incentives to distributors so that they can stock and upsell high efficiency HVAC equipment. The current upstream HVAC program measures include:
- Packaged & Split AC
- Water Source Heat Pumps
- Evaporatively Cooled AC
- Air Cooled Chillers
- Water Cooled Chillers
- Variable Refrigerant Flow
While other programs claim to have “online application systems,” our distributor program incorporates a fully-automated application processing system that includes real-time tracking (like FedEx), automated reporting and large batch submissions. It enables applications to be processed in 2 minutes and makes participation easy for participating distributors and utilities. Since the online rebate system was incorporated into the program, new measures, equipment categories and clients have been seamlessly included as well as enabling our staff effectively operate the program from afar.
Watch a demo video here.
Program Growth since Inception
The HVAC market offers a unique challenge and opportunity for energy savings. Many HVAC programs do not achieve their potential because there is simply too many barriers to participation. The chart below highlights how the simplicity, targeting marketing initiatives and fully-automated application processing from PG&E’s HVAC distributor program drastically increased savings compared to their downstream HVAC programs (the upstream program achieved on average 900% greater impacts). While this graph is specific to PG&E’s HVAC measures, our other clients have experienced very similar results.
PG&E Upstream HVAC Program vs. Downstream HVAC Program
- “Simplicity, simplicity, simplicity” – ACEEE, 2010
- Increased activity… by an order of magnitude!
- Commercialization of advanced HVAC equipment / market transformation – Incentives are provided for a variety of advanced equipment types, including chillers, ductless mini and multi splits, variable refrigerant flow (VRF) systems, and package units. The incentives push the market toward quicker adoption of these advanced and efficient technologies.
- Leverage the informed actor – Distributors clearly understand the value of the tiered incentives and proactively engage the program and market the high efficiency equipment as a result.