Market Transformation Programs: Past Results, Future Directions

Steven Nadel and Howard Geller

1994

Abstract

Market transformation is a process whereby energy efficiency innovations are introduced into the marketplace and over time penetrate a large portion of the eligible market. In the past few years, many program planners and policy makers have begun discussing program and policy initiatives to encourage and accelerate the market transformation process. Instead of saving energy building-by-building, a market transformation approach seeks to change the entire market for particular products or services so that efficient products or services are the norm and do not need to be promoted with incentives. A market transformation strategy can be built from a combination of different program and policy initiatives ranging from R&D to utility incentives and voluntary commitments to building codes or equipment efficiency standards.

This paper reviews market transformation efforts that have occurred in recent years and the lessons they teach. Based on eight case studies we conclude that: (1) market transformation is feasible; (2) the preferred market transformation strategy varies from product to product, depending on characteristics of the technology and the market being served; (3) quality assurance is critical to the market transformation process; and (4) minimum efficiency standards and building codes often play a critical role in market transformation. However, developing and implementing a market transformation strategy is not easy, as such a strategy requires extensive coordination among, and long-term commitments by, many diverse parties.

This paper also examines future directions for market transformation including an analysis of promising market transformation targets. Eight high-priority targets for new market transformation initiatives are identified based on potential energy savings, cost-effectiveness, and likelihood intervention can make a difference. Policy strategies for each of these eight targets are presented. However, in order for these and other market transformation initiatives to succeed, there is a need to plan and implement more comprehensive long-term transformation strategies, develop evaluation procedures for market transformation, and design rewards for utilities that participate in successful market transformation ventures.

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1994, $12.00, E942