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Demand Side Market Transformation

By April 22, 2013November 8th, 2021Energy Efficiency, Energy Rant

Last week I was reading a couple regulatory dockets; one by a citizen and another by an intervener.  They made some good points, including a situation of being locked out of the market[1] in one’s own state, to which I replied, “Welcome to the party.”  Both dockets had a ring of “market transformation”.

Our friends at the American Council for an Energy Efficient Economy (ACEEE) define market transformation as, “The strategic process of intervening in a market to create lasting change in market behavior by removing identified barriers or exploiting opportunities to accelerate the adoption of all cost-effective energy efficiency as a matter of standard practice.”  I think I am correct in saying that behavior in this sentence includes consumers choosing CFLs over incandescent as one example, and in a broad sense, consumer choices.

Some market transformation, per my definition, has been very successful, including the CFL example mentioned previously.  ENERGY STAR® appliances, including refrigerators, have been another one, to the point that some programs are dropping refrigerators from their portfolios.  Another odd one is ground source heat pumps.  In certain spheres, ground source heat pumps have taken on a cult-like following, and to say ground source heat pumps don’t make the meter spin backwards in every application is blasphemy[2].  After beatings from “trade allies” for a heat pump study Michaels completed a few years back, I found last winter that MidAmerican Energy is dropping them from their energy efficiency plan going forward due to lack of cost effectiveness.  Touché.

Aside from equipment choice, market transformation to its advocates includes training the masses to be energy experts – contractors, controls companies, architect and engineering (design) firms, and so on.  This sort of market transformation is never going to happen.  Why?  It is easy to teach people to care for their lawn.  It isn’t easy or cheap to teach people how to successfully replace four knee joints per day.  Have you ever seen a knee surgery performed?  To an ignoramus it looks easy – like carpentry, cobbling, and seamster rolled into one.

Barrier number one, therefore, is time and money.  It reminds me of a manufacturer one time that wanted us to show them in a day or two how to be do-it-yourselfer energy efficiency experts.  That would be like satiating a couple thousand ravenous souls with two croissants and a few mackerel.  That is, give “us” the equivalent of an engineering degree and 10-20 years’ experience in a couple days.  If only it could be reproduced and stored on a micro SD chip placed under the tongue, dissolved into the bloodstream, and stored permanently in the brain.

Barrier number two:  Few capable of sawing lumber and wielding a hammer and chisel are interested in becoming an orthopedic surgeon.  Nor does the orthopedic surgeon really want to become a neurosurgeon or dermatologist.  The core building blocks of the MD profession, as they are with engineering, are similar.  Energy efficiency, particularly for large commercial and industrial systems and process optimization, requires highly trained and experienced talent.  Even converting a commissioning agent to retrocommissioning (RCx) agent is no small feat because they are substantially different services.  In the former, the professional is ensuring the systems are built and operating as intended, while the latter only cares about the design intent for purposes of understanding how it is supposed to work.  Any RCx agent worth paying is going to go far beyond the design intent to capture savings in addition to recognizing design flaws or mistakes that result in waste – and how to fix it.

Like consumer choice, markets can be transformed and are transformed on the demand side of the equation.  While buyers obviously don’t understand the details of RCx, or they would do it themselves, they love the benefits and the word spreads to propagate the service/program – transforming the market.

Lastly, when it comes to market transformation, supply cannot be dictated.  The market, like every other, gravitates to the best products and services.  A layperson example of this is farming.  Many today would like the family farm of the 1950s – the ones that include 25 head of swine, a dozen dairy cows, a few beef cattle, seven egg-laying chickens, a collie, and three cats to take care of the mice.  That doesn’t work anymore.  Why?  Because the market calls for cheap food, and that’s why prices for many items have remained the same or even fallen in the past 25 years – for sure when adjusted for inflation.

A prosperous market serving these advanced programs consists of few firms that really know what they are doing.  Spreading it around isn’t cost effective, nor will it last; i.e., transform the market.  Market transformation agents want the 1950s farm with today’s cheap food.  They cannot both be had.

[1] Locked out of the market means other firms provide program funded services to end users, free or massively subsidized by the program.

[2] Ground source heat pump systems work great for many applications and have many strong attributes, but like everything else, they are not the best in all applications, particularly for residential when competing against natural gas.  Refer to the referenced report.
Jeff Ihnen

Author Jeff Ihnen

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