PGE Water Heater ET Final Report - FINAL.pdf - Emerging ...

PG&E’s Emerging Technologies Program ET12PGE3191
National and local points of reference for water heater programs show the importance of
collaborating with channel partners to:
bring the highest price reduction possible to the customer;
have of high percentage of ENERGY STAR qualified water heaters in stock;
inform customers about limited time opportunities to participate in a program.
BARRIERS TO ENERGY STAR WATER HEATER SALES
Fundamentally, the barriers to increasing sales of ENERGY STAR water heaters in PG&E’s
service territory are supply and demand. Retailers and manufacturers currently do not
perceive that there is sufficient consumer demand for qualifying water heaters.
Consequently they have exerted minimal efforts to stock these models. At the same time,
consumers do not perceive the sum total of benefits from an efficient water heater justify its
price and the transaction costs.
In a rational economic market, an appropriate water heater price should drive desired levels
of supply and demand, but today’s high prices only satisfy the needs of a small segment of
consumers and limit the availability of qualified products. Utility intervention with financial
incentives is one requirement for expanding the market for ENERGY STAR water heaters.
Four factors are embedded in this supply and demand conundrum that accentuates market
barriers: High Percentage of Purchase Decisions is Emergency Decisions, Channel
Indifference to High Efficiency Products, “Out-of-Sight-Out-of-Mind” Purchases, and
Regulatory Requirements.
High Percentage of Purchase Decisions is Emergency Decisions
Almost two-thirds of water heater purchases are undertaken because of some kind of
emergency, Figure 12. Decision making for water heater purchases does not follow the
ideal economic model because homeowners view hot water as an essential commodity and
often make sub-optimal decisions in an emergency when a water heater has failed. From
the consumer’s perspective, the least risky decision in an emergency situation is to replace
a failed water heater with a nearly identical one. Fortunately, most water heater failures
are not catastrophic and purchase decisions need not be instantaneous. Intervention at the
point of purchase is necessary to explain the near term and long term benefits associated
with an energy efficient product purchase. The sales person has to be equipped with
adequate messaging to simplify the discussion of higher efficiency alternatives and eliminate
confusion about water heaters.
Channel Indifference to High Efficiency Products
Sales will always come down to price and “what is on-the-truck or in-stock”. A retailer’s or
distributor’s product assortment and stocking decisions are based on what has been selling
and what the anticipated consumer buying behavior will be in the near future. Stocking is
not done on hope and speculation because there is a cost associated with carrying inventory
and displaying products. Water heaters are expensive to display and inventory because of
their sheer bulk. Once a water heater is out of the box and on-display, it then becomes a
used product, cannot be sold as new, and causes a financial loss. Retailers and distributors
seek profits and market share and are indifferent to a specific product feature if it does not
contribute to these business objectives. Thus, utility interventions to increase demand for
high efficiency products or to stock a greater number of efficient models are needed to
cease the perpetuation of trucks and stores stocked with inefficient, non-complying
products.
36