1.1. Program Design Elements for a stand-alone CE Program: 1.2. A critique of PECI s PacifiCorp proposal (2008) 1.3. Task 4 Deliverable 1.4.

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1 1.1. Program Design Elements for a stand-alone CE Program: 1.2. A critique of PECI s PacifiCorp proposal (2008) 1.3. Task 4 Deliverable 1.4. FINAL To: Diane Levin and Dain Nestel, PECI From: Marti Frank and Jane Peters, Research Into Action Date: April 1, Overview This document discusses program design elements for a stand-alone consumer electronics program. It is based on a critique of PECI s 2008 proposal to PacifiCorp for a Class 2 DSM program. Program design element can mean a program s outcomes, measures, approaches or a combination of the three. Outcome: The result of program activity, typically measure adoption, energy savings or market transformation. Measure: A technology or behavior change the program aims to implement in a given population. Approach: The strategy or specific implementation tactics used by the program. This document organizes program design elements into three sections: Keep: Elements of the 2008 proposal that are still relevant and appropriately address market conditions

2 Page 2 Reevaluate: Elements of the 2008 proposal that do not address the market as stated, but could if modified slightly Add: Elements not included in the 2008 proposal but indicated by market data and which appear to fit with the programmatic structure defined in the proposal Keep Characterization of the Consumer Electronics (CE) Market The proposal accurately characterizes key elements of the CE market and provides a convincing argument for a funder to address it. This includes the increasing importance of CE energy use as a percent of total residential (and commercial) building energy use and the growing number of household CE products (p. 1). Additional data that support this argument include: The increasing unit electric consumption (or energy use per device) of some CE products, for example, today s TV, set-top box or game console compared to similar products in the 1990s Emphasis on Program Flexibility The proposal is dead-on to stress the need for flexibility and adaptability in this fast-changing marketplace (pp. 1, 3, 4, 5) and a bigger case could be made for the challenge this presents to programs. For example, PECI could describe how its experience prepares it to meet the challenges of: Rapid improvements in product energy efficiency as new product generations or models come to market Rapid change in product features and models names/numbers Rapid ascendancy of entirely new products, for example, MP3 players/compatible audio products or multi-function imaging devices (MFDs) Building Brand Awareness of ENERGY STAR CE Products The proposal makes a strong claim for the importance of PECI s experience developing brand awareness for ENERGY STAR appliances and homes. There are additional reasons this capability is relevant to the CE market. The proposal could present an even stronger argument by:

3 Page 3 Stating that manufacturers believe awareness of ENERGY STAR products is low and that they desire help improving it 1 Showing how current marketing for ENERGY STAR-qualified CE products is negligible Providing Co-op Marketing Funds for Manufacturers The proposal identifies providing co-op marketing funds to manufacturers (p. 9). This is an area of support that aligns well with what manufacturers interviewed for Electronics and Energy Efficiency said they wanted. Manufacturers in six of the nine product areas desired either: Co-funded marketing campaigns Assistance market products to utility customers Utility endorsement of specific products This included manufacturers of: Set-top boxes Servers Imaging equipment Home audio equipment Power strips Uninterruptible power supplies In working with manufacturers to market efficient products, programs should consider that: What manufacturers do to market to consumers will be different for every product Most manufacturers (and retailers) appear to need assistance with efficiency-related content for websites 1 Jane Peters, Marti Frank, Joe Van Clock and April Armstrong Electronics and Energy Efficiency: A Plug Load Characterization Study. SCE0284. Rosemead, Calif.: Southern California Edison.

4 Page Reevaluate Comparison to Appliance Market The proposal argues the CE market is similar to the appliance market in that the utility industry will have to pull the market along and may meet with a lot of resistance, efficient product availability is limited and consumer awareness is low (p. 1). While there are certainly similarities, these are not all accurate and a stronger case could be made to preface the usefulness of PECI s appliance market experience. Industry awareness is high and programs will not have to pull the industry along: Many manufacturers and retailers (if not most) are aware of the rising trend in green products and a widespread interest in sustainability. Those interviewed for Electronics and Energy Efficiency noted a sea-change in attitudes both at their companies and in their industry in the last three years. It thus seems programs will find themselves in the position not of pulling manufacturers toward efficiency but of providing incentives to get them moving even faster. Product availability varies widely by product: In some product areas, like monitors, ENERGY STAR penetration has been above 90% for several years. In others, like audio products, penetration is around 20-30%. Each product needs to be assessed individually. Retailer experience: PECI s long history working with retailers is perhaps its most useful experience to be drawn upon in running a CE program. PECI s existing relationships and understanding of buying practices and their impact on the supply chain will be valuable in running a mid-market, retailer-focused program. Given the recent experience of the PG&E BCE program, it also seems that experience dealing with device SKUs, their changes and working with sales reports from retailers will also be useful. Promotion of ENERGY STAR Products The proposal describes ENERGY STAR-qualified products as meeting strict energy efficiency guidelines. However, each product specification needs to be evaluated separately. In some cases it may be appropriate to incentivize the base ENERGY STAR standard. In others, the program may want to incentivize a standard that it sets, based on ENERGY STAR, just as the PG&E-led BCE program is doing (for example, ENERGY STAR + 15%). In others, it may be best to incentivize an ENERGY STAR tier or version that is finalized but not yet in effect (for example Tier 2 of the set-top box specification before its effective date of 2011). In making this assessment, the program should consider:

5 Page 5 ENERGY STAR specification revision timeline: When was the specification last revised? When is the next version expected? Market penetration: What percent of the market has ENERGY STAR already captured? International standards: How does ENERGY STAR compare to other standards worldwide? Are products of a higher efficiency mandated or certified in other markets? The assessment of what efficiency level to incentivize is an area of great importance, where the utility or funder will look to the implementer for guidance, and upon which the program will be judged during an evaluation. It is also important to note that efficiency levels cannot be static and the program will need a strategy for staying ahead of the curve in device efficiency improvements (see Product Portfolio Roadmap). Outcome: Creating Consumer Demand and Changing Consumer Behavior The proposal claims the program will result in extensive demand for energy-efficient CE (p. 3) and that the program will effectively transform consumer behavior (p. 9). All current research shows that consumers do not even consider energy use when selecting the vast majority of CE products and are unaware of just how much energy some of them use. Demand for CE products will only come after awareness has been raised and even then it may be slow and halting, for example, in products that are miserly energy users. PECI may thus want to emphasize its program s ability to raise awareness of energy use and of energy efficient products rather than increase demand, which will likely take longer than one program cycle. It is interesting to note that consumer education and demand creation is NOT a significant part of the PG&E BCE program:... marketing and outreach is a secondary and substantially smaller effort of the program... While this effort is included in the program logic, it is a smaller effort, whereby the program s primary goal is to generate market effects through its upstream incentive, not through generating and/or increasing consumer demand. 2 This could become a point of differentiation for PECI, if it attempts to compete head-to-head in this space with the PG&E-led BCE program design. Program Objective: Education The proposal says one program objective is to educate manufacturers, retailers and consumers about the financial and environmental impacts and benefits of energy efficiency (p. 3). However, these 2 Opinion Dynamics Corporation. (2009). Statewide Business and Consumer Electronics Baseline Study: Final Report, Volume I of II, Main Report. Study ID: PGE Prepared for Pacific Gas & Electric Company, Southern California Edison, San Diego Gas & Electric.

6 Page 6 benefits are not the same for each party and the program should be clearer about what messages will go to each, and why. Manufacturers care most about reducing costs and selling more product. Messages for them can feature the non-energy benefits of efficiency (especially where heat generation is an issue), which can include reduced production costs, improved ability to differentiate the product from competitors, and contributions to corporate sustainability goals. Incentives for qualifying product sales and co-op marketing dollars are also valuable tools that can increase margins on tight products and help the manufacturer gain market share. Retailers presumably care most about increasing their margins and differentiating themselves from other retailers, both of which can be achieved through incentives for product sales and marketing assistance. Consumers may not be moved by financial or environmental arguments. The overall cost of energy use for most CE products may seem relatively minor and efficiency is not even on the map as far as product features are concerned. In this first generation of CE programs, program managers may need to experiment with other ways of getting mind share, and may want to be upfront about this in the proposal process (see below, Marketing Messages for Consumers). Marketing Messages for Consumers The proposal identifies providing information on the benefits and savings from energy efficient products as a core of the marketing strategy and makes a strong argument for spending a significant portion of its budget on multiple outreach channels to consumers. This includes information for salespeople, point-ofpurchase materials and more broad media campaigns (pp. 4, 12). Two key items to consider: The program needs to ensure that its messages move people. However, this may be difficult when energy use per device is small and so are savings. A collective approach (we would save X if everyone did X we are wasting X because we don t X) or a relative approach (your X uses most of it s energy when you re not even using it) may be alternatives to try. The Energy Center of Wisconsin notes a few examples (more may be forthcoming in its report) and NRDC has also exhibited sophisticated marketing, particularly around game console energy use. Helping retailers with signage at the point-of-purchase is a valid option, especially when purchase decisions tend to be made in the store (for example, with power strips). However, the proposal would benefit from more specific examples of PECI s plans.

7 Page 7 Moving Beyond TVs, PCs and Displays The proposal notes the program will be expanded in the second, third and fourth years to include other CE products and gives set-top boxes, game consoles and MFDs as examples. When adding device types to an existing program structure it will be important to consider which CE products fit, meaning products with similar distribution channels, product development timelines and an ENERGY STAR specification. By this definition, neither set-top boxes nor game consoles are good fits for the program as defined in the PacifiCorp proposal. MFDs may be good candidates, as might home audio products. PECI could identify additional products either by first looking at other devices with ENERGY STAR specifications or at other products sold at the retailer partners. Timing and Product Mix The proposal indicates the program will conduct outreach to manufacturers (p. 4). PECI should be careful to avoid promising too much change too quickly from manufacturers. Consideration should be given to product development and manufacturing timelines, recognizing that very little about the two can be changed in the immediate 12-month period. It is also important to note that manufacturers may not be willing to make any changes to their products to meet the needs of a regional program. Data Collection The proposal is correct in the types of data a program will need to stay abreast of the market (p. 5). However, the proposal s stipulations about how this data will be obtained in the fast-paced course of a program is problematic. Design and conduct a qualitative and quantitative survey: Depending on the depth and breadth, good research of this type takes several months. Purchase in-depth reports on consumer behavior: Unfortunately, there is scant information available. Reports are available on market data (product sales, manufacturer market share, etc.), but rarely will consumer behavior be included. It is also important to note that these reports typically cost thousands of dollars. Focus groups: The proposal says focus groups will be used to learn about customer behavior issue like purchase decision-making, use of products, sales/demographic correlations and intent to recycle products. However, focus groups may not be the best way to obtain good data on these behavioral issues, and they are very expensive. PECI might be better to consider phone or surveys. They are less expensive, can collect opinions from more people and could cover a client s entire geographic territory. Such a data collection approach may even capure a big enough sample to do qualitative/statistically significant analysis.

8 Page 8 Use of EPEAT or Other Third-party Labels The proposal includes multiple references to the EPEAT certification for PCs and monitors (pp. 5, 6, 7, 9, 17) and proposes developing a program-specific green label (p ). Several market factors would recommend against these ideas. While EPEAT is a reputable source of green product information, programs should use caution in introducing additional green labels. Manufacturers and consumers are showing signs of green fatigue and recent studies show that only the most recognized labels ( recyclable and ENEGY STAR) significantly affect purchasing decisions 3 Each new label requires an introduction and validation which is expensive and time-consuming Some third-party labels, like EPEAT, apply to only a few products, requiring consumers to learn about multiple labels - this includes a program-designed brand Programs may find it more effective to focus their education campaigns and marketing instead on existing brands like ENERGY STAR that already have broad awareness in the marketplace. Retailer Incentives The proposal identifies multiple options for incenting retailers. It would be instructive to consider the approach of the PG&E-led BCE program and evaluate its achievements. The PG&E program: Pays the retailer or manufacturer for each qualifying item sold 4 Targets the retail buyers Manufacturer Relationship Building The proposal proposes building relationships with manufacturers outside of other organizations (CEE and ENERGY STAR) in an effort to influence product availability and the energy efficiency of products (pp. 8-9). However, these changes will likely be very slow in coming. The program should take into account product development timelines and the fact that all very little can be changed in the immediate 12-month period, as production lines have already been committed and product designs set. 3 GreenBiz. (September 23, 2009). Most green labels fail to catch shoppers eyes, survey finds. GreenBiz.com. Retrieved from 4 Opinion Dynamics Corporation. Statewide Business and Consumer Electronics Baseline Study.

9 Page Add Product Portfolio Roadmap The proposal notes that PECI will develop a Qualified Product Portfolio that presumably lists the products to be incented and that PECI will adjust the portfolio periodically to address changing products and market conditions (p. 8). Periodic updates to such a list are of course necessary. However, an approach merited by market conditions is to develop a roadmap that specifics at the program s outset how and when the portfolio will be reevaluated. The roadmap approach has several advantages over a more adhoc approach to updates because it: Sets specific timelines or triggers for reevaluation, which takes the guess-work out of program managers hands and prevents this important process from slipping Reduces the likelihood that the program will incentivize products that are no longer best in class, thus improving energy savings and additionality Allows the program to provide its partners with advance notice of the dates on which the portfolio will change A Product Portfolio Roadmap should include the following criteria: How the decision will be made to update the portfolio options include update periods at regular time intervals or trigger points based on market conditions Which data will be used to evaluate qualified products and how the data will be obtained If possible, suggestions about when each portfolio update process will begin and when a new portfolio will be finalized/take effect Cross-marketing Power Management Opportunities The proposal identifies promoting the CE program in other PacifiCorp program materials and in bill stuffers (p. 13). These opportunities, as well as all CE program marketing materials, can also be used to make customers aware of the many opportunities to save money/avoid waste by turning off devices when not in use. These include: Setting PC power management settings (only about 20% of computer users have enabled these settings for their PCs, although 80% have for monitors) can be marketed with new monitor purchases

10 Page 10 Setting game console power management settings or turning off the console when not in use (potential for wasted energy is equivalent to that used by two refrigerators) could be marketed with TV purchases, as users will likely connect the console to the new TV Smart power strips and/or timers can be promoted with both TV and PC purchases as a way to eliminate the vampire power used by peripherals in standby mode or by those left on accidentally

11 Program Comparison The table below shows how PECI s PacifiCorp program design compares to other programs currently in operation.

12 Page 12 Table 1: Program Comparison PROGRAM (YEARS) TERRITORY IMPLEMEN- TER(S) PRODUCTS GOAL(S) APPROACH PECI PacifiCorp Proposal (2008) parts of CA, ID, UT, WA, WY PECI TVs, PCs, Monitors Increase sales of energy-efficient CE products Make energy-efficient CE products more available by influencing manufacturers planning and production, retailers purchasing Retailer incentives, manufacturer and end-user outreach Educate manufacturers, retailers and consumers Maximize market share of energy-efficient CE products through consumer demand PG&E/NEEA Business and Consumer Electronics Program ( ) 5 parts of CA, ID, MT, OR, WA QDI Strategies, Inc. Energy Solutions TVs, PCs, Monitors Increase market share of high efficiency CE models Move market beyond ENERGY STAR specifications for CE products Increase the number of high efficient units manufactured and distributed Mid- and upstream incentives Increase the number of high efficiency models available to end users Increase sales of high efficiency models to generate on-going and sustained increases in energy efficiency purchases throughout the electronics market 5 Opinion Dynamics Corporation. Statewide Business and Consumer Electronics Baseline Study.

13 Page 13 PROGRAM (YEARS) TERRITORY IMPLEMEN- TER(S) PRODUCTS GOAL(S) APPROACH SCE Business and Consumer Electronics Program ( ) 6 parts of CA SCE TVs, PCs, Monitors Increase stocking level and promotion activities of high-efficiency electronic products Mid-stream incentives New Jersey Consumer Electronics Initiative ( ) NJ Ecos Set-top Boxes Increase purchases of ENERGY STAR products Cross-market other programs Promote NJ Clean Energy Program Establish partnerships with service providers NYSERDA Power Management ( ) NY Lockheed Martin Smart power strips Increase sales of smart power strips Manufacturer buy-down 6 Southern California Edison. (2009). SCE s Energy Efficiency Program Implementation Plans. A Amended March 2009.

14 Logic Model PECI should develop a logic model for any proposed program to make its assumptions about program causes and effects explicit both to itself and the client. During the program design and proposal stages, a logic model can be used to identify and fill gaps in program activities. In developing a logic model for a new CE program, it may be instructive to consider the logic model of the PG&E-led BCE program. Connections in red should be considered speculative at this point, as their causal links are undemonstrated. Figure 1: Logic Model of the PG&E BCE Program 7 7 Opinion Dynamics Corporation. Statewide Business and Consumer Electronics Baseline Study.