“Money makes the Residential Retrofit world go ‘round”
In previous weblogs, I explained why incentives are necessary for driving energy efficiency programs, as well as how strategic messaging enhances social acceptance of efficiency-centered upgrades. In this post, I will explain how to tackle the sometimes challenging job of setting an appropriate incentive level for your program—guidelines pulled from a soon-to-be released handbook on residential retrofit program design.
Basically, program incentives exist to encourage the right behavior, discourage wrong behavior, and avoid rewarding free riders that would have done precisely what was desired anyway. Designing your own program’s incentive structure is as much an art as it is a science. Fortunately, there is a great deal of experience and information that can guide you. Some key things to consider are:
- Encouraging Comprehensive Retrofit, and Discouraging “Tire Kickers” and “Cherry Pickers”
Simple prescriptive incentives may be easy to administer, but they also tend to reward activities that would have occurred regardless. These sorts of incentives also ignore the desired goal of completing a full retrofit and maximizing savings. A tiered incentive structure, or one that includes a “bonus” to reward comprehensive work, can help push consumers and contractors alike toward desired program goals.
- Including All Participant Classes
As noted in my earlier posts, targeting high savings opportunities is important for program success. However, strive to not limit program access to only those who can afford investments in energy efficiency. The best programs are those that have a single retrofit program design with various entry points and tiers, as well as the tools to help households of varying income levels participate.
Low-income participants eligible for the Weatherization Assistance Program (WAP) should be directed to that program’s resources (or to appropriate internal resources if partnering with WAP for additional resources). However, there are many households with income levels above WAP guidelines that can’t access resources to pay for home energy upgrades. In this case, an educational program that shares information about no-cost actions, such as using a clothes rack rather than a dryer to save $200 per year, is appropriate for people who cannot afford to make home improvements. Another option is a sliding scale incentive structure and/or reduced rate financing, which may provide access to people with smaller budgets.
The Clean Energy Finance Guide provides a wealth of information on different financing products to consider when developing an incentive structure.
- Considering Assignment of All Customer Incentives to Contractors
Many grantees and subgrantees have had success in assigning the customer’s incentive to the contractor. The advantage is that the total cost of the retrofit is “instantly” discounted. Any remaining cost may not need financing. If financing is needed, however, it is for a lesser amount, and the contractor is assured of a direct payment from the program.
Under this sort of incentive structure, the customer does not have to wait for the incentive, which is typically issued later as a reimbursement (a practice that can also add some degree of confusion). This approach puts the decision in the hands of the customers – they decide whether they’d prefer to receive a check from the program or have the contractor immediately discount it from their bill. An additional benefit is that the program has greater leverage for receiving the required data from contractors who are paid directly.
As a final resource, link to the Solution Center’s archived webcasts to access the webinar from October 29, 2010, Designing Effective Incentives to Drive Residential Retrofit Program Participation.
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Content for this Blog post courtesy of Nick Lange, Vermont Energy Investment Corporation