It’s time to gear utility rebate programs to the folks who need them

Better-off homeowners take advantage of rebates while others – who really need them – don’t. 

Here are some things we know from our Utility Pulse study earlier in the year:

• 60 percent of Americans say it’s important that their utility offer energy efficiency programs.
• 82 percent say the availability of rebates would impact their purchase decisions.
• But only 32 percent of the people who’ve made energy-efficient improvements actually claimed rebates for those improvements.
• Why? Most folks said they just weren’t aware of the rebates.

So, why does this matter?

It matters because, if you’re a utility, you “keep score” on whether or not you’re hitting mandated energy efficiency program goals largely based on the number of rebates redeemed and the kilowatt-hour savings presumed to be attached to each item purchased.

And if people don’t take advantage of rebates, utilities don’t get to count those savings toward their goals. (And not hitting mandated goals has a huge negative financial impact on most utilities.)

Many people would say this system is flawed for a number of reasons:

• Perhaps some people were going to buy the more efficient item anyway, and they just took advantage of the rebate because it was there … but the rebate didn’t drive them to buy the more efficient unit, so it shouldn’t be counted toward program goals.
• Conversely, perhaps the presence of the rebate is what nudged someone to buy the more efficient item, but they just never got around to redeeming the rebate, which means counting rebates isn’t exactly a fair measure of a utility program’s effectiveness.
• We’ve actually documented that some Americans buy a more efficient product and then use that as a “permission slip” to use more energy.

Those are all good reasons to figure out a new way forward, but perhaps the best reason is that the rebates miss a segment of the population that probably needs them the most: the middle class.

People with household incomes well above the national average don’t actually need the rebates, but are the most likely to take advantage of them.

And people with low incomes qualify for free energy efficiency upgrades. The folks who need the rebates most are in the $35–$75K household income range, which represents almost one-third (32%) of the nation’s households. These folks don’t qualify for free help, but many don’t have the up-front cash to purchase the rebated items.

Here’s our idea: only make rebate programs available to Americans under a certain income threshold and concentrate the rebates … so instead of offsetting a small percentage of a higher-efficiency HVAC unit, offset half the cost. So serve fewer households, but in those households make a big impact. And then literally track household energy consumption year over year to prove out savings.

If you work at a utility managing energy efficiency programs, I’d love to hear your thoughts on this – feel free to point out all the ways this idea wouldn’t work and let’s see what would work to get us to bigger impacts.