Upstream HVAC Distributor Rebate Program

HVAC cropper

Key Project Information

Partners & Clients: Pacific Gas and Electric (PG&E), Southern California Edison (SCE), NV Energy, San Diego Gas and Electric (SDG&E), Sacramento Municipal Utility District (SMUD)

Duration: Began in 1996, ongoing

Goals: Engage the HVAC market to significantly increase the sale and stocking of high efficiency HVAC equipment for commercial installation

2010 Results: 16 million kWh, $8.8 million in rebates paid, 73,500 tons of HVAC equipment rebated for 3 participating utilities – PG&E, SCE & SMUD

Recognition: In 2008 the PG&E Upstream HVAC and Motor Distributor Rebate program received an ACEEE Exemplary Energy Efficiency Program Award

Project Overview

Energy Solutions has been working with utility clients since 1996 designing and implementing heating, ventilation, & air conditioning (HVAC) rebate programs that deliver energy savings for utilities and benefits to end users, and are embraced by the HVAC market.  The programs are based on the Upstream incentive model, which provides incentives to distributors or manufacturers (i.e. upstream market actors) who stock and sell qualifying high efficiency HVAC equipment.

The Upstream HVAC Distributor Rebate programs have introduced a number of innovative features.  Energy Solutions has been the first implementer to offer a paperless, web-based rebate application processing system in California.  Additionally, these programs have been the first in the state to provide prescriptive incentives for the sale of advanced HVAC technologies, such as variable refrigerant flow (VRF) systems, ductless mini and multi splits, and water-cooled chillers.  In 2009 over $6.5 million in rebates were paid through the program for HVAC sales in PG&E, SCE, SMUD, and NV Energy utility territories.  These rebates represented 75,000 tons of installed high efficiency HVAC equipment and over 18 million kWh of energy savings.

Need

The HVAC market offers a unique challenge and opportunity for energy savings.

  • HVAC equipment purchases are big ticket items ($5K – $200k+ for commercial sector)
  • The payback period for purchases of high efficiency HVAC, compared to standard efficiency, is approximately 4 to 6 years.  Since HVAC units last 15+ years, consumers recoup upfront costs and pocket significant savings over the life of the equipment.¹
  • The industry has a relatively small number of manufacturers and distributors compared to a large number of contractors who install the equipment and end users who own and run the equipment.
  • Identifying the best HVAC equipment for a commercial building can require significant technical and engineering knowledge.
  • Energy use for heating and air conditioning accounts for more than 25% of the primary energy consumed in commercial buildings in the United States. ²

Solution

The Upstream HVAC Distributor rebate programs that Energy Solutions has assisted in designing and implementing for utility clients take advantage of the unique characteristics of the HVAC market. By providing rebates ‘upstream’ to equipment distributors, the programs are able to influence a larger portion of the market, limit administrative costs, and accelerate the introduction and sale of more efficient HVAC equipment models.

The Upstream rebate programs take advantage of existing distribution networks and infrastructure; through which, HVAC distributors and manufacturers are in a position to influence thousands of contractors and customers and impact the greatest number of purchase decisions.  Further, in some programs, participating distributors receive individual support from Energy Solutions staff to assist with application submittal, program engagement, and strategic up-selling and stocking strategies. This support can help distributors maximize sales of high efficiency equipment.

Benefits

  • Significant Peak Demand Savings - HVAC products deliver peak demand reductions that are most desirable to utilities facing peak supply and distribution constraints.
  • Quick Program Launch and Assured Success - Program model has a proven success record, much of the infrastructure is established, and Energy Solutions has existing relationships with many of the regions’ largest distributors and manufacturers.
  • Minimal Utility Staff Resources Required - Minimal utility staff involvement is inherent in the highly automated Upstream approach.
  • Commercialization of High Efficiency HVAC Equipment – Incentives are provided for a variety of advanced equipment types, including chillers, ductless mini and multi splits, variable refrigerant flow (VRF) systems, and package units. The incentives push the market toward quicker adoption of these advanced and efficient technologies.
  • Persistent Savings – HVAC Equipment typically has a useful life of over 15 years.
  • Market transformation – By targeting influential market actors, Upstream HVAC programs spur market change by promoting increased stocking and up-selling of premium efficient equipment.
[1] Lawrence Berkeley National Laboratory. Life-cycle Cost and Payback Period Analysis for Commercial Unitary Air Conditioners. March 2004.

[2] DOE/EIA, Annual Energy Outlook, 1998