GreenMadeSimple.com

Did Cash for Appliances Work?

It’s a huge success. It hasn’t gone anywhere. Actually, it’s a little of both.

Fifty states and six territories have launched “Cash for Appliances” programs since late last year. Each one had the same amount of money – about a dollar per resident – but the results have been wildly different. Some states ran through their entire rebate budgets in hours; others can’t seem to give away their money. What’s been going on?

(click for full sized chart)

Cash for Appliances, modeled on (or at least nicknamed after) last year’s “Cash for Clunkers” program, was funded as part of the $787 billion stimulus bill. Unlike “Cash for Clunkers,” the appliance rebate program wasn’t designed and administered by the federal government. Instead, the government directed $300 million to the 50 states (plus DC and several American territories), at a ratio of roughly $1 per person in each state. Each state then had the opportunity to design their own program within the general guidelines given by the government.

As you’d imagine with a lot of cooks in the kitchen, no two states designed their rebate program in the exact same way: rebate amounts, categories, eligibility, application processes and marketing plans have all differed. As have the results… Ten states had crushing consumer demand that caused them to run out of rebate funds within 4 days of the respective program start dates, with complaints of flooded call centers and crashing websites. Thirteen other states still have desperate operators standing by and literally can’t give away their money.

Comparing State by State Rebate Programs

It’s not just a matter of some states having better deals than others. Take, for example, refrigerator rebates in Massachusetts, Minnesota and California. The programs in all three states offered $200 rebates on efficient refrigerators. Massachusetts and Minnesota “sold out” in 1 day and 2 days respectively. California? Same rebate amount, but the program has been open since April and still has $19 million in rebates unredeemed.

Across the country, the rebate categories and amounts are all over the board:
So what attributes matter the most when it comes to determining whether a state program sells out quickly or not at all? The answers aren’t as straightforward as you’d think. We did some analysis to compare each of the programs to see what predicted their likelihood to sell out.

What Doesn’t Matter

Average Electricity Rates: One of the biggest surprises in analyzing the state by state rebate data is that the average price of electricity in a state has almost no impact on how popular its Cash for Appliances program is. Consumers don’t seem to be thinking about this program in terms of its ability to save them money over the long-term – otherwise, we’d expect to see that the states with much more expensive electricity selling out their rebate programs much more quickly than those that have relatively cheap power.

Non-Appliance Rebates: There are the “shiny” appliances (refrigerators, washers, freezers and dishwashers), and then there are the “boring” systems (air conditioners, furnaces, heat pumps, water heaters, boilers and solar water heaters). There’s almost no correlation between the number of “boring” categories that a state has rebates for, or the maximum amount of any of those rebates, and the speed at which the state has gone or is going through their Cash for Appliances budget. While we haven’t seen break-downs for many states in terms of the numbers of each type of rebate that have been redeemed, this result indicates that most people aren’t being motivated by the number or dollar figures of non-appliance rebates.

What Matters a Little Bit

Number of “Shiny” Appliance Rebate Categories: There are four basic appliance categories where states can offer rebates (refrigerators, freezers, dishwashers and clothes washers). Generally speaking, the states that offer rebates in 3 or 4 of those categories are more likely to have run through their rebate dollars quickly than those that have offered rebates in fewer appliance categories.

The fact that states that offer smaller rebates on a broader set of appliances have handed out their money faster than states that offer larger rebates on fewer types of appliances may mean that rebates aren’t successfully channeling consumers into buying specific appliances, but rather “catching” buyers who were already planning purchases.

What Really Matters

“Do you have reservations, sir?”: The number one predictor of whether a state rebate program sold out quickly didn’t have anything to do with how generous the rebates were. It actually turned out to hinge on the program’s design. Virtually all the “fast” states required consumers to pre-reserve a rebate application before making a purchase. These states set up websites and call centers that “opened” at a certain date and time, creating an “event” that turned into a feeding frenzy of activity, before closing down within days, or even hours.

Ten of the 17 “fastest” states required consumers to reserve a rebate before purchasing a qualifying appliance. Six others had hybrid programs where consumers could either reserve ahead of time or get the discount at the point of sale (if available). Of the 15 “slowest” states, 11 have no reservation system, and three others have optional reservation systems. Basically, all the “slow” states use mail-in rebates after purchase.

Conclusions

For rebate program designers in government, utilities or manufacturers, there are a few lessons that can be taken away from the Cash for Appliances results:

1. Create demand through scarcity by requiring pre-reservation for new rebate programs. For rebate programs like Indiana and Pennsylvania (and like many utility rebate programs across the country), that only pay out non-appliance rebates, a potentially effective strategy to kick-start demand would be to re-launch the program with higher rebates for the same back-end measures, but require consumers to pre-reserve their rebate on a specific launch date.

2. Bundle “shiny stuff” (basic appliances) and “boring stuff” (HVAC systems) together to increase the uptake of less exciting, but greater energy saving, systems.

3. Catch the “already upgrading” crowd by offering rebates on a wide set of categories but only on the most efficient models in each category. The program may not be stimulating purchases that wouldn’t have happened already, but it can nudge consumers to the highest efficiency products in each category.

The data from the Cash for Appliances program results fit with academic research on consumer behavior.

“The variable rates of uptake based on seemingly trivial factors such as creating a sense of urgency are further evidence that, when the goal is to encourage consumers to act in their best interest, giving them some reason other than pure rationality can be surprisingly effective,” said Michael I. Norton, Associate Professor of Marketing at Harvard Business School, “Inserting some excitement into behaving well – in some sense, copying the way parents induce their children to eat their vegetables via airplane noises – should always be an important consideration for policymakers interested in encouraging behavior change.”

read full article

Cash for Caulkers: The Definitive Guide

6/11/2010
By: Houston Neal
Director of Marketing, Software Advice

“Cash for Caulkers” is nearly here. Last month the House of Representatives passed H.R. 5019 – also known as the Home Star Energy Retrofit Act of 2010 or “Cash for Caulkers” – to kick-start construction, create jobs and cut back carbon emissions. While the bill still needs to clear the Senate, supporters predict it will pass this summer.

This is great news for homeowners and contractors alike. The bill provisions $6 billion for energy-efficient or “green” retrofits. It is expected to fund renovations for 3 million families, create 168,000 new jobs and save consumers $9.2 billion on energy bills over the next 10 years.

But in order to cash in on upcoming rebates, homeowners and contractors will need to do their homework. There are 13 types of retrofits eligible for funding. Each retrofit has unique eligibility requirements and set rebate amounts. You can read the full text here.

Cash for Caulkers update

What has been dubbed “Home Star 2.0″ has been introduced to the full Senate on May 27 by the Senate Energy and Natural Resources Committee (Jeff Bingman, Chair; Lisa Murkowski, Ranking Member). The version of the bill, S.3434, has bi-partisan support and there are some hopes it will be passed by July 4.

Delaware announces 10,000th appliance rebate

Gov. Jack Markell and state Sen. Harris McDowell III, co-chair of the Sustainable Energy Utility (SEU), announced this week that the SEU’s Energize Delaware had issued its 10,000th appliance rebate as part of its popular Energy Star Appliance Rebate Program.

Launched last September and designed to provide Delawareans money-back incentives for upgrading to new, high-efficiency household appliances, the program has provided nearly 10,200 rebates, saved more than $225,000 per year in energy-related costs, more than 1.2 million kilowatts of electricity and more than 16,500 therms of natural gas per year, officials said.

Delaware was the first state in the nation to deploy an appliance rebate program using federal American Recovery and Reinvestment Act (ARRA) funds. Having the non-profit Sustainable Energy Utility in place helped make the state’s leadership possible and move the appliance rebate money more quickly than most other states, officials noted.

Congressman Sestak Announces Pennsylvania’s Cash for Appliances Program

Rebates available for non-electric water heaters, furnaces, and boilers

MEDIA, PA – The opening of the Cash for Appliances program will allow Pennsylvanians to receive rebates of up to $500 for the purchase of new ENERGY STAR qualifying non-electric water heaters, furnaces, and boilers. These rebates are being funded with $300 million from the American Recovery and Reinvestment Act of 2009, which Congressman Sestak voted for last year. The ENERGY STAR program is a joint project between the Environmental Protection Agency and the U.S. Department of Energy which looks to provide information on how to save money and protect the environment through energy efficient products and practices.

“Decreasing our energy consumption through energy efficiency is one of the most critical steps we can take in establishing our economic and environmental security,” said Congressman Sestak. “As Pennsylvanians continue to manage their budgets during this historic economic recession, the Cash for Appliances program can provide assistance to households who need to upgrade old and inefficient equipment but might not have been able to otherwise afford it.”

The Cash for Appliances program is being managed by the Pennsylvania Department of Environmental Protection (PA DEP) and applies only to equipment purchased after April 21, 2010. In order to learn more about the specifics of the program, visit the Pennsylvania Cash for Appliances website, www.paheatingrebates.com, or call 1-877-592-2061. Note that the rebate program will run for a limited time only and will end when funds run out.

“An efficiently managed Cash for Appliances program will benefit American citizens and local businesses as well as taking us one step closer to a more secure and sustainable economy,” said Congressman Sestak.