Three-Legged Stool Approach: The Key to a Successful HPWH Program

Effective program design entails addressing each major barrier, and in some cases using a variety of different strategies for each. In simplest terms, effective HPWH program design can be viewed as a three-legged stool. 

Successful HPWH Programs:

 1) address the first cost barrier with the goal of getting the initial HPWH unit price for contractors and consumers close to the price of standard electric water heaters; 

2) drive consumer demand for HPWHs by harnessing public awareness in a way that underscores the annual and lifetime financial savings they deliver; and 

3) train, incentivize, and regularly engage with the primary actors (installers, distributors, builders, etc.) in the supply chain. 

The following table (Table 1) cites these overarching and more specific barriers as well as strategies to overcome them. 

Table 1: HPWH Market Barriers and Strategies to Overcome Them
BARRIERSTRATEGIES
High first cost for customers
  • Adopt a distributor-focused midstream model that incorporates the incentive at the point of sale. 
  • Adopt an “instant rebate” retail program to reduce the “out the door” cost to professional installers and DIY consumers.
  • Offer distributors and retailers additional incentives to stock/sell HPWHs (See Efficiency Maine Program details)
  • Establish incentive levels with a goal of achieving price parity with standard electric resistance storage models.
  • When possible, offer low- or no-interest loans for large equipment replacement (water heating and HVAC). This can be leveraged through proven Inclusive Utility Investment methods (IUI) such as PAYS model and other on-bill financing offerings.
  • Provide guidance to distributors, installers, and customers on how to leverage Inflation Reduction Act incentives.
  • Create low-to-moderate-income programs and market utility incentives alongside federal incentives.
  • Include builder targeted HPWH rebate/incentive programs.
  • Allow DIY installation. Successful programs frequently see DIY participation between 30 – 50 percent.
Lack of customer awareness and demand for HPWHs
  • Offer contractor incentives to promote HPWHs.
  • Advertise and promote utility marketplaces where options to research, educate, purchase, and schedule installation are found in a single online portal.
  • Fund manufacturers to provide advertising.
  • Ensure clear, accurate information on utility website of HPWH benefits including facts, figures from a trusted source; incentive levels, how to access those incentives and find trained installers.
  • Promote “planned early replacement" rather than emergency replacement. Get the attention of consumers/homeowner early, before water heater failure, when they can learn about the product, savings, and benefits. 
  • Translate materials into locally predominant languages.
  • Where possible, focus on customers that are most likely to make the switch
Lack of local HPWH Distributor and Retail supply
  • Optimize Distributor Engagement
  • Consigned inventory of HPWH
  • Sale Counter training
  • Contractor loyalty promotion events
  • Additional services different from other distributors
  • Faster payment and or more compensation on HPWHs
  • Provide specialty equipment to install HPWHs, drain pumps, stair hand trucks, lift systems
  • $50 administrative fee + $100 if sell
  • Regular communication on sales and stocking
  • Distributor sales staff training events
  • Drive awareness of tax credit and local rebates
  • Create installer success stories
  • Contractor Engagement - Does the installer have trucks that can carry inventory? Could they stock product in their shops?
Contractor lack of buy-in and familiarity with HPWHs
  • Leverage ENERGY STAR Manufacturers Action Council (ESMAC) contractor general awareness training to increase knowledge of technology and value proposition to customers and their business partners (engage  with OEM’s, ESMAC).
  • Elevate cash flow management to an appropriate level as larger businesses have greater resources and are more accustomed to managing cash flow. (Contractors and plumbers do not typically have cash on hand to carry multiple rebates and wait to be reimbursed.)
  • Provide contractor support and/or funding or any call backs over and above industry norms.
  • Provide specialty equipment to install HPWHs, drain pumps, stair hand trucks, lift systems (distributors).
  • Clearly outline the business case for HPWHs and make mention of the coming wave of electrification and greater opportunities to integrate into their business models.

Next: A Closer Look: Strategy Details>