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ENERGY STAR
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Why It Works

Understand How the Market Chain Benefits When Incentives Target Distributors

Distributor-focused midstream residential programs work well because they appeal to all actors in the market channel:

The program administrator:

  • Realizes improved program delivery through eliminating rebate breakage, reducing market confusion, and improving customer, distributor and contractor understanding.
  • Transforms market by increasing stock of efficient equipment available in distributor inventory.
  • Leads to efficient equipment, available for same day delivery, installed during “emergency replacement” scenarios that heavily favored conventional units in the past.
  • Focuses limited funds on a smaller audience – wholesale distributors in their service territory – to reach more contractors and customers, leading to higher energy savings at lower program costs.
  • Benefits a more diverse socio-economic range of homeowners as price differentials are reduced and distributors/contractors make energy efficient units the default installation.

The manufacturer:

  • Increases market share of higher margin energy-efficient products.
  • Can focus energy efficiency outreach efforts (distributor relationships, manufacturer discounts, etc.) in service territories where midstream programs exist.

The distributor:

  • Makes more profit per unit sold with energy-efficient equipment.
  • Earns a competitive advantage by becoming experts in energy efficient equipment and incentive processing as midstream incentive structures spread to other programs across the country.
  • Earns an administrative fee per transaction to ease incentive processing burden.

The plumber or HVAC contractor:

  • Avoids paperwork and waiting for incentive checks for their small business because the rebate is “instant.”
  • Receives training/education on energy efficient equipment from a familiar source – the distributor or manufacturer representatives – and delivers quality installs with fewer callbacks.
  • Passes along incentive to the customer typically to maintain competitive quotes and win jobs.
  • Meets customer demand for efficient equipment and is a trusted resource for energy saving options.
  • Builds reputation by being a “green” or “energy-efficient” HVAC contractor or plumber.

The homeowner:

  • Is no longer limited to only standard efficiency equipment available during emergency replacement.
  • Saves money upfront when plumbers and HVAC contractors pass along the instant discount, avoiding the burden of downstream rebates (e.g., evaluating energy savings, determining eligibility, filling out paperwork, and waiting for an incentive check).
  • Reaps impressive annual savings over the lifetime of the product.
  • Inclined to consider other energy efficient residential products like heat pump dryers or smart thermostats after purchase of an efficient water heater or HVAC system.

If interested in speaking to utility program managers and/or consulting firms that have implemented distributor-focused midstream programs please contact ENERGY STAR at midstreamdistributor@energystar.gov.

Next: Best Practices: Learn the right way to run a distributor-focused midstream program >

Quotes from Contractors in the Energize CT Midstream Program

“I have been promoting the rebates since they started. I used to have customers that didn’t want to be bothered filling out the forms. Now with the increase in rebates and the fact they are instant, I install a lot more energy efficient equipment.”

“I use the rebates all the time. I always recommend the most energy efficient products available and the rebates really help.”

Quotes from Distributors in the Energize CT Midstream Program

“We like that the program allows us to offer a high efficiency furnace with a rebate for a net price close to a low efficiency furnace.”

“The upstream* rebates has affected how I set my inventory. Once the rebates went instant and the mail in rebates went away I started to sell a lot more energy efficient equipment, especially ECM pumps.”

“When giving an estimate the contractors always ask for a model that fits the size they are looking for and qualifies for the rebate. The rebate is having an impact on selling better, more efficient furnaces.”

* EPA considers the distributor a “midstream” actor in the market chain although some efficiency program administrators label distributors as “upstream” actors.

Blodgett Supply’s Dramatic Increase in Heat Pump Water Heater (HPWH) Sales

ENERGY STAR certified HPWH sales at Blodgett Supply before the Efficiency Vermont’s Midstream program began were 12% in mid-2014. By 2015, an astounding 44% of all 50-gallon electric water heaters sold were HPWH.

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