• MARKET PRIMING AND FINANCING

Market priming and financing policies and programs kick-start markets for high-efficiency technologies by creating economies of scale and facilitating reduction of costs to end consumers. Access to finance is often cited as a barrier to adoption of high-efficiency technologies, especially by low-income consumers. The key to scaling these programs is to develop schemes by which investments in the program are paid back by another benefit to government funds, or to society as a whole. A related set of programs provides an incentive (rebate) that makes enough consumers adopt a certain technology, encouraging manufacturers to increase production and marketing and ultimately leading to economies of scale, which have the effect of lowering prices.

Bulk Procurement

Bulk procurement refers to programs or policies to purchase large volumes of high-efficiency equipment by a single buyer. The most common example of this is the purchase of high efficiency equipment by government agencies through the creation of a list of eligible products from which procurement officers can choose. In another example, a public sector entity such as an ESCO makes a large purchase and then redistributes the equipment. The goal of bulk procurement is two-fold. First, it helps large organizations such as government agencies improve energy efficiency across the full range of their operations. Second, it creates economies of scale, growing markets for energy efficient technologies and thereby encouraging industry to produce more of them at competitive prices. The role of energy efficiency technical assistance in this case primarily supports technical criteria to identify qualified products and support certification.

Technical Assistance Toolkit

Technical assistance for bulk procurement include:

  • Technical Specifications for Qualified Products – Metrics and testing procedures for equipment are the technical basis for assuring the energy performance of models eligible for purchase within the program.
  • Product Registry and Procurement Handbook – Product registries list qualifying product models available on the market and define a process for keeping them up to date. Procurement handbooks cover multiple programs and describe best practices for acquiring high-efficiency equipment.

Incentive Programs

In an incentive program, consumers receive a rebate in order to offset potentially higher retail prices or construction costs associated with energy efficiency measures. For example, a consumer might receive a rebate after purchasing a high-efficiency refrigerator that has a higher upfront cost than less efficient appliances on the market. An ideal incentive program provides the minimum incentive needed to drive adoption, and should not greatly exceed the amount needed to guarantee net benefits. Incentive programs lower financial hurdles in order to grow the market for very high-efficiency equipment or building efficiency measures and encourage economies of scale. Care must also be taken to minimize “free-ridership” associated with incentive programs, meaning a significant incidence of participation by consumers who would buy high-efficiency equipment in the absence of incentives. Multiple options exist for administration of incentive programs. Incentives can be paid directly to consumers or “up stream” at the point of production. They can be managed through retailers or directly from manufacturers with cash rebates, payments through utility bills, tax incentives, or green mortgages.

As in the case of bulk procurement, incentive programs require clear and consistent criteria to identify qualified products, and the technical parameters and procedures needed to establish these are an important role for technical assistance. Other important objectives for technical assistance include optimization of the incentive to be offered, assessment of impacts, and design of public awareness campaigns to encourage program participation.

Technical Assistance Toolkit

Incentive programs share elements with those for equipment performance standards but include financing elements and public awareness. These programs should include:

  • Technical Specifications for Qualified Products – Incentive programs should target high efficiency products that are not cost-effective in the absence of subsidies, and for which market transformation is feasible given a sufficient market impulse.
  • Rebate Amount and Financing Mechanism – Rebates must be designed to be large enough to encourage mass adoption but still provide net benefits at the societal level in terms of reduced energy infrastructure and environmental costs.
  • Public Awareness Campaigns – Because incentivized purchases are voluntary, well-designed public awareness campaigns can greatly increase adoption.

Energy Efficiency Funds

Government efficiency funds provide financial resources to projects at an ad-hoc level to projects implemented by various actors. Funds are typically provided through the energy ministry and applied for and granted through a rigorous procedure of proposals and evaluations in order to minimize the risk of corruption. The management and evaluation of fund dispersal can be cumbersome and stretch the capacity of ministry staff. Therefore, a role for technical assistance exists in not only building the capacity of staff and providing evaluation of specific proposals, but also is providing more general guidance about the most effective themes for fund activities and methodologies for efficient and effective monitoring.

Technical Assistance Toolkit

Energy efficiency funds support effective program design and implementation and build capacity within the fund. They should include:

  • Technical Capacity Building of Fund Administrators – International best practices and experience around energy efficiency technologies and sectoral opportunities as well as monitoring and evaluation.

  • Program Design – Identification and prioritization of opportunities in terms of energy technologies and end users, particularly for small businesses.

  • Awareness Raising / Stakeholder Outreach – Targeted outreach via webinars, workshops, and publications to communicate fund program opportunities and criteria.

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