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Why running out of money can be a good thing

image credit: Oleg Dudko - Dreamstime

Utility energy efficiency programs are driven by legislative policy.  Like all state legislative issues, the details will vary widely from state to state but always include energy saving targets along with the funding allocated to meet those targets.  As with all legislation, this is an imperfect process and the allocation of funding and the energy savings goals usually do not line up to market realities.  In those situations, energy efficiency programs can and sometimes do exhaust their budgetary funding before the program year ends.  Although this is never an outcome that you hope for, it can have some advantages.  Here are three:

It allows for better planning / preparation in the next program cycle.  When the program stops accepting applications staff resources are freed up to plan for the next program.  Setting incentive levels, developing new measure specifications, and laying out a marketing plan are all activities that deserve attention, but planning for an upcoming program year can be difficult if your attention is focused on the current program year.

It encourages you to reexamine how you allocate incentives.  When your program runs out of funding, you become focused on developing ways to make sure that doesn’t happen again.  This forces you to examine how much money you are dedicating to certain measures and to identify and reduce funding for measures that don’t need an extra financial “push” to be adopted by customers.  In the long run, this can make your energy efficiency program more cost effective than if you kept the incentives at “status quo.”

It creates a “sense of urgency” in the marketplace.  Have you wondered why marketing and advertising often use the phrases, “Act now supplies are limited,” “This sale ends Sunday at midnight,” or “The first 200 callers will also receive…”?  All of these phrases are meant to drive a “sense of urgency” within the marketplace and motivate customers to act for fear of losing out on an opportunity.  I would argue that developing a customer “sense of urgency” for energy efficiency can have tremendous benefits.  Let’s face it, lighting upgrades, adding insulation, or installing control technology are all projects that could be delayed until next year—they aren’t mission critical for homes or businesses.  When customers learn that there are financial incentives to do these projects today, but there may not be incentives in the future, it can create a good reason to act right away.

Although you may receive some complaints from vendors and customers, exhausting your program funding is a sign that you have a popular program and have engaged the marketplace in a meaningful way.  While you never want to plan to close down an energy efficiency program, running out of money can have some benefits to both the program and the marketplace—including making it less likely that you will face this challenge again.

Steve Baab's picture

Thank Steve for the Post!

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Matt Chester's picture
Matt Chester on Jun 8, 2019 1:18 pm GMT

Interesting perspective, Steve, and I appreciate how you're finding the silver lining surrounding that glass half-full of water!

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