Federal agencies could transform the market for climate-friendly products. Here's how.
The Inflation Reduction Act includes a bounty of financial incentives to lower the cost of consumer technologies to help achieve the administration’s climate goals. Many of these incentives–from rooftop solar panels to heat pumps to electric vehicles to induction cooktops and more–are designed to make it more affordable and accessible for consumers to voluntarily adopt these climate-friendly products.
IRA Consumer Incentives
Lowering the financial cost of these technologies will certainly make them more attractive to consumers, but changing consumer purchasing decisions at scale is a complex and multifaceted challenge.
Fortunately, the federal government has a blueprint for achieving this sort of market transformation from the EPA’s ENERGY STAR program. Recognized by more than 90% of American households, ENERGY STAR has motivated consumers to purchase energy efficient products like household appliances and light bulbs that reduce greenhouse gas emissions.
ICF has been there every step of the way supporting the EPA’s ENERGY STAR program. Along the journey, we have gathered insights that can help other federal agencies repeat the success of ENERGY STAR to make climate-friendly products mainstream.
A strong foundation
There are four must-haves for a product to have market transformation potential
Those are the four pillars without which your product is not going to succeed. Let's take an example of residential induction cooktops, an energy efficient alternative to gas ranges much-beloved by chefs and consumers. The technical potential of induction cooktops comes from the energy benefits such as decarbonizing and reducing emissions compared to the use of gas stoves. It also has significant safety and health benefits from the absence of indoor air pollution and the ability of the cooking surface to remain cool to the touch even when in use.
In terms of the economic potential, residential induction cooktops and ranges are typically more expensive than conventional electric models. But prices have continued to drop in recent years, and new financial incentives are included in the IRA. Top brands such as Samsung, LG, Frigidaire, and many more now offer induction appliances, demonstrating the market penetration is increasing. The customer potential is being amplified by municipalities like Los Angeles banning gas appliances in new homes and businesses.
Considering the technical, economic, market, and customer potential of this product, it’s clear why induction cooktops are moving from niche product to being proven and becoming commercially viable. From there, the next step is to get on the path to market transformation.
Keys to market transformation
Once the foundational conditions for market transformation are in place, climate-friendly products can start on the market transformation journey. We have identified key insights on the path to market transformation that every product must navigate to become mainstream.
Know the market
First, it’s important for federal agencies to understand every aspect of the market—all the way from the raw materials used in production to the consumer making the purchase to disposal of the products it is replacing. Who makes the decisions on your product at each step of the process? Anywhere along that decision chain could be a person or group of people with the influence to impact the product, so it’s important to map out the potential failure points in order to pave the path to success.
Going back to the induction stove example, federal agencies need to know the major and minor players in the manufacturing industry and the commercial food service sector, etc. This involves rigorous stakeholder engagement and identification of key influencers for each group. Who are the elected officials on committees that pass relevant regulations? Who are the chefs switching from gas to induction stoves? Knocking on doors and engaging stakeholders are critical parts of the journey to market transformation.
Understand the barriers
Many products and solutions do not make it to market, even if they are technically and economically viable. The graph below shows the arduous journey to success with several "valleys of death" that products must cross to achieve market transformation.
Each dip represents a different phase where the process could get stuck and not make it to the next phase. For example, a prototype might never make it out of research and development, or insufficient capital is raised to convincingly demonstrate the product in the market. The chasms get deeper, and the peaks get higher. It’s important to understand the likely barriers the product will face as it moves from R&D to prototype to demonstration to commercialization and eventually to mainstream market success.
There are many good ideas that have been proven to be technically and financially viable but haven’t been commercialized to the level where enough of them are being sold to reach the tipping point for market transformation. When ENERGY STAR first set out to introduce qualified energy efficient lighting, we had to work with both large firms and lots of smaller companies. As we started to work with the early adopters and gain momentum, we continually evaluated the market dynamics to determine the next level of stakeholders to engage. At each junction, we had to scale up in order to expand markets and reach new customers while still being able to meet the demands for new lighting products.
Continue to improve and adapt
Finally, achieving market transformation requires agility to react to changes in the market and consumer demands. As more agile project management practices are being adopted by the federal government, agencies are better able to continually iterate as required. This is crucial as a product moves through various phases of customer journey mapping where stakeholder engagement generates feedback that impacts outreach and marketing efforts.
At the end of the day, incentives can be an effective tool for encouraging consumers to choose climate-friendly products, but they aren’t without challenges. Leveraging the learnings from the successful ENERGY STAR experience, coupled with deploying the power of IRA incentives, can help the federal government make more climate-friendly products mainstream to achieve its ambitious climate goals.
Meet the author
Paul Vrabel, Vice President, Energy Efficiency and Sustainability Programs at ICF