According to the Consortium for Energy ­Efficiency’s 2013 State of the Efficiency Program Industry report, “U.S. and Canadian combined gas and electric Demand Side Management program budgets reached $9.6 billion in 2013, representing a 2 percent increase over 2012 DSM budgets. In 2012, these programs saved approximately 27,000 GWh [gigawatt-hours] of electricity and 425 million therms of gas, which represents 21 million metric tons of avoided CO2 emissions.” 


These programs offered rebates on everything from energy-efficient lighting, motors and appliances to water heaters, roofs and insulation. While 2014 data isn’t yet available, “I would estimate that 2014 expenditures will represent a 2–5 percent increase over 2013 levels,” said Steve Rosenstock, P.E., senior manager of energy solutions at the Washington, D.C.-based Edison Electric Institute. 


So will 2015 be “the year of the rebate” for the proactive businesses, homeowners and contractors driving these projects?

Experts agree that rebates offer great opportunities for contractors to promote their services, sell higher margin products, get closer 
to their customers, and differentiate themselves in a 
competitive market. However, prudence is crucial.

“Yes, but 2015 might better be characterized as ‘the year of rebate revisions,’” Rosenstock said. 


Here, he and other industry experts share their perspectives on the current and future landscape for utility rebates on energy-efficient products and offer tips to help contractors maximize their participation in this attractive financial opportunity.


A view from the hill


Since the 1980s, when utilities began engaging in large-scale DSM—the offering of incentives has become big business for the nation’s roughly 3,000 electric utilities (2,000 municipals, 900 co-ops, and 150 investor-owned entities). Incentives include product rebates designed to encourage electricity users to adopt more energy-efficient products and practices that reduce the need to build more capacity. 


“Compared to 5–10 years ago, the current utility-rebate landscape is more active but shifting based on new technologies and the impact of federal appliance energy-efficiency standards and building codes,” Rosenstock said. 


Rebates typically reduce the incremental cost—e.g., the purchase price differential between baseline efficiency and high-efficiency product—by anywhere from 25–50 percent, depending on the particular technology or the type of building. However, continuously rising energy-efficiency standards are increasingly serving to offset the need for and magnitude of rebates.


“For example, between January 2012 and April 2015, every major home appliance and common lighting technology had or will have an increase in their minimum efficiency requirements,” Rosenstock said. “As the efficiency floor gets closer to the technically achievable efficiency ceiling for more technologies, the savings percentages decrease and the economics can get harder to justify. As a result, I would suspect that overall rebate activity on a national basis will be roughly the same in 2015 as it was in 2013–14, but that rebate amounts might be adjusted downward as new standards take effect and prices for higher efficiency equipment decrease.”


Lighting leading the way


At leading investor-owned utility Consolidated Edison in New York, Peter Jacobson, lighting specialist, confirms that incentives on energy-efficient lighting products represent at least 70 percent of the rebate programs in the marketplace because they involve a visible product that customers can relate to and have followed the evolution of. 


Leendert Enthoven, president of BriteSwitch, a Princeton, N.J.-based company that specializes in managing and securing rebates, tax incentives and other financial rewards (primarily in the lighting arena) for commercial properties in the United States, agrees.


“Overall, lighting rebates have gotten stronger over the years, and 71 percent of the U.S. is currently covered by an active commercial lighting rebate program,” Enthoven said. “The landscape is constantly changing, though. For example, a large rebate program in the South has been out of funding for over a year but will be starting again in January 2015, while other areas that have been strong in rebates, such as Ohio and Indiana, have also experienced recent changes due to new legislation in their states. Rebate programs for commercial customers were at an all-time high in 2013–14, however, and, in 2015, we expect a slight increase in program budgets overall.”


Jacobson said that the programs have grown, which has coincided with maturity and stability in their management and execution. 


“Utilities have all learned lessons from previous DSM programs, while users have gained an understanding of the concepts of sustainability and conservation along the way,” he said. “Technologies are well-proven, so it’s easier for the market to apply them and secure greater savings, and utilities are more at ease running these programs now than they were in the early 1990s, when they first became popular. Overall, it’s now a better marketplace for everyone, and there are no real unknowns.”


That’s not to say that the rebate market hasn’t seen its share of internal changes. 


“We’re continuing to see a big shift towards incentives for LED lighting and away from more traditional lighting technologies,” Rosenstock said.


“LED solutions seem to be where most rebate programs are focusing now,” Enthoven said. “While rebates for products like LED pole lights and high bays may have been custom before, they’re now switching to prescriptive formats—e.g., a set dollar rebate per each unit purchased—which may often increase the dollar amounts. The next rebate category that we think will take off in 2015 is LED replacements for T8 fluorescent technology, such as LED tube T8s and retrofit kits.”


At ConEdison, “we’re seeing a big push for rebates on LEDs and lighting controls,” Jacobson said. “It’s not just about changing out a bulb anymore but about changing a system for greater savings, and these SSL systems are more reliable, easier to understand and easier to integrate than ever before. We also offer different ways for users to participate—either prescriptively for components or on a custom basis for systems—so that we give customers more flexibility.”


While Enthoven believes that many programs offer prescriptive rebates for established technologies because they are more straightforward for customers to understand and take advantage of, “most programs that offer prescriptive rebates will also offer a custom program for projects that don’t fit in the prescriptive guidelines,” he said. “These custom rebates typically require a lot more work than the prescriptive programs but, ultimately, still provide a nice incentive to the customer.”


According to Stan Lazarian, president of Electric Service & Supply Co. (ESSCO), a nearly 70-year-old, family-owned electrical contracting firm in Pasadena, Calif., “Rebates have undergone significant adjustments in our area, and utility companies are taking a more targeted approach, allowing some blanket rebate programs to expire and unveiling new rebate programs aimed at particular industries. For example, the L.A. Department of Water and Power recently began offering larger rebates for lighting retrofits and other energy-efficiency measures in industrial facilities. Because Title 24 mandates energy-efficient lighting and lighting controls, utility companies have reduced lighting rebates in many areas, though Southern California Edison is unveiling a new rebate for meeting lighting control requirements. Overall, rebates may be declining in some areas and industries while others are increasing.


“Since the cost of LEDs and other energy-efficient lighting measures have dropped while their efficiency has increased dramatically, we don’t need really large rebates to make lighting retrofits a wise investment,” he said.


An untapped opportunity?


Interestingly enough, our experts all note a quandary about the market’s current response to rebates. 


“There’s an enormous amount of free money out there waiting for customers, and yet, each year, few programs actually use all of their funding,” Enthoven said.


The shortfall may lie in the logistics. 


“Nearly every photovoltaic and energy-efficiency project we do involves rebates of some kind, though when we approach customers, they rarely know how to access rebates or which rebates are available,” Lazarian said. “The process of applying for and receiving rebates is daunting and virtually none of our customers are willing or able to wade through the bureaucracy.”


“I think the market knows that rebates exist, but very few people understand how to take advantage of them,” Enthoven said. “Many contractors will tell a customer that a rebate may be available, but few actually include an estimate in their pitch and show the improved payback period driven by the rebate. Perhaps because of this, we’ve experienced a strong increase in the demand for rebate-processing services in the past few years. Many contractors see the value in rebates but don’t want to invest the time and money to pursue it themselves. By partnering with a rebate-management company, contractors can count on rebates for their customers without worrying about all the fine print and other pitfalls that can be associated with the rebate process.”


The bottom line


Experts agree that rebates offer great opportunities for contractors to promote their services, sell higher margin products, get closer to their customers, and differentiate themselves in a competitive market. However, prudence is crucial. 


“Contractors have to be familiar with the rules of each program, as they may differ in terms of requirements or validation, and they’re often subject to change,” Rosenstock said. 


He recommends that ECs visit the local utility program’s website at least weekly to check for updates or revised deadlines.


“Contractors who know how to leverage rebates have a distinct advantage over ones who ignore them, because they’re basically able to offer the same products at better net prices without eating into their own profit margin,” Enthoven said. 


In terms of helping customers to obtain rebates, which can often be a six-month process, he said some contractors choose to process the rebates on behalf of their customers, while others direct customers to the rebate program’s website or partner with a rebate-management company that can take care of the entire process for the customer.


“It’s important to ensure that the product you want to use is qualified,” Enthoven said. “Most rebate programs require an LED product to be on the Energy Star or Design Lights Consortium [DLC] list and T8 products to be on the CEE list. These lists contain thousands of products, but it’s important that the actual model you’re selling is listed on the website—it’s not enough just to see an Energy Star or DLC logo on the spec sheet for the product.”


“Rebates do offer a great opportunity for electrical contractors, but they require constant vigilance,” Lazarian said. “We meet with local municipalities and utilities, engage in lots of networking, and spend time on the utility company websites in an effort to stay abreast of the most recent information. Targeted rebates are allowing us to match our sales effort to the specific areas and industries where rebates can reduce the cost of the project and benefit the building owner.”


Jacobson also remains bullish on rebates. 


So is it a good time for contractors to capitalize on rebates? “It’s the best time,” Jacobson said. “Utilities are more confident in delivering these programs than ever before and customers should feel more confident in participating.”