Talbot Gee, HARDI's EVP & COO discusses drivers and trends being seen in the world of energy efficiency incentive programs at the 2011 HARDI Western Region Conference.

1. Trends and Drivers in HVACR Energy Efficiency Incentive Programs Presented by: Talbot H. Gee, HARDI Prepared Exclusively for: HARDI Western Regional Conference Las Vegas, NV March 21, 2011

2. Objectives: Maximizing $6+bil Market and EE overview SCE Program Highlights Discussion with Dale Gustavson, Better Buildings NV Power: Program Specifics with Tom Downey Q&A Curbing the high-efficiency equipment slide Update on the U.S. energy efficiency market Why the Western Region is especially important How to capitalize on EE incentives

3. A New Normal? Ten year avg: 6.35 million units Source: AHRI, JP Morgan

4. U.S. Factory Shipments of Central A/C and Air-Source HeatPumps to HARDI Member Sales12/12 Rates-of-Change

5. U.S. Factory Shipments of Central A/C and Air-Source HeatPumps to U.S. Housing Starts12/12 Rates-of-Change ITR predicts a 1.5% decline in 2011 housing starts from 2010, forecasting 579,000 units. This does not bode well for 2011 unitary shipments given this historical correlation.

6. 2011’s Efficiency Mix Since 2006: Nearly 5x increase in >15 SEER unit shipments Over 2.5x increase in >13 SEER unit shipments 2010 record $5.4 bil in US electric efficiency funds …but 27% drop in total unitary volume (7 mil to just over 5 mil) HARDI est. 78% 13 SEER in 2011 Source: JP Morgan 2011 HVAC Outlook, CEE 2010 Annual Report

7. System Replacement Rates Plummet Source: JP Morgan

8. The Appliance Standards Effect “It is important to keep in mind, that the economics of energy efficiency, even with the help of the government, are generally not attractive enough, in our view, to drive discretionary replacements without a “green” incentive, as most consumers tend to focus on the upfront costs of replacing a new system. This is best exemplified by the significant pre-buy seen when the industry transitioned to 13 SEER in 2006- distributors clearly saw that the value delivered by higher efficiency was not commensurate with the higher price.” JP Morgan 2010 HVAC Market Review & Outlook

9. All of This Despite… $5.4b is electric 39% C&I 31% Resi & low income 75% in West for EE Source: CEE 2010 Annual Report

10. Source: CEE 2010 Annual Report

11. While Leading, CA is Not Alone CA, NY, FL, MA accounted for 50% ($2.7b) of 2010 budgets Source: CEE 2010 Annual Report

12. Utility Efficiency Program Needs Simpler to design, implement, and justify + Cheaper to design, implement, and justify + More effective (i.e. better uptake) = Better prescriptive OR performance based

13. Southern Cal Edison Distributor Incentives 2010 Program Highlights Added incentives for water-cooled chillers and variable refrigerant flow equipment (VRF) 10 GWH energy savings and 4 MW demand reduction Incented over 42,000 Tons with 31% annual growth rate Source: CEE 2010 Annual Report

14. Snapshot of Others in CA

15. Other Notable Western Region Programs Source: 2010 CEE Annual Report

16. And a few more… Source: 2010 CEE Annual Report

17. Maximizing EE $$ HARDI Foundation to form: Center for Energy Efficiency Optimization Will study how wholesale distribution can best drive and influence energy efficiency Support Your HARDI Foundation!

18. Q&A w/ Dale Gustavson Better Buildings Inc. www.betterbuildings.com Staff for Western HVAC Performance Alliance SCE and PG&E program support

19. Nevada Energy Program Tom Downey, Field Manager, Proctor Engineering Anne Marie Blankenship, Program Manager, Resource Solutions Group

20. Questions