This presentation was given to the staff of the NYSERDA NYC office as a primer to market transformation principles and specifically to NYSERDA\'s application of those principles through the Clean Energy Continuum.

1. Market Transformation & NYSERDA’s Clean Energy Continuum: A Primer on Program Design, Implementation, and Evaluation Presented to the NYC Office, December, 16, 2009

2. Market Transformation “Market transformation combines individual policy and program initiatives into a coherent strategy for rapidly moving up the diffusion curve and increasing the ultimate market penetration of energy efficiency measures.”1 “Market transformation is the strategic process of intervening in a market to create lasting change in the market behavior by removing identified barriers or exploiting opportunities to accelerate the adoption of all cost-effective energy efficiency as a matter of standard practice.”2 “Market transformation is a reduction in market barriers resulting form a market intervention, as evidenced by a set of market effects, that is likely to last after the intervention has been withdrawn, reduced, or changed.”3 1Market Transformation Strategies to Promote End-Use Efficiency, Howard Geller and Steven Nadel, 1994, www.aceee.org/pubs/e941.htm 2NEEA’s Definition of Market Transformation,www.nwalliance.org/participate/docs/NEEAMTDefinition2008.pdf 3Market Effects and Market Transformation: Their Role in Energy Efficiency Program Design and Evaluation, Mitchell Rosenberg and Lynn Hoefgren, California Institute for Energy and Environment, March 2009, http://uc-ciee.org/energyeff/documents/mrkt_effts_wp.pdf

3. Market Transformation Technology Diffusion Curve The diffusion of innovations according to Rogers. With successive groups of consumers adopting the new technology (shown in blue), its market share (yellow) will eventually reach the saturation level.4 4Diffusion of Innovations, Wikipedia, http://en.wikipedia.org/wiki/Diffusion_of_innovations

4. Market Transformation 5NEEA’s Definition of Market Transformation, www.nwalliance.org/participate/docs/NEEAMTDefinition2008.pdf

5. Market Transformation Characteristics of a Market Transformation Program6 A Careful Analysis of the Overall Market A Clear Statement of the Overall Goal of the Initiative The Development of a Set of Coordinated Activities to the Achieve the Goal Successful Implementation of the Individual Activities Development and Execution of an “Exit Strategy” 6Market Transformation: Substantial Progress from a Decade of Work, Nadel, Thorne, Sachs, Prindle, & Elliott, April 2003, ACEEE

6. Market Transformation A Theory-Based Approach7 7A Theory-Based Approach to Market Transformation, Blumstein, Goldstone, & Lutzenhiser

8. Concentration (how many sellers and buyers are there? What is their relative size?)

9. Transparency (is it possible to know all prices and product variants? How much effort is required to know them?)

10. (Cross-)Ownership (are there particular formal (legally binding) ties among sellers or with other stakeholders?)

11. Government Regulation (also the sometimes double role of government as owner and regulator is relevant.)

12. Delineation and Separability(how well can the market be distinguished from markets for substitutes or complements? Are there a lot of spill-over effects to or from other markets or non-markets including environmental effects?)8From Technology Transfer to Market Transformation, Blumstein, Goldstone, & Lutzenhiser

14. Transaction Repetition (do buyers make often repeated transactions (for example, grocery purchases) or infrequent transactions (for example, automobile purchases)?)

15. Production Modality of the Market Goods (there is a continuum here from craft-based production (for example, buildings) to mass production (for example, refrigerators))

16. Social Networks (what is the nature of the informal relationships among market participants?)

17. Norms (what are the agreed upon standards of conduct for market participants? What sanctions are applied to those who violate the norms?)9From Technology Transfer to Market Transformation, Blumstein, Goldstone, & Lutzenhiser

18. Market Transformation 10Market Effects and Market Transformation, Rosenberg & Hoefgren, March 2009, California Institute for Energy and Environment

19. Clean Energy Continuum

20. Clean Energy Continuum Scientific Research and Market Analysis “…provide knowledge on the environmental impacts of current and emerging energy options, conduct early stage market analysis associated with new technologies, and stimulate an innovative economy in New York.” What are the characteristics of this stage? What type of programs and incentives are appropriate for this stage? What programs does NYSERDA currently operate that would be in this stage?

21. Clean Energy Continuum Technology Adoption and Market Expansion “…takes output from the previous Stage and other sources to begin concept and bench-scale testing of products and technologies that leads to full-scale and beta testing. Provides continued support to assess and improve the commercial and market viability of new technologies.” What are the characteristics of this stage? What type of programs and incentives are appropriate for this stage? What programs does NYSERDA currently operate that would be in this stage?

22. Clean Energy Continuum Technology Demonstration and Business Development “…continues to support product developers and end-use customers in the buildings, industrial process, transportation, power, and bio-energy sectors that want to conduct feasibility studies and/or post-development demonstrations of clean energy technologies and processes.” What are the characteristics of this stage? What type of programs and incentives are appropriate for this stage? What programs does NYSERDA currently operate that would be in this stage?

23. Clean Energy Continuum Technology Development and Commercial Feasibility “…provides mid-market actors and end-use customers with incentives to promote and use commercially-available products, processes, services, strategies, and methods. Supports the infrastructure and workforce development necessary for overcoming barriers to full adoption. Provides code officials with evidence to adopt green buildings and sustainable new construction as standard practice. Pursues transformation of the financing, real estate, insurance and other market support sectors to value energy efficiency and clean energy. Enhances energy diversity and system reliability. What are the characteristics of this stage? What type of programs and incentives are appropriate for this stage? What programs does NYSERDA currently operate that would be in this stage?

24. Clean Energy Continuum Standard Practice and Code Enforcement “…systems, equipment, and appliances demonstrated and/or installed in New York buildings under the earlier stages of the Continuum that are found to be cost effective and performing as expected in terms of energy savings and other non-energy benefits, are then written into advanced codes and standards.” What are the characteristics of this stage? What type of programs and incentives are appropriate for this stage? What programs does NYSERDA currently operate that would be in this stage?

26. Recent trends in prices and availability.

27. Likelihood of inclusion in a near-term codes or standards rulemaking.

28. Market readiness of more efficient substitute technologies.1111Market Effects and Market Transformation, Rosenberg & Hoefgren, March 2009, California Institute for Energy and Environment

29. Conclusion Consider Recent Public Policy Goals 15% by 2015 20% by 2020 30% by 2030

31. Milestone 2.1.2 Convene focus group at least twice to gather input on technical challenges associated with auditing and retrofitting mixed use buildings

32. Milestone 2.1.3 Research incorporation of mixed use building types into existing efficiency programs and certification tracks

33. Milestone 2.1.4 Develop and test technical protocol for auditing mixed use buildings

35. January’s staff meeting

36. Vision 2010

37. Taking your program to the “next level”

38. Behavioral Economics

39. 1-4 Homes Program Team Market Analysis and Strategy Memo