Tax credits and their effect on the HVACR distribution industry were at one time an increasingly hot topic. Concerns about tax credit expiration and what that would mean for the industry kept CEOs and business owners busy. While the industry did have to adjust to a drastically reduced federal tax credit in 2011, one source of funding to promote energy-efficient HVAC systems did not decline: rebates offered by energy-efficiency programs. A study commissioned by the HARDI Foundation and conducted by the Vermont Energy Investment Corp. (VEIC) found that HVAC distributors can play an extremely important role in the support of those programs..

The study is a multifaceted research project that was completed in Nov. 2011. Through multiple surveys and interviews of non-HARDI and HARDI members, it contains results from both primary and secondary research sources. These sources combined to yield the "Optimizing Residential HVAC Efficiency Programs" report, an analysis that spans four years of energy-efficiency programs activity.

"We've watched incentive funding skyrocket over that time while the volume of HVAC equipment sales has steadily declined until only recently leveling off in 2010. We saw the share of this shrinking pie grow significantly for high-efficiency units during the two years of robust $1,500 federal tax credits, only to plunge right back to historic levels in 2011," said the study's forward, signed by Talbot Gee, HARDI executive vice president and COO; and Bill Shaw, president of the HARDI Foundation board of trustees.

"In short, the vast majority of utility energy-efficiency programs are simply not working. In those instances of program success, it has been the engaged and active efforts of HVAC distributors that have made the difference."


The study defines the term "energy efficiency" to generally mean cooling and heating equipment meeting at least the minimum Energy Star(r) specifications. As providers of that equipment, distributors find themselves in a prime position to foster and advance energy-efficiency programs. One of the issues the study explored via phone interview was the question of which was more important, higher rebates or greater engagement?

According to the report, one-half of the efficiency program managers interviewed said, "Up-front engagement with distributors and contractors would be more valuable than higher rebate amounts."

Southern California Edison explained that when distributors are involved in rolling out these programs, that "They come up with creative ways to motivate sales staff rather than just lowering the price of the equipment."

The utility experienced better success providing distributors the opportunity to be the expert in implementing the program.

On the opposite side of the coin were entities like Xcel Energy and Resource Solutions Group that felt the right combination between incentives and engagement had to be struck.

"A program needs to set a high enough rebate to get the industry's attention and then to use engagement to maximize impact," commented Xcel Energy.

The balance between incentive and involvement can be a challenge, but the report outlined other challenges to energy-efficiency programs. The economy was one, primarily due to the fact that participation usually relies on customer purchases. Institutional infrastructure and customer reach/influence were others. Trouble with increasing amounts of paperwork and administration can bog down a growing utility program, as well as establishing and maintaining standard operating procedures.

Among a list of key recommendations that the study makes for emerging and developed efficiency programs, "Communicate in terms that are meaningful for the distributor, and work with distributors early in the program design process," are two of the first three on the list. Of the 16 recommendations made in the study, six of them deal directly with distributor influence, feedback, and participation.


Having reported many facts and supplied suggestions to keep energy-efficiency programs busy, the study flips the coin and focuses further on the distributor's role in these programs. It provided five key recommendations for HVAC distributors based on all of the research compiled by VEIC. They were presented in order from the simplest to the more complex undertakings.

- Become aware of local efficiency programs. According to the web-based portion of the survey, 15 percent of respondents were not aware if there was or was not an efficiency program in their area. To help distributors to accomplish this, the study suggests they access the Database of State Incentives for Renewables and Efficiency as well as the CEE Directory of Energy-efficient HVAC Equipment.

- Offer to connect efficiency programs with contractor customers. The study suggests that this offering will help open the dialogue between the distributor and the efficiency program. Ways to accomplish this include "offering to host events where the program representative presents and conducts outreach, placing program materials and posters at distributor counters, and stapling program information to invoices."

- Inform efficiency programs about training offerings. Distributors provide a core service of training HVAC contractors according to multiple research methods used by the study.

"Because an informed and trained contractor base is essential to efficiency programs, this represents an untapped area of opportunity for most distributors and efficiency programs."

The study suggests adopting an integration strategy of adding efficiency program informational and training sections to other technical and sales training sessions.

- Provide constructive input at the right time. Planning cycles are not only key to the distributor, but they are also key to the efficiency program. It is important that distributors are aware of the efficiency program planning cycle.

"Efficiency programs are typically constrained as to the number of changes they can make outside of that formal planning cycle, so providing input as program planning is occurring is most effective."

-  Help efficiency programs understand emerging technologies. "There is remaining technical potential in the near term that would help offset increases in federal minimum standards, thus helping to justify additional efficiency program support." According to the report, it is important that distributors not only help the efficiency programs to understand the technology, but that they also help programs to promote these technologies.


Continued study and growth on the part of the distributor and the efficiency program will further provide new opportunities to better take advantage of the money to be made and saved with energy-efficiency programs and equipment. The study established there is a strong role for the distributor to play within this unfolding story of residential HVAC energy-efficiency programs.

"Specific areas ripe for partnership between efficiency programs and distributors include program promotion, stocking efficient equipment, contractor outreach, contractor training, understanding sales trends, and providing program input."

For more information, visit

SIDEBAR: Purpose, Goals, Methodology

The purpose of this study was to explore the opportunities for increasing the market acceptance of high-efficiency residential HVAC equipment through improved collaboration between trade distributor networks and energy-efficiency program implementers. The primary goals were to:

- Indentify the degree of influence that HARDI member distributors have on their contractor customers' purchasing decisions and sales strategies.

- Identify the specific supply chain barriers - especially those that can be impacted at the distributor level-that to date have kept residential HVAC energy-efficiency programs from achieving greater success.

- Present possible scenarios for efficiency programs to address those barriers on a regional basis.

- Quantify the potential benefits to efficiency programs if they address those barriers.

To achieve the goals of the study, the researcher completed the following basic tasks. These tasks are a brief summary. Full details are provided in the complete report.

- Research and provide a high-level summary of the current state of residential HVAC programs.

- Develop a survey instrument that HARDI can deploy to its membership on a regionalized basis to gather information on distributor perceptions and desires relative to residential HVAC efficiency programs.

- Evaluate and provide a high-level summary of technical residential HVAC efficiency opportunities to ensure ongoing viable role for residential HVAC efficiency programs.

SIDEBAR: Highlighted Key Findings

The study produced large amounts of information and insight. Among some of the key findings are the following:

- Even though residential program budgets in the United States have grown by 129 percent since 2007 (from $752 million in 2007 to $1.72 billion in 2010), sales of HVAC equipment have stagnated. Data from the Air Conditioning, Heating, and Refrigeration Institute (AHRI) indicate that shipments of residential central air conditioners and heat pumps dropped by nearly 20 percent and shipments of residential furnaces dropped by 12 percent over the same 2007-2010 time period.

- Efficiency programs to date have not been major drivers of high-efficiency product sales, especially when compared with the $1,500 federal tax incentive that was in place during 2009 and 2010. The J.P. Morgan/HARDI 2011 HVAC Review and Outlook asked distributors, "Have you seen any benefits to your business this year from utility incentive programs?" Only 30 percent of respondents said yes.

- Given upcoming changes to federal minimum energy performance scheduled to take effect in 2013 for furnaces and 2015 for central air conditioners and heat pumps, efficiency programs have a limited time period to garner energy savings from today's technologies. After those standards take effect, programs will need to look to emerging technologies to capture additional savings.

- Source: Optimizing Residential HVAC Efficiency Programs