Will Customers Pay for Residential Energy Efficiency Services?

Nobody really knows how the utility or home performance industry is going to sell unsubsidized energy efficiency services to residential customers. What we do know through experimentation is that many customers will pay something for those services, and the lower the cost, the more people will participate. But standing in the way of successful market-driven programs is the fact that years of utility demand-side programs have created an expectation that these services will come for free.

As deregulation takes hold and utility funding for energy conservation activities continues to dwindle, customers will need to perceive value if they are expected to pick up their own tab for efficiency services. For providers of those services, the task in the residential sector is daunting. Where can we collect fees and make a profit, at the entry point or at the point of installation? Should and will all beneficiaries of transactions, such as customers, contractors, or financial institutions, pay for the benefits they receive from home efficiency services? Given what customers are willing to pay, are profit margins large enough to sustain the service? Is the marketplace ready to support services that feature advanced home diagnostic services given their cost?

Most of these questions don't yet have any answers, and we'll only find answers through trial and error in the marketplace. But this experimentation should be supported by funding for market research. We need to test programs across different geographic regions, and hopefully find a way to support these services when deregulation takes hold.

Although we may find a solution through continued experimentation in the marketplace, research will give energy service companies and utilities a better understanding of pricing efficiency programs in a deregulated atmosphere.

Paul Berkowitz writes on behalf of Wisconsin Energy Conservation Corp. where he is director of energy efficiency services.