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Rebates

Rebates for energy efficiency products are usually designed to encourage the purchase, and accelerate the market penetration, of specific products. State and local governments reap significant air quality and health care benefits through rebate programs, since an increase in energy efficiency generally results in fewer harmful emissions. Rebate programs for solar water heating and photovoltaic systems are becoming increasingly popular in state and local governments and utilities.

Historically, manufacturers and markets respond to rebates. For example, Home Energy Magazine researchers compared the electricity consumption of refrigerators made by the top five manufacturers in the United States. They looked at the refrigerator rebates offered and found that these five manufacturers, who are responsible for 95% of refrigerator sales in the country, produced models that were just beyond the common rebate qualification level — exceeding standards by 10 to 20%. The lesson learned is that manufacturers respond to rebates and increase energy efficiency levels accordingly.

The concept behind most rebates is to entice the customer into purchasing a product that is more energy efficient than the minimum energy code. Rebates offset some of the extra cost of the purchase with additional post-purchase money from state, local, or utility funds.

Most state-managed energy efficiency programs provide rebates ranging from $50 to $500 per product. Rebates for renewable energy projects vary. Generally, rebates for photovoltaic systems are offered for each watt installed ($2-5/watt), not to exceed 50% of the total project cost. Many solar water heater programs provide rebates ranging from $400-800. Most programs send a check to the purchaser within six to eight weeks after accepting the rebate application.

Most rebate programs target appliances and equipment meeting ENERGY STAR® standards, which are typically 10%-30% more efficient than most products. Rebates of $50 and $75 per unit for new energy- and water-saving clothes washers and dryers have been especially popular. Many programs have annual caps on their rebate programs.

A common program design is to offer higher rebates for more efficient models. For example, by exceeding a particular energy efficiency standard by 10%, the consumer would receive a $100 rebate; for exceeding it by 15%, $150; and for exceeding it by 20%, $200. Rebate programs traditionally were funded through both public and private utilities; recent programs are increasingly funded through System Benefits Charges. They are funded usually on a first-come first-served basis and are often short term — even one year or less.

Depending on the size of the rebate program, administrative costs usually run 10%-20%. Public awareness and advertising expenses tend to be a significant budget item in rebate programs.

Monitoring and evaluation are important in rebate programs. Tracking the number of appliance purchases and the number of old appliances recycled helps program personnel total the emissions reduced and energy saved. Allowing consumers the flexibility to use the installers they choose makes the program easier to administer. Creating a list of approved contractors can be time-consuming and perceived by consumers as restrictive.

Arguments for Rebates

  • Rebates spur the development of markets.
  • Rebates result in fewer harmful emissions and lower health care costs.
  • Rebates are proven to induce consumer purchases of energy efficient products.
  • When combined with recycling programs, rebates help remove old, inefficient, polluting from the marketplace.
  • Rebate programs are relatively easy to administer.

Arguments against Rebates

  • Administrative costs can be high for certain rebate programs.
  • Rebates effectively choose winners and losers in the marketplace — the losers are the products with no rebates.
  • Rebates can be paperwork intensive.
  • If designed improperly, rebate programs can cost more money than anticipated.

For more information on rebate programs for energy efficiency and renewable energy products, visit the Database of State Incentives for Renewable Energy.