Insights from Market Characterization Studies

As savings from lighting and other low cost/high benefit opportunities become more difficult to achieve, program administrators need to look closely at different markets to understand where potential savings exist. Baseline or appliance saturation studies are great tools that give program administrators a snapshot of the market. They help to answer the questions “what percentage of homes or businesses have this type of widget?”, “how many widgets are in there in each home or business?”, and “how many of those widgets are energy efficient?” This helps program administrators understand their program in terms of potential participants and potential savings. However, these studies usually come up short providing information on how to best achieve these savings. That is where market characterization studies can help.

Market Characterization Studies

Market characterization studies (or market assessment studies) can look at a market segment, such as health care, or an end use or technology, such as heat pumps or lighting controls. The nuances of each market under study will dictate the specific scope of each study, market characterization studies typically include the following:

• Characteristics of the market
• Market drivers and barriers
• Installation and maintenance practices
• Customer awareness and interest
• Regulatory landscape
• Supply chain and competitive landscape

No two markets are the same, and the studies dig into the specific characteristics of an individual market and what makes it unique. Better understanding the qualities of a market and its various participants allows program administrators to tailor their approach to meet each market’s needs and maximize its potential savings.

Example: Connecticut Agriculture Sector

Michaels Energy recently completed a market characterization study of Connecticut’s agriculture sector. The purpose of the study was to provide the state’s program administrators with information about energy efficient opportunities in an under-researched and underserved market. Overall, we found that the agriculture sites in Connecticut are very different than other commercial and industrial sites and treating agriculture as just another C&I segment will result in low participation rates and savings. Some of the key takeaways from the study include:

• The vast majority of agriculture sites are small and use less than 75 MWh of electricity per year.
• The diversity within the agriculture sector results in divergent practices. Small sites are more likely to repair equipment well beyond its useful life to postpone the cost of replacement as long as possible. Larger sites are more likely to have equipment purchasing requirements and access to capital and financing for energy efficiency upgrades.
• Practicality is a key driver of equipment purchase and replacement decisions. As a key input to production, reducing energy use is important but less of a priority, especially for smaller sites and sites for which energy costs are a small share of overall operating costs.
• Farm production/output is a critical factor in decisions to replace/retrofit equipment and site owners/operators are reluctant to implement any projects that could reduce output (real or perceived). Any disruptions to production must be minimal and temporary.
• Agricultural sites have a limited network of trusted sources for information; their local contractors, farm equipment suppliers, and themselves are most influential in their decisions.
• Reliance on delivered fuels is prevalent in the agriculture sector.

Program administrators can take the findings from market characterization studies like this and develop targeted strategies to maximize savings in the market. For example, in the case of the CT agriculture market, we found that agriculture sites have small networks of trusted sources for information about energy-using equipment, but also that they used different sources for production equipment and general service equipment (e.g., lighting). Program administrators may need to target farms differently depending on the type of equipment being installed. This insight would not be possible without research focusing on specific markets.