This document discusses how government action can accelerate the market penetration of energy efficient technologies. It provides examples of effective government programs in Japan and the US. The Japan's Top Runner program sets energy efficiency standards for appliances and vehicles that are higher than the best existing products, phasing out less efficient technologies. This pushed companies to accelerate introducing more efficient products and increased consumer awareness through labeling. Similarly, US refrigerator efficiency standards introduced in 1978, along with energy labels and incentives, drove steady efficiency improvements and cost reductions over time. The document also outlines how technologies, products, markets, and regulations generally progress in parallel over time as government policies target different stages of development.

1. ExCo 05 // 20-22 September 2011
CEM02 February 15, 2011
May 2, 2011
Presentation
Market Penetration of
Energy Efficient Technology:
a
Role of Government Action
Amit Bando
ambando@gmail.com
Author

2. Government Action can Accelerate Progress
ExCo 05 // 20-22 September 2011
on EE Technology Deployment & Market Penetration
 Government Action Can
Provide R&D Support
 Promote Public Awareness
 Provide Policy Stability




Support markets and industry
Provide predictable regime
Establish Regulations, Standards & Labels


Monitor, verify & enforce standards
Use labels - promote awareness and branding
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3. ExCo 05 // 20-22 September 2011
Government Action: Japan’s Top Runner Program
 Energy conservation law prescribes energy
efficiency standards for appliances/vehicles

Standards - set higher than the best performance value
of each product currently on sale in the market (pull)
 Standard setting takes into account
technological development


21 products are included
Low technology products are phased out (push)
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4. Government Action: Japan’s Top Runner
ExCo 05 // 20-22 September 2011
Program (continued)
 Example: passenger vehicle standards were set in 1999
Target: By 2010, fuel economy improvement would be
22.8%
 Fuel economy of passenger vehicles improved by 22.8%
during 1999-2005
 Example: air conditioners saw EE improvement of 67.4%
between 1999-2004
 Companies utilized technologies that they may otherwise
have waited to commercialize
 Improved consumer and retailer awareness – using labels,
etc. - accelerated pace of market penetration

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5. Government Action: USA’s Refrigerator Standards,
ExCo 05 // 20-22 September 2011
Labels & Incentives Program
 Between 1945 and 2010, the average refrigerator volume has
increased from 8 cubic ft. to 21 cubic ft.
 Government action on standards, labels and incentives led to
sustained EE improvement
 During 1945-1978 the annual energy used by a typical
refrigerator quadrupled
 In 1978, refrigerator standards were introduced in
California – other states followed
 Since 1978, the annual energy used by a typical refrigerator
has declined steadily - reached 1945 levels in 2010

This has not interrupted the long-term decline in real purchase
price – declined from $1,000 to $600 (2009$)
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6. Government Action: USA’s Refrigerator Standards,
ExCo 05 // 20-22 September 2011
Labels & Incentives Program (continued)
 Government action on Standards, Labels and Incentives has
accelerated the decline in life cycle costs (LCC) of refrigerators
 During 1945-1978, refrigerator LCC remained steady at
$5,000 (2009$)
 During 1978-2010, refrigerator LCC declined steadily to
$1,000 ((2009$)
 Government action has led to savings of about $20
billion/year in 2010 and $300 billion cumulative since 1978
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7. Transition Technologies, Products
ExCo 05 // 20-22 September 2011
and Services Follow Parallel Journeys
 Technology Journey
 Company Journey
 Market Journey
 Regulation Journey
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8. Transition Technologies, Products and Services
ExCo 05 // 20-22 September 2011
Follow Parallel Journeys
Technology Journey
Basic
research
Principle
Individual
innovators
Applied
research
Concept
Early
demonstration
Full
demonstration
Validity
Viability
Company Journey
Small group: start-up
/unit in a company
Marketed
product
Value
Medium-size
operation
Revenues
Venture Capital
Market Journey
Demonstration &
Early adopters
Rational economic
sample distribution
& niches
purchase
Market Pull
Awareness
Positive Potential
Regulation Journey
General
General
General
Specific
regulation
regulation
regulation
regulation
Negative
Positive
Positive
Neutral
Often unintended
Own capital
Warranted
product
Quality
Large scale
operation
Profits
Technology &
Market evaluation
Feedback
General
regulation
Neutral or positive
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9. EffectiveSeptember 2011
ExCo 05 // 20-22 Government Action
Recognizes the Stage of Each Journey
 A “policy package” constitutes effective
action
In Japan, government action enhanced market pull by
using specific (positive) regulation to provide proof of
value and positive profits
 In the US, progress on the regulation journey from
specific (positive) to general (neutral) has been
accompanied by movement on the market journey from
early adopters to market evolution

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