How Consumers Are Picking Renewable Winners

How Consumers Are Picking Renewable Winners

Exploring Yellowstone National Park, we were awestruck by marvels such as Old Faithful, the Lower Falls and Sulphur Cauldron – phenomenal displays of nature’s power to generate energy. Hiking with the family, our conversation turned to the practicality of renewable energy applications for American consumers.

“Everyone who lives in a sunny climate should have solar panels on their roof,” my mother-in-law said. I agreed and asked what is still holding her back from having a solar array installed on her Texas hill country home.  “Expense,” she replied. “I don’t know much about the incentives available. There’s also the matter of the minerals the Chinese are extracting from the earth to make the panels.”

Cost, confusion over incentives and unintended environmental consequences still prevent many of us from taking the plunge into cleaner power purchases. Most people, except for a few population segments that reliably buy green products, still stop short of purchasing renewable energy despite industry reports claiming that as many as 85 percent of global consumers desire green power. The LOHAS market estimates that 13 to 19 percent of adult Americans demand sustainable solutions, but the figures may be far lower.

“Some research suggests that only 1 to 5 percent of consumers are die-hard greenies,” says Edwin Stafford, co-director of the Center for the Market Diffusion of Renewable Energy and Clean Technology at the Jon M. Huntsman School of Business at Utah State University.

“As a market segment, such a small amount of consumers may not be profitable for green marketers. The objective should be how to appeal to the other 95 to 99 percent of consumers who could be lured to buy green if the benefit is framed to match their values.”

Once marketers get past values, there’s still another hurdle to cross: transaction cost, a term that refers to the behavioral resistance inherent in transitioning to a new technology. It’s a major obstacle for low-carbon economic growth, according to the World Bank, representing a powerful source of inertia in the diffusion of clean technology. Education lags far behind innovation. Buyers, for example, continually cite cost as a major reason for not adopting clean technologies, but in many cases, the cost is diminishing or has disappeared.

Take solar, for instance. In some parts of the global market, solar power already has reached grid parity. Earlier this year, Deutsche Bank released new analyses concluding the global solar market would become sustainable by the end of 2014, no longer needing subsidies to continue performing.

In the U.S., new financing options make it possible for more consumers to benefit from affordable solar power. In Provo, Utah, for example, Vivint Solar recently secured $200 million in two new tax equity funds to finance solar power systems on residential rooftops. Solar City and other companies make it possible to lease panels at little to no up-front costs, saving consumers thousands of dollars. (Check out Jim Motavilli’s assessment of the pros and cons of the home solar lease.)

“The appetite for renewable energy continues to increase,” says Jennifer Clymer, environmental manager at Green Mountain Energy Company based in Austin, Texas. “We’ve seen consumer demand for renewable energy grow exponentially, as more and more homeowners understand the environmental benefit of choosing electricity generated by pollution-free sources like wind and solar. The amount of wind energy produced has increased by more than 28 times since Green Mountain pioneered the voluntary market in 1997. With costs on the decline, solar is also making strides, with solar output expected to more than double between 2012 and 2014.”

Geothermal heat pumps also have become a sensible option for heating and cooling.

“While geothermal heat pumps are still often considered costly for a retrofit, for a brand new home we see no reason why people should not have a system installed,” says Maria Richards, geothermal lab coordinator at SMU Geothermal Laboratory, a 40-year-old research institute.

“The recent increase in numbers of geothermal installations was related to tax incentives. Awareness of the possibility of using geothermal heat pumps is lagging by both the customer and many contractors, but here in Texas, they are becoming more common for homes and public buildings interested in LEED certification.”

Richards recommends as a good reference for information on regulations, contractors and other information.

While hesitancy over green power’s feasibility and affordability remains a barrier to widespread adoption for most consumers, certain population segments remain unfazed. Here are four types of buyers that marketers can rely on until green becomes more mainstream:

1. Deal seekers: The American Recovery and Reinvestment Act of 2009 allotted funding for energy efficiency research, development and outreach projects, offering consumers tax incentives to purchase energy efficiency and renewable energy technologies. The Residential Energy Property Credit (Section 1121) has been extended for two years through December, providing tax incentives for energy efficiency and more “exotic” technologies, such as geothermal heat pumps. For the latest information, visit the Department of Energy-funded website DSIRE.

2. Tech junkies: Stafford’s lessons in green marketing highlight a trend toward bundling energy-efficient technologies with novel apps, solar battery chargers and other gadgetry to add an irresistibility factor. He cites the example of Philips Hue bulbs sold through Apple stores, which can be controlled with a smartphone iOS app to display a much richer spectrum of color than what could be achieved with CFLs and incandescent bulbs. Gadget critic Lee Hutchinson said that after several weeks of almost nonstop fiddling with Hue bulbs, he found them “indispensable” and “addictive.”

3. Status seekers: The affluent doctor or venture capitalist who drives the Tesla around town may look like a peacock to his friends, but in terms of marketing, he is a critical part of the equation. Affluent, values-driven, brand-loyal consumers can afford to take a risk on renewables and are happy to pay for green bragging rights. Until these technologies reach a tipping point, marketing the glam side of green is a way to keep wealthier customers interested.

4. Early adopters: In pursuit of a mainstream audience, marketers should not discount the individuals most willing to open their wallets and stick out their necks to purchase renewable energy technologies that many consumers still regard as quirky and strange. In terms of diffusion of technology, early adopters are extremely important in socializing and commercializing new technology. Adjusting one’s electricity plan to include more renewables also may be an easy change that doesn’t cost money, and could even lower monthly bills.

The evidence shows that renewables already are commercially viable and gaining in popularity. In the past five years, U.S. renewable energy capacity has doubled, according to a 2013 report produced by Bloomberg New Energy Finance.

Given the market trends toward innovation, affordability and sustainability, as well as the dogged perseverance of green entrepreneurs, the right ingredients are readily available. To lead more buyers to adopt these technologies, thus acting on their convictions and in their own self-interest, marketers need to ensure they are offering the highest-quality ingredients possible and then provide digestible, easy-to-understand recipes for assembling them.

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