I recently had the opportunity to interview Richard Rattray, LC, Commercial Engineer, LEDVANCE, for an article about midstream lighting rebates I developed for tED Magazine’s August issue. This is the transcript.
DiLouie: How does a typical midstream rebate program work from the distributor perspective?
Rattray: Typically, the distributor sells the lighting products to their customer at the price of the product minus the incentive. At the end of the month, the distributor goes back to the utility and notifies them of the sale and requests to be paid for the full amount of the incentive.
DiLouie: Programs vary, but what are typical requirements most programs have in common?
Rattray: The utility’s goal of the program is to save energy, so all programs have that as the first requirement. Many programs also have a minimum customer contribution.
DiLouie: What are the advantages of midstream utility rebates of energy-efficiency lighting products for electrical distributors? What are potential benefits for manufacturers?
Rattray: An advantage for the electrical distributor is that customers who would typically purchase traditional lighting products are incentivized to purchase higher initial cost energy-efficient products (An electrical distributor typically earns higher profit on these type of products). A benefit for the manufacturers is that these programs increase the volume of the energy-efficient products which helps lower the manufacturers’ product cost.
DiLouie: What are disadvantages of these rebates for distributors and manufacturers? How can distributors mitigate them?
Rattray: A disadvantage for the distributor is that some programs require specific information be gathered regarding the end user. The distributor needs to capture these details (such as an address) electronically and send to the utility at months end. Some distributors’ computer systems are not set up to input this information and are forced to do this outside of their normal process which takes significant time and manpower.
DiLouie: What overall effect are midstream rebates having in the markets they serve, and what effect would they have on the overall industry if implemented nationwide?
Rattray: Midstream rebates very effectively drive energy efficiency. The program advantages far outweigh the disadvantages and should be implemented nationwide.
DiLouie: Can you point to an example of a midstream rebate program this working very well for moving lighting products? Or any examples of distributors getting behind them?
Rattray: The Mass Save Bright Opportunities Upstream Program is an example of a program that is working very well and is well supported by local distributors. Reasons: 1) The program covers a wide range of products including LED lamps, tubes, and fixtures. They also incentivize controls which helps to save additional energy. 2) The utilities and their program implementer meet quarterly with the distributors and manufacturers to discuss program performance, answer questions, and help resolve any issues. This type of dialogue helps create a more efficient program. 3) Any updates to the program are clearly communicated to all involved so that everybody knows what is being changed and when. 4) Occasionally throughout the year, utilities for a limited time increase incentives for specific products that they feel should be emphasized (the higher incentives benefit everyone involved in the program and helps increase the ROI for the end users).
DiLouie: Where do you see midstream rebates headed as an overall trend? Do you see more utilities adopting them?
Rattray: I see more utilities adopting midstream rebates because these programs effectively promote energy efficiency and are a good investment for the utility.
DiLouie: What is the typical process involved in a distributor becoming a midstream rebate provider?
Rattray: In order to become a midstream rebate provider, distributors simply complete the necessary paperwork that says they will follow the rules of the program.
DiLouie: What advice would you give to distributors interested in becoming midstream rebate providers?
Rattray: I suggest distributors fully embrace this program as it helps build a profitable business.
DiLouie: What do electrical contractors need to know about these rebates?
Rattray: Electrical contractors can help the process by having information such as end user addresses available for the distributor when the product is purchased. Additionally, electrical contractors need to know that these incentives are for a limited time, meaning that the utilities can change incentives with short notice.
DiLouie: If you could tell the entire electrical industry just one thing about midstream lighting rebates, what would it be?
Rattray: Midstream lighting rebates are a home run! They are effectively transforming the lighting market to energy-efficient LED products. The process is designed such that it provides benefits to each of the participants. End Users: No need to complete lengthy incentive paperwork application. Incentive is received up front at time of product purchase. Distributor: Minimal amount of work is required (monthly download sent to utility program implementer) which helps transform their business to selling more profitable products. Manufacturer: Increased volume for energy-efficient products helps lower manufacturing costs and increase profitability. Utility: Their goal is accomplished (energy savings are significant as LED products use significantly less wattage).
DiLouie: Is there anything else you’d like to add about this topic?
Rattray: Where would we be with midstream lighting rebates? This type program has enabled the market to start its transformation. Manufacturers can design and produce more efficient products, distributors can stock and promote more profitable products, and contractors can promote better performing product that helps drive replacements which increases their business. Lastly, but most important, the end users were able to install more efficient products with reduced material cost which helped increase their ROI. A win-win for EVERYONE!
