Appliance Energy Efficiency Package, in the context of energy efficiency, typically involves regulations for setting energy efficiency standards for appliances, raising awareness on the importance of energy conservation, and providing incentives for manufacturers and consumers to adopt more energy-efficient technologies.

The second article of this series, in the April 2024 issue of Climate Control Middle East, covered the regulation in detail. This article focuses on detailing out Information – raising awareness, and the need and role of incentives.

Information policy instruments help reinforce the public understanding of more efficient products and help with comparing among products. Energy-labelling programmes are the most effective and economical means of transmitting information. It is information that helps people make more efficient choices in what they buy and how they use energy.

Incentives, in the forms of rebates, grants and other financial offers, encourage consumers and manufacturers by making investment in and development of efficient appliances more attractive. Incentives also drive innovation and the adoption of new technology and practices.

Objectives of an energy-labelling programme
Energy labels provide a clear and simple indication of the energy efficiency and other key features of products at the point of purchase. They makes it easier for consumers to save money on their household energy bills and contribute to reducing greenhouse gas emission. The labelling of appliances works best as a complement to appliance standards such as MEPS.

The main objectives of energy labelling include:

• Helping consumers make informed choices on energy use and savings among the labelled products
• Creating impact on the energy savings in the medium and long run
• Competing in international markets, where norms for energy efficiency in many countries are mandatory
• Helping consumers understand which products have the lowest total cost

Types of labels
There are two main types of labels:

1. Comparative
2. Endorsement

Comparative labels
A comparative label enables consumers to compare the energy consumption of the speci­fic product with defi­ned rating slabs, and allows the consumer to compare multiple models of the same product, such as RACs. For example, a comparative label varies from 1-star to 5-star, where 5-star-labelled products are the most efficient and 1-star-labelled products are the least efficient. Mandatory comparative labels are more common, globally.

Comparative labels usually communicate in two ways:

• A quick visual rating
  • Detailed data (to cite some examples, actual kilowatt-hours (kWh), running costs and capacity/size.

Endorsement labels
This label only indicates whether the product is energy-effi­cient or not and does not include details such as the product’s energy consumption, energy efficiency ratio or any other parameter to compare with other products.

An endorsement label:

• Identifies the energy efficient models
• Generally, shows no product specific information
• Is part of a voluntary programme but has rules around its use, which must be complied with
• Can be updated more rapidly than a comparative energy label
• Is often linked to High Efficiency Performance Standards, or HEPS, which are, in turn, used for incentives

Label design principles

People must be able to easily read and understand the content to make informed purchasing decisions. From illustrations and colours to word choice, all elements of a successful energy label must work together to support the consumer experience.

Raising awareness
Energy labels are an important public-facing tool used in more than 80 countries to promote efficient appliances and stimulate technological innovation. Through strategic designs and rating scales, energy labels help consumers differentiate more efficient appliances and equipment, leading to long-term cost and energy cuts.

Once the label is designed, strategic dissemination and communication ensure widespread understanding and acceptance.

• Effective label programmes require buyer awareness-raising campaigns
• Buyer purchasing decisions that favour energy-efficient and high-quality products ultimately provide a “pulling” force in the market
• Encouraging consumers and others to buy products at the high end of efficiency and quality creates market demand
• Retailer training programmes have been successful in many countries

Consumers also count on retailers to explain differences between products bearing different star ratings. However, it is important to ensure that the salespeople have accurate information. For example, they must have the ability to inform consumers about more efficient types of air conditioners, which may not be clear from the label.

The success of energy-labelling programmes depends on the ability to connect with people purchasing appliances. By collecting intentional data, regulators and other label stakeholders can amplify the label programme – allowing technical implementation to run in parallel with growing consumer trust. Expanding these best practices across the globe would support countries to realise the full benefits of energy-efficiency programmes, and ensure customers are able to access high-quality energy-saving appliances and equipment.

Incentives
Incentives make efficient options more attractive and hasten the upgrade and replacement of appliances. They also encourage the use of new technologies and practices.

Promoting energy efficiency investment and financing has been one of the key priority areas of governments, globally.

Rapidly upscaling of investment in energy efficiency also depends on enhancing access to low-cost financing, particularly in emerging and developing economies.

The cost of capital provides a critical benchmark to assess the risk and return preferences of investors and the pricing of money in the wider economy and can act as a lever for financial flows to influence prices and choices in the real energy economy.

Incentives have long been used to promote energy efficiency through traditional demand-side management (DSM) programmes. However, over the years, the role of incentives has changed. The goal is no longer simply to increase the market penetration of energy-efficient products in the current programme year, essentially buying load reduction. Instead, the goal of energy efficiency programmes is to establish sustained market share of products over time, even after incentives are discontinued.

Incentives can play an important role in market transformation, essentially acting as a catalyst to jump-start markets and overcome initial barriers. Incentives serve many important functions in overcoming market barriers typically targeted by market transformation programmes, including:

• Reducing risk for market actors
• Creating a marketing impact on consumers
• Acting as a temporary market support until economies of scale reduce product costs

Incentives are often used to reduce the costs of efficient appliances for consumers – these drive the market for more efficient appliances and can lead to economies of scale, which in the longer term, reduce the price of products.

Successful incentives programmes are designed in a way to limit the negative potential while stimulating the markets through a catalytic effect. To use incentives effectively in market transformation, administrators must use long-term planning, develop individual strategies for each technology, use an integrated market-transformation strategy, and set market-based rebate levels.

One option for identifying market-based rebate levels is to use an auction process to encourage manufacturers to provide information that leads to a market-clearing result.

In summary, each element of the energy efficiency policy package – regulation, information and incentives – plays a crucial role in isolation as well as when put together to achieve greater energy efficiency gains. Careful design and implementation will deliver efficiency’s full potential to enhance energy security, create jobs, increase living standards, cut energy bills and reduce emissions.