States roll out appliance rebates with widely varying results

Iowa launched its energy efficient appliance rebate program at 8 a.m. on March 1, releasing nearly $2.8 million in federal cash to consumers buying energy-efficient appliances. By 3:45 p.m., the money was gone. And in those eight hours, phone lines were flooded and the Web site set up to distribute rebates crashed due to high response.

By contrast, more than a month after the Feb. 16 launch of Michigan's rebate program, the state had given away just $1.5 million, 16 percent of its $9.6 million pot. Organizers say rebates might still be available at the end of the summer.

Why the disparity? Iowa offered fatter rebates than Michigan, offering -- for example -- $200 to $250 more for a dishwasher.

"We looked at identifying higher dollar rebates ... to create excitement and interest," said Linda King, Iowa's rebate program planner. Meanwhile, John Sarver, Michigan's manager of consumer education said his state's program was designed to provide the greatest opportunity of participation, spreading the money in a wider pool.

Such contrasts can be seen across the country. Unlike the Department of Transportation's "Cash for Clunkers" program that dished financial incentives for people who traded gas-guzzling cars for more efficient models, the appliance program allows states to construct their own schemes.


But the Department of Energy's "dollars for dishwashers" program distributed $300 million of federal stimulus money to states for rebates on energy-efficient appliances. DOE announced the effort last August and has been distributing cash steadily since December, with most states launching their programs in March and April.

"The states were given the flexibility to design the programs that would work best," said Jen Stutsman, a DOE spokeswoman. "A lot of states were looking to appliances that would save as much money as possible. In Louisiana, it obviously doesn't make sense to give rebates for a heater. It's the same in Alaska for air conditioners."

DOE gave each state a list of 10 approved products and guidelines on how to assign and distribute rebates. State plans had to be approved by DOE, mostly to ensure that the program would support public demand. But states were generally given leeway to act, especially since roughly half had ongoing rebate programs of their own.

California, for example, chose to offer rebates for just three appliances -- clothes washers, refrigerators and in-room air conditioners -- because utilities were offering incentives on other appliances. Michigan, meanwhile, focused funding on large appliances such as furnaces or water heaters.

Economic stimulus or education tool?

State rebate programs can be broadly characterized as designed to provide a sharp economic stimulus or teach its consumers about energy efficiency.

Iowa went the stimulus route. Its hefty rebates effectively made more efficient appliances cost the same as traditional ones. The state relied on efficiency ratings by the nonprofit Consortium for Energy Efficiency to distribute cash according to an appliance's energy needs.

The Consortium rates "super efficient" clothes washers, dishwashers, refrigerators and air conditioners on a three-tier scale, with Tier 3 being the highest. Iowa gave a $250 rebate for dishwasher rated Tier 1 and $500 for a Tier 3, 18-cubic-foot refrigerator.

"Our utilities right now give out $50 rebates, $100 rebates, and it's an ongoing program throughout the year," Iowa's King said. "Because this was limited stimulus funding, we chose to get this money out as quickly as possible."

Sarver, though, said it was more important for Michigan residents to have time to think about the rebates and plan for them. He noted that people generally make improvements to their heating or water systems later in the summer and so the state wanted rebates for those products to last at least that long.

"We want to spend the money and stimulate the economy, but at the same time we wanted enough time for people to find out about it and not have a response like they did in Iowa," Sarver said. "We provide a greater opportunity for more citizens to participate and find out about the program. ... The job is to get people to think about buying a higher efficiency product."

Amy Morgan, a spokeswoman for the California Energy Commission, said her state's program was designed to blend the economic jolt with education. She noted that a Web site advertising the program and offering information about the benefits of energy-efficient appliances was launched weeks before the rebates began. Officials assigned rebates based on feedback from manufacturers, retailers and past public workshops. They were also trying to balance the program with existing utility rebates.

Based on manufacturer feedback, California made a late change to raise refrigerator rebates from $75 to $200. Morgan said the decision was based largely on discussions with the appliance industry and were aimed at maximizing the rebates' economic punch.

Lani Macrae, DOE's program leader for the rebates, praised the states' varied efforts.

"Many of the states were very sophisticated," Macrae said. "We were really pleased at how sharp these plans were. Most states took into account if they were offering rebates for the first time. Others were layer rebates to further stimulate the economy. That adds a layer of complication."

Eye on energy benefits

Robert Wilkinson, an environmental-studies lecturer at the University of California, Santa Barbara, said the trick of calculating the right rebate was to balance the net effect on energy consumption. While it is important to influence a consumer's purchasing decision, the result should be an overall decline in energy consumption.

"Often when you do a rebate, you're only looking at one goal," Wilkinson said. "The interesting thing is if you do accounting and look at the multiple benefits, the benefit column goes up. What that means is it could be worth investing more because you're getting much more of a benefit."

For states, balancing those calculations has meant varying degrees of success for the programs, at least in public response.

While Iowa and Minnesota were crushed with people looking to replace their appliances, most other programs have been slow moving. But most state planners say enthusiastic responses to some programs would have little effect on their own programs.

"It's kind of intimidating, but we don't anticipate any changes," said Charlie Hawkins, planning and outreach coordinator for Rhode Island's rebate program, which launched last week. "We've been getting a great amount of demand, and that caused us to start later than usual."

Hawkins said the Rhode Island program was near the middle in terms of rebate amounts, offering $100 for refrigerators and freezers and $500 for boilers. And while he had an eye on other states, he said demand was so high for those rebates that they were "getting hit from all sides" by the public.

Wilkinson said figuring the right rebate to balance enthusiastic response with widespread energy impact is difficult, especially depending on what other rebates the state provides. But he said results of such efforts can pay real dividends.

"My sense is that we tend to be too conservative because it's hard to make the case for these rebates," Wilkinson said. "Generally, public policy doesn't over-incentivize this stuff, which may be good, but it may be forgoing additional investments in ways that are more cost-effective."

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