Market transformation

Market transformation describes both a policy objective and a program strategy^[1] to promote the value and self-sustaining presence of energy-efficient technologies in the marketplace. It is a strategic process of market intervention which aims to alter market behavior by removing identified barriers and leveraging opportunities to further the internalization of cost-effective energy efficiency as a matter of standard practice.^[2][3] Market transformation has rapidly become the objective of many privately and publicly supported energy efficiency programs in the United States and other countries.

Background

First coined in a paper presented at the ACEEE Summer Study in 1992,^[4] the term "market transformation" is underpinned by the classic microeconomic model of markets, which describes a downward-sloping demand curve and an upward-sloping, presumably short-run supply curve.^[5] In the energy efficiency market, however, standard price and quantity equilibria are often rendered inefficient because of structural market barriers like split incentives, asymmetric information, distorted market power, and hassle costs. ^[4][5] Market transformation targets these barriers to optimal efficiency with strategies to shift entire market sectors into a more efficient product mix.

While it recognizes and harnesses the power of market forces and players, market transformation has also been conceptualized as a holistic, market-based marketing strategy, building on the diffusion of innovations theory through a strategic framework for justifying market intervention.^[1]

Implementation

Contrary to traditional energy efficiency strategies, which often focus on small-scale procurement and installation of efficient products, the goal of market transformation is to produce new patterns of "business as usual" for all actors in the marketplace.^[6] Programs act on market inefficiencies by removing quantity or price constraints, or by lowering transaction and uncertainty costs.^[5] Market transformation program strategies can resemble demand side management (DSM) as well as supplier innovation interventions, but with the added goal of long-term energy savings and changing standard business practices.

References

1. ^ ^{a b} York, D. A Discussion and Critique of Market Transformation, Review 186-1. Energy Center of Wisconsin, June 1999
2. ^ http://www.aceee.org/topics/market-transformation
3. ^ Northwest Energy Efficient Alliance, NEEA's Definition of Market Transformation.
4. ^ ^{a b} Nadel, Thorne, Sacks, Prindle, Elliott. Market Transformation: Substantial Progress from a Decade of Work American Council for an Energy-Efficient Economy, April 2003.
5. ^ ^{a b c} California Energy Commission
6. ^ http://www.tecmarket.net/market_transformation.htm

See also

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