This article is my contribution to the August 2019 issue of tED Magazine, the official publication of the NAED. Reprinted with permission.
Prescriptive product rebates offered by utilities and energy efficiency organizations are an enduring and influential force in the lighting retrofit market. Typically, the rebate is administered by the utility and paid directly to the customer, usually involving a lengthy process involving qualification, pre-approval, and payment.
In recent years, some rebate programs have begun to experiment with a different model called midstream or “instant” lighting rebates. In this model, the rebate is provided via the distributor at the point of sale rather than directly to the customer (downstream) or to the manufacturer (upstream).
As such, it can facilitate sales of energy-efficient lighting at the distributor level by reducing both hassle and initial cost for the customer, thereby reducing a barrier to adoption. While currently available in a small fraction of rebate programs, midstream rebates are likely to continue growing due to benefits for the rebate program, customer, and distributor.
“Midstream programs continue to gain in popularity because of their simplicity for a participant,” said Lee Levitt, National Utility Manager, Current Lighting Solutions, LLC (www.CurrentbyGE.com). “The responsibilities of tracking, reporting, and reconciling rebate award sales is charged to the distributor and not the facility owner.”
“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,” said Rich Rattray, Commercial Engineer, LEDVANCE (www.Sylvania.com). “An electrical distributor typically earns higher profit on these types of products.”
Levitt described a typical midstream rebate program from the distributor’s perspective. First, the distributor must enroll in the program via an application, typically accessible all year long, though some programs may accept applications in a limited window during the year. Eligibility requirements vary related to having a physical (brick-and-mortar) facility in the rebate program’s territory, training, and minimum participation to remain enrolled. The distributor also prepares a list of its products that will pre-qualify for rebates, typically based on the DesignLights Consortium’s Qualified Products List (www.DesignLights.org) or ENERGY STAR (www.EnergyStar.gov), which must satisfy a certain standard of performance. Note that some midstream programs incorporate other categories besides lighting, such as HVAC equipment and energy-efficient motors and drives.
After acceptance, the distributor engages in sales to customers, effectively selling at the product price minus the incentive. At the end of the month, the distributor reports sales to the rebate program and receives payment, requiring diligence in reporting. Often, the program requires that each unit sale must involve a minimum customer contribution to ensure the customer is invested. The program typically requires that the full rebate be delivered to the customer, though some programs may allow the distributor to keep a piece of it as compensation for stocking, promoting, etc. The rebate provider may require end-user information be collected and shared with the program, which in some projects the contractor will have to provide.
As the rebate may cover some products while other products are covered by more common downstream rebates, the distributor may find it beneficial to become knowledgeable about both so as to best advise customers on their incentives. The distributor will also need to stay on top of incentive amounts and what products qualify—both of which can change—and incorporate that both into sales and communication to customers such as contractors.
All of these requirements may require distributor investment in internal resources to be able to effectively administer the rebate.
Finally, as with any rebate program, note the goal is efficiency, not necessarily quality. While listing by ENERGY STAR and the Qualified Products List assures a certain standard of performance, additional qualification by the distributor may be needed to ensure the given rebated product is not glaring or otherwise will not dissatisfy the end-user.
“I suggest distributors fully embrace this program as it helps build a profitable business,” said Rattray. “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.”
Currently, midstream rebates are available covering both residential and commercial customers, said Levitt. Out of the roughly 1,000+ utility rebate programs available in North America, they are available in about 100 rebate territories. They have been focused on lamps, though programs are beginning to cover luminaires as well. According to BriteSwitch, midstream rebate programs currently represent less than five percent of replacement lamp rebates and two percent of luminaire rebates across the United States. Again, however, they are expected to grow as rebate programs gain experience about what works, which may entice more robust existing midstream programs and the launch of programs in new territories. Distributor participation is likely to occur as the lighting market is competitive, and being able to offer an effective price discount on premium products at the point of sale presents a potentially strong sales advantage.
“Current by GE collaborates closely with our sales channel partners like Graybar, Grainger, WESCO, Crescent Electric, and others throughout the country to leverage midstream program enrollment and participation for their contractor partners and facility owners,” Levitt said. “For example, some distributor partners have seen immediate success in major utility markets like Consolidated Edison in New York or Commonwealth Edison Company in Chicago. Upon enrolling and acceptance into these midstream programs, distributors have experienced sales activity driving themselves into one of the top volume sales positions and utility rebate award recognitions from their midstream program provider.”
Rattray pointed to the Massachusetts Mass Save Bright Opportunities Program as an example of a very effective midstream rebate program well supported by local distribution. “First, the program covers a wide range of products including LED lamps, tubes, and fixtures,” he said. “They also incentivize controls. Second, the utilities and their program implementer meet quarterly with distributors and manufacturers to discuss program performance, answer questions, and help resolve any issues. Third, any updates to the program are clearly communicated to all involved so that everybody knows what is being changed and when. And fourth, occasionally throughout the year, utilities for a limited time increase incentives for specific products that they feel should be emphasized.”
“Midstream programs will continue to grow in popularity,” Levitt said. “Participating does not have to be overwhelming or demand an abundance of internal resources. In fact, if managed properly, I believe the benefit of participating in a midstream program will deliver financial advantages for everyone involved—lighting manufacturer, distributor, contractor, facility owner, and utility.”
