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HEM November/December 1994 - Home Energy Magazine Online November/December 1994

Home Energy Magazine Online November/December 1994

MARKETPLACE

Putting Energy-Efficient Lighting in Its Place

In the past, consumers greeted compact fluorescent lamps with mixed enthusiasm. Will new, improved bulbs and manufacturer attempts at mainstream marketing increase the popularity of the CFL in the home?

by Emily Polsby

Since the early 1980s, many utility companies have been puzzling over the paradox of consumers' attitudes towards the compact fluorescent lamp. Homeowners seemed happy enough to purchase CFLs as long as they were subsidized by the utility, but those same customers were unlikely to acquire CFLs on their own (see "Consumers and Compact Fluorescents" HE Nov/Dec '93, p. 11).

After several years of CFL programs, "there is still no self-sustaining market for energy-efficient residential lighting products and many utilities are questioning the wisdom of continuing with [demand-side management] funding in this area," says Energy Strategy Reports (ESR) in their latest report on residential lighting. ESR (formerly Macro Consulting) prepared the Electric Power Research Institute (EPRI) report, Perceptions of Compact Fluorescent Lamps in the Residential Market,¹ and has since examined consumer feelings about CFLs more closely, interviewing 4,004 consumers and finding out what lighting products were actually in their homes.

The results show some interesting trends in home lighting history. Table 1, for instance, suggests that the CFL has thus far failed to transform the home lighting market as a whole (see "What Do They Mean by Market Transformation?" p.43). But the news isn't all bad. Lighting manufacturers seem to be finally taking an interest in selling CFLs directly to the U.S. consumer, and they're putting their money where their mouth is.

Lighting manufacturers are the first to admit that the CFL is an evolving technology, and they have finally come up with a new generation of lamps that surmount most of the drawbacks of the earlier CFLs. All three of the major manufacturers (General Electric, Philips, and Osram Sylvania) along with Panasonic now produce miniaturized, electronic triple-biax lamps that offer "warmer" color rendition, more light output, and less temperature sensitivity. Because of their smaller size they can be used in a wider variety of applications. General Electric (G.E.) even offers an "octo," or double-quad, miniature lamp that they claim will shatter the 100-watt equivalent barrier. (Until recently, screw-based, A-lamp replacement CFLs could shed only about the same number of lumens as a 90-watt incandescent.) Although they are still expensive and are incapable of dimming or three-way light, these new lamps could potentially make energy-efficient lighting common in American homes. But one small problem remains: People have to be able to find them.

How Lighting Products Are Distributed (or Not)

CFLs have been conspicuously absent from the usual places where Americans buy lighting products. Consumers may have screwed in the bulb that the utility company gave them a coupon for two years ago, but when they go to replace it, chances are they will have difficulty finding another. Why?

As a nation, we buy most of our light bulbs at the grocery store. Grocery stores typically carry only one brand of bulb because of exclusivity agreements. Because G.E. dominates the U.S. residential lighting market with well over 50% market share (when most people go to the store they only have G.E. lights to pick from), it is tempting to blame them. Gary Gumz, G.E.'s manager for marketing research and trade relations, points out that they can't force grocery stores to carry anything they don't want. "The grocery stores are always worried about anything too expensive that they think they can't sell," he says.

Like the other major manufacturers, G.E. says that what will save the CFL is the fact that consumers are purchasing more and more of their lighting products in other stores--hardware, home improvement (Home Depot, Home Base), and discount general merchandise (Target, Wal-Mart) stores--and that they're much more willing to spend large amounts of money on lighting products in this type of store. As light bulbs become thought of less as a commodity like eggs and milk, and more as a home improvement purchase, price sensitivity will go down.

"No retailer wants to stock his store with something that's not going to move," says John Cameron, director of corporate relations for Ace Hardware, the second largest hardware chain in the United States. According to Cameron, Ace actively encourages their dealers to participate in utility lighting programs, but "consumers aren't going to come in the store to buy the product if it's much more expensive, and ugly-looking, compared to a regular light bulb." Moreover, conventional bulbs are an important promotional item for hardware stores, especially during "light bulb season" (from October on), when many hardware stores give away free light bulbs to attract customers.

Home Depot is the nation's largest home improvement chain.² Mark Eisen, Home Depot's manager of environmental marketing, is coordinating a "culture change" within the company that he hopes will lead to a "culture change" in the consumer market toward environmentally-friendly products. But even Home Depot, which participated in the Federal Trade Commission's workshop on lamp labeling (see "New Lamp Options and Labels," p.25), has been hearing the same complaints about CFLs. Home Depot's lighting buyers think that the new, smaller lamps promise "great opportunity for the category," but one buyer commented that the manufacturers could be doing a better job explaining why a consumer should "buy a CFL for $9-$18 versus the four-for-$1.39 A-lamp."

Advertise, Advertise, Advertise

Home Depot has a point. Unless you explain life-cycle costs, the pricey, "ugly-looking" CFL looks like a pretty bad idea to the average shopper. Forget educational campaigns; up until now, none of the major manufacturers have had any kind of advertising at all for CFLs aimed at the residential market.

According to Brent Haddad, a graduate student at the University of California at Berkeley's Energy and Resources Group who also owns a small lighting distribution company, "Oligopolistic structures have been shown in theory and practice to slow innovation and set up barriers to entry in order to protect strategic position. In the case of lighting, the `Big Three' manufacturers share the seemingly conflicting incentives to innovate technologically in lighting, but at the same time not to push the market in fundamentally different directions that might threaten their ... profits." Haddad's viewpoint,³ from a paper he presented at the American Council for an Energy-Efficient Economy's summer study this year, is shared by many. They theorize that the big lighting companies (and especially G.E., the market leader), have an interest in keeping energy-efficient lighting from taking off because they have already paid for the plants for incandescents, so sales of their chronically burning out star products are all gravy.

Resistance to change may have been the policy in the past, but the U.S. market is not a closed system, and U.S. manufacturers can't ignore pressure from outside. Panasonic, a small player in the U.S. lighting market, is a division of Matsushita Electric Corporation, which controls a huge portion of the lighting market worldwide. Matsushita has been successfully selling energy-efficient lighting technologies in other countries for years, and now they plan to do the same in the United States. "Nineteen ninety-four will be the launch for the Panasonic residential market in cooperation with Angelo Brothers," says John Cunningham, eastern regional sales manager for Panasonic. Panasonic plans to support their products with point-of-sale displays, direct mail, and print advertising--all explaining life-cycle costs with easy-to-understand graphics (see "Compact Fluorescent Lighting Comes of Age," p.44).

"Energy-efficient lighting is going into everyone's home...because the government has mandated it," says Steve Goldmacher, Director of Public Affairs for Philips Lighting. He is referring to the Energy Policy Act of 1992 that outlaws the import or sale of various types of inefficient lighting. Most notable for the residential market is the ban on certain types of inexpensive flood lights used widely in recessed applications.

"We're trying to educate the consumer," says Dick Dowhan, manager of corporate communications for Osram Sylvania, "but it's a very difficult sell." Osram Sylvania is also planning in-store displays to help shoppers do the math before they buy.

"The single biggest challenge facing the industry is education," says Gary Gumz of G.E. "You have to get the consumer to make a trial purchase." G.E. is the only major manufacturer planning a television commercial to support their bulbs and Gumz is optimistic about the future of the CFL, noting that "people are getting more sophisticated about lighting."

What Do They Mean by Market Transformation?

Beyond the A--Lamp

The big lighting manufacturers are concentrating on finding an A-lamp replacement for the residential market that looks and acts as much like a "regular" bulb as possible, but Energy Strategy Reports discovered that of the CFLs they investigated, the one that was most accepted by consumers was one that looks nothing at all like an A-lamp--the circline. These "clunky" circular lamps are capable of delivering the equivalent of 100 watts of incandescent light output right now, and in spite of their odd appearance, auditors claim that they fit in many more fixtures and table lamps than other fluorescent A-lamp replacements. "The circline meets user needs in terms of light output, where they can put it, and what it's going to cost them," says Colin Campbell, President of ESR. "That makes the ugly duckling appearance easier to overlook."

Given that the ballast of a CFL can last much longer than the bulb, the modular or two-piece CFL has been touted as a much more environmentally-friendly technology than the integrated one-piece unit. Since a ballast is much more expensive to produce than a bulb, modular units could also potentially crack the price barrier because the consumer is only required to invest in the expensive ballast once. But according to John Cunningham of Panasonic, the two-piece unit "has never served the residential market well." In fact, the next frontier in CFL technology--the addition of a microchip to the ballast--will not only enable CFLs to dim, provide three-way lighting, and stop interfering with televisions and stereos; the chips may make CFLs as small as incandescents, and eliminate even a passing interest in marketing a modular unit to homeowners.

Many experts believe that the quest to simply replace the A-lamp is a flat out mistake (see "Fixing the Fixtures"). They maintain that the only way to get energy-efficient lighting into the American home is to hard wire for it--replace the fixtures and the bulbs will have to follow. "By 1995 over half of the DSM money will go towards energy-efficient hardware rather than screw-in CFLs..." promises Brian Halliwell of Lights of America. Rising Sun, a lighting distributor and consulting agency, has already worked with 30 utilities over the last three years on residential fixture replacement programs. All of the major lighting manufacturers are enthusiastic about the future of energy-efficient fixtures in homes except Philips. "There's a trend towards miniaturization, not toward replacing [fixtures]...You're talking wiring, dry wall...[Retrofitting fixtures] is probably a hurdle we don't have to go over," says Philips' Steve Goldmacher. Fred Davis, president of Fred Davis Corporation, a national wholesaler of efficient lighting products, and an eleven-year veteran of the energy-efficient lighting wars, partially agrees. While he likes the idea of CFL fixtures he adds: "The incandescent technology we've invested in has a flexibility that is advantageous."

Contractors would be responsible for replacing some of those fixtures, and contractors can be a difficult sell when it comes to new technologies for homes. Don Folkemer, Advertising Manager for Graybar, the leading electrical distribution house, says contractors have been gravitating towards energy-efficient lighting for some time for commercial jobs because building managers are used to thinking in terms of payback periods. The residential market is another story. Residential contractors have been hesitant to switch to low-voltage fixtures for track and recessed can lighting, even though low-voltage fixtures have been around awhile, offer substantial energy-savings, and are only marginally more expensive to install, says Folkemer. According to the National Electrical Contractor's Association, 86%-88 % of contractors buy lighting products at electrical distributors, so they have a pretty good idea what contractors are doing.

Coming to a Store Near You

With manufacturers finally publicizing energy-efficient lighting products, retailers will undoubtedly start to carry more CFLs, making utility lighting programs simpler to administer, and the "lighting revolution" people have been predicting since the 1980s closer to becoming reality. Whether A-lamp replacement will continue to be the major focus, rather than an approach to consumer lighting needs that is more application specific, only time will tell.

References

1. EPRI Report #TR-100734, Perceptions of Compact Fluorescent Lamps in the Residential Market, July, 1992 and EPRI Report #TR-102120 Market Infrastruc-

ture and Compact Fluorescent Lamps, March, 1993. The Electric Power Research Institute Distribution Center, P.O Box 23205 Pleasant Hill CA, 94523. Tel: (510)934-4212; Fax: (510)944--0510.

2. "Competing Against Goliath." Hearth and Home, June 1994, Village West Publishing, P.O. Box 2008, Laconia, NH 03247. Tel: (603)528-4285; Fax: (603)524-0643.

3. Brent M. Haddad, "Why Compact Fluorescent Lamps are Not Ubiquitous: Industrial Organization, Incentives, and Social Convention." The Proceedings of the ACEEE 1994 Summer Study on Energy Efficiency in Buildings, American Council for an Energy-Efficient Economy, 1001 Connecticut Ave, Suite 801, Washington, DC 20036. Tel: (202) 429-8873; Fax: (202) 549-9914.

4. See "Market Transformation: Getting More Conservation and Energy Efficiency for Less Money" by Jeff Schlegel and Ralph Prahl, Selected Readings, Affordable Comfort '94, Philadelphia, PA, March 1994.

TABLE 1. PRODUCT PENETRATION

In November, 1993, 4,004 homeowners were questioned about 18 widely distributed products. Compared with the nearly ubiquitous GE 75-watt, energy-efficient lamps are in relatively few homes.

Total Installed Incidence

% Households Product Base= (4,004 total) G.E. 75W incandescent A-line 53.8 Sylvania T12 4' tube 23.9 Lights of America circular 22W 7.6 Philips halogen PAR 38 45W 7.1 Philips incandescent indoor flood 75W 7.1 Philips director 40W 3.9 G.E. Compax 15W capsule 1.5 Osram electronic 23W 1.4 Sylvania Capsylite 42W 1.2 Philips SL18 18W 1.1 G.E. Compax 15W globe 0.9 Philips PL-S9 9W adapter system 0.8 Lights of America quad 18W 0.7 Feit ECObulb 18W 0.6 Osram Dulux D 13W (with adapter) 0.6 G.E. Biax 13W (with adapter) 0.5 Osram component system 9W 0.5 Osram Dulux 7W (with adapter) 0.3

This data (copyright (c)1994 by Energy Strategy Reports) is used with permission. For the full text of this report, Energy Strategy Reports Volume 1, #1: Residential Lighting, contact ESR directly at 2581 Leghorn Street, Mountain View, CA 94043. Tel: (415)940-7790; Fax (415)964-9949.

WHAT DO THEY MEAN BY MARKET TRANSFORMATION?

These days, many utility and government conservation programs have a stated goal of "market transformation." It's one of those terms everyone throws around. It usually refers to a situation where the way a product is perceived by consumers and marketed by manufacturers undergoes a significant change.

How do you know when you've transformed a marketplace? A market transformation occurs "when conservation and energy efficiency programs induce a lasting, beneficial change in the behavior of some group of actors within a market system."⁴ The key to transforming a marketplace is long-term results.

"Bright Prospects for Lighting Retrofits" (Hasterok)
"Energy-Efficient Lighting for the Home" (Byrne)
"Fixing the Fixtures" (Siminovitch and Mills)
"How to Keep 'Em Down Home in the Socket" (Manclark)
"Lighting Makeovers: The Best is Not Always the Brightest" (Conway)
"Remodeling Bathrooms: Let the Energy Savings Flow" (Johnston)
"Remodeling Kitchens: A Smorgasbord of Energy Savings" (Sullivan)
"Steps to Successful Lighting Programs" (Fernstrom)
"Training Guide for 'Total Comfort' Professionals"
"Understanding Power Quality" (De Almeida)
"What to Do when the Lights Go Out" (Polsby)
"Whatever Happened to the E-Lamp?" (Atkinson)

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Home Energy Magazine Online November/December 1994

Putting Energy-Efficient Lighting in Its Place

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