Department of Energy issues new lighting standards: Projected impacts to utility programs
The new definitions will become effective on July 8th, 2022, and the implementation of the efficacy standard will become effective on July 23rd, 2022. However, DOE also released a tiered enforcement policy that permits manufacturers to import non-compliant bulbs until January 2023 and allows retailers to continue selling them until July 2023 before full enforcement actions are taken.
These new rules will effectively eliminate the halogen/incandescent baseline for lighting savings calculations, practically putting an end to LEDs as a viable residential measure, as only a few bulb types remain, and those bulb types make up a minute portion of the market.
Here’s a breakdown of the timelines and impacts—along with our recommendations for utility program leaders.
An unprecedented, accelerated DOE enforcement policy
The exact timeline for utility programs is not 100% known, but we do have guidance from the Enforcement Policy statement, which provides our best indication for impact to utility program timelines at the moment and serves as an indicator for when changes will occur at retail:
- Reduced penalties will be issued to retailers beginning March 2023.
- DOE will end its enforcement flexibility to retailers in July 2023.
These are expedited enforcement timelines, as efficiency standard changes traditionally provide a minimum of one year to give industry reasonable time to adjust the supply chain.
DOE confirms it will allow companies to import non-compliant bulbs until January 2023 (with reduced penalties beginning November 2022) and allow retailers to continue selling until July 2023 (with reduced penalties beginning March 2023). This will result in nearly all medium and candelabra base bulbs being removed from the market, effectively eliminating the current baseline for lighting savings calculations.
The enforcement policy begins with a period of enforcement leniency, progresses to warning letters then reduced fines, and ends with enforcement to the fullest extent of the law. The timelines are different for manufacturers and retailers, as shown in the following summary of the tiered enforcement policy:
How and when will the market react?
Multiple major retailers and manufacturers have told us not to expect any notable changes in retail inventory before 2023. The enforcement timelines, as noted in the section above, are likely to indicate the timeline for general compliance by major retailers. If the supply chain allows, most would be in compliance in or around July.
Manufacturers are concerned with the compressed timeline of this transition, which will require replacing all incandescent and halogen bulbs. Why? These products currently represent approximately 35%-40% of the market, and this change will lead to a significant increase in production and shipping of LEDs. This would be challenging in any market, but is particularly challenging with existing supply chain constraints.
It now appears that program support of lighting measures will remain viable through at least part of 2023.
Recommended response and program strategies
How should utility program leaders respond to these new standards? Our best recommendation is to continue with lighting measure support as long as incandescent and halogen bulbs are in the market. This should run through at least the end of 2022—and likely through the first half of 2023—but you should also be prepared to pivot to other measures and delivery methods. This strategy will allow you to maximize savings from lighting for as long as possible while mitigating backsliding that is sure to occur if programs are turned off while halogen and incandescent bulbs are still available for purchase. We have consistently received data from partners demonstrating this backsliding behavior, which occurs, without exception, when a program is turned off—regardless of how "mature" a market may be considered.
In terms of program strategies, if you can ramp up lighting measure support, shifting savings to 2022 and 2023 from future years, do so as soon as possible. Maintain elevated incentives and marketing efforts for lighting to harness maximum savings for as long as feasible. Given that lighting is the most cost-effective residential measure and replacing it entirely will be practically unachievable, a variety of measures will be necessary to maintain a portion of the savings currently generated from lighting. Be prepared for shifts in cost-effectiveness targets, as well as administrative and incentive budgets, as delivery of non-lighting measures is more costly per kWh.
During this accelerated transition period, industry collaboration is foundational to limiting disruption and identifying successful replacement strategies. In this spirit, utilities should maintain open dialogue with planners, regulatory entities, and EM&V on the future realities of savings potentials, cost per kWh, and budget allocations.
What’s next?
DOE’s new lighting standards are major news for the industry, and there are many facets to explore that could result in different guidance for utility program timelines. In the short term, we can support you through this transition and accelerated timeline for lighting, helping you optimize resources and maximize positive outcomes based on your specific program portfolios and objectives.
But as the energy landscape continues to evolve at a rapid pace, you may want to explore longer-term, more ambitious initiatives as well. Examples include shifting from counting kilowatt hours of energy savings to measuring greenhouse gas emissions or standing up innovative pilots that open the door to more expansive, proactive program opportunities. Whatever path you’re on, we can help you light the way to a bright future.