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Climate Change Is Important: Energy Conservation is the First Step


June 14, 2012

Reality: Only Businesses Care about ROI; People Want Sexy

Category: Climate Change,Observations – Tom Harrison – 10:06 pm

I attended a startup conference today, and while I am not professionally in the home efficiency business any more, I couldn’t avoid the session on Clean-Tech Energy. Several experienced company founders described their business models, and it quickly became apparent that they all had concluded the same thing: the vast majority of consumers are not willing to spend money on energy efficiency. And, quite the opposite, businesses will readily adopt efficiency measures that have a reasonable return on investment.

One company CEO is making very small and efficient switching transformers (converting A/C into D/C for electronics), and has found that LED lighting is a great application, since replacement lamps need to fit in small spaces. Many in the audience were clearly anxious to hear her confirm that her market was made by people whose motives were environmental. She said “nope”, and thus her market was business not residential. She also noted that the transformer is just one part of a set of components needed by LED lights, and her product also would make it possible to change the color balance or temperature of the light being produced … and this feature was the only one she had heard any interest in from companies selling consumer products. People would pay $60 for LED light because it was a cool gadget, not for the savings, and certainly not to “go green”.

People want sexy features. They don’t give a damn about ROI. And nobody gives a damn about being “green” or “sustainable”, except for businesses seeing the really long horizon. And those businesses are making change because they see a long-term financial benefit.

This is the cold truth, not really a revelation for me, or probably anyone reading this. It’s just reality.

One thing that motivated changes in people: rebates, tax breaks, and other incentives. In short, people will respond to free money.

Yet meanwhile, climate change rolls along and we’re doing far from enough. And it’s all about the economy these days, and apparently there’s something wrong with the government jumpstarting strategic technologies or solving big problems the market has not yet found a way to exploit. Props to the EPA and others who are managing to address as much as possible through non-legislative means, but it’s not enough.

Are we all really this dumb? Do we just want sex? Are we so bad at math that the promise of money (or pain) in the future isn’t sufficient to change our behavior in the present? Psychologists and behavioral economists will answer: yes, that’s exactly how our irrational brains respond.

So I guess we need to work in this framework to cause change. It’s who we are.

4 Comments

  1. “Are we all really this dumb?” – Um, yes, I think so, on average.

    I think some of the reasons ROI doesn’t resonate w/ consumers is that they’re used to being sold a bill of goods. “CFL bulbs will last 20 years and save you $150!” – and then the cheap-ass bulb they bought burns out in a year, and they chuck it in the trash and vow never to do THAT again… and then there are the other renewable energy scams that confuse the public, and outlandish claims of reduced-footprint iPhone chargers, and promises that window replacement will save you thousands … it goes on and on. There ARE good strategic moves out there for consumers, but I’m afraid the waters are really muddied with distrust and skepticism.

    But businesses grokking this stuff is good news; it’ll keep the market going, and some of it will trickle down (though as you say – fast enough?). And then there are the Nests of the world trying to put sexy on top of efficient, hopefully there will be more of that.

    Comment by Eric — June 18, 2012 @ 10:41 am

  2. :-)

    Your point on people being sold a bill of goods is a right — the original CFL rollout was so badly done: poor quality of light, terrible construction just to get the prices down. Then everyone hated them.

    Another comment made by the company CEO I quoted was “people don’t want LED’s that look light night-lights”, and the whole brightness issue is another opportunity for the lighting industry to screw up.

    But these issues aside, there really is some science as to why people don’t go for ROI. here a link to just one story explaining irrational behaviors in behavioral economics.

    Comment by Tom Harrison — June 18, 2012 @ 12:56 pm

  3. I don’t think you are giving consumers enough credit. I think the vast majority really cares about doing good for the environment. Adding some sexiness to a good, beneficial product like LED lights basically just gives the consumer a little push towards making the right buying decision.

    Comment by Chad @ Landscape Lighting — January 15, 2013 @ 11:12 am

  4. Chad –

    I am really not (quite) that cynical, but I have to say that having worked for a few years at Energy Circle, where we sold home energy efficiency products to consumers, and provided software services to home energy efficiency contractors I will say that I had at least some actual access to how people respond. Add to writing this blog since 2005 and I have a pretty clear picture of how people respond.

    I definitely agree with you that most people do care about the environment. I don’t think I was making the point that people don’t care, just that all indications are that this isn’t the only thing they care about, and when asked to part with money in order to do something abstract like “help the environment” it’s a long sell indeed.

    Since I wrote the post, I read the book “Thinking, Fast and Slow” which describes in detail the stuff I mentioned at the end about what behavioral economics is about. Concepts of “rational actors” and stuff I learned in college Economics have been largely debunked.

    The important point (and why my cynicism is probably not warranted) is that we’re all like this — our brains are wired to make “incorrect” decisions about certain kinds of things. We can’t help it, really.

    So I guess I just replaced cynicism with hopelessness.

    Have a great day!! :-)

    Nah, we’ll figure it out the hard way, as always.

    Comment by Tom Harrison — January 16, 2013 @ 8:49 pm

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