Market transformation

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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][4] Market transformation has rapidly become the objective of many privately and publicly supported energy efficiency programs in the United States and other countries.


First coined in a paper presented at the ACEEE Summer Study in 1992,[5] 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.[6] 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. [5][6] 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]


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.[7] Programs act on market inefficiencies by removing quantity or price constraints, or by lowering transaction and uncertainty costs.[6] 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.


  1. ^ a b York, D. A Discussion and Critique of Market Transformation Archived 2010-05-24 at the Wayback Machine, Review 186-1. Energy Center of Wisconsin, June 1999
  2. ^
  3. ^
  4. ^ Northwest Energy Efficiency Alliance, NEEA's Definition of Market Transformation.
  5. ^ 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.
  6. ^ a b c California Energy Commission
  7. ^ "Archived copy". Archived from the original on 2011-07-24. Retrieved 2010-10-21.CS1 maint: archived copy as title (link)

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