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What makes consumers buy energy efficient appliances? Expensive electricity.
At this year's IFA home appliance and consumer electronics show in Berlin, manufacturers have taken great pains to point out just how little electricity their latest high-efficiency wares use. While American appliance makers may mention Energy Star ratings amidst claims about performance and size, it's nothing in comparison to European manufacturers' single-minded devotion to saving water and electricity.
In fact, European appliances have become so efficient in recent years that grade inflation has taken hold. Previously, the EU has rated products on an A-to-G scale, depending on how much power they use to get the job done. In 2011, the EU had to add A+, A++, and A+++ ratings to differentiate the latest ultra-efficient machines.
The drive for saving water and energy is partially due to idealism. Bosch led its press conference with the results of a study about German consumer behavior, and found that sustainability plays a "fundamental role in the daily lives of consumers." Indeed, the study showed that Europeans often have the environment on their minds when purchasing a new appliance. According to Bosch, around 81 percent of German appliance buyers said they wanted an energy efficient appliance, and 85 percent wanted a model with a long life cycle.
More importantly, however, Europeans tend to pay twice as much for electricity as those in the mainland US. While a small efficiency gain may add to the initial sale price of a dishwasher, dryer, or refrigerator, the payback period for that gain is significantly less in Europe. For example, a technological improvement that reduces energy by just 500 kWh/year may save an American consumer $275 over five years. A European consumer, on the other hand, could save upwards of $700.
That's why Miele's latest dryers use heat pumps and solar collectors instead of heaters and vents, and why induction ranges from Bosch and Electrolux aren't niche products in Europe—though they'd hardly make it into a Home Depot or Lowe's in the US.
Electricity prices also explain why European consumers pay attention to EU energy rating labels, and why an A+++ dishwasher commands a price premium over an A++ model. Dynamic pricing—energy costs that change depending on overall demand—also explains why Bosch, Miele, and LG have made announcements about smart appliances that automatically prefer to run when electricity is cheapest.
If America wants consumers to care more about energy efficiency, it's likely that our antiquated energy rating system needs to change. The EU system, for example, takes performance into account in most of its tests. The US Federal Trade Commission's EnergyGuide label and the Department of Energy's Energy Star program don't yet—though they may sometime soon.
But even a better rating system won't drive sales. Just as Americans started to check out fuel efficient cars when gas prices skyrocketed, we likely won't pay as much attention to energy efficiency as Europeans do unless it starts saving us some serious cash.