Columnists: Alan Meier, LBNL

Published on: 9 Jun 2009

Now we know the value of Energy Star

The US elections overshadowed a press release by Energy Star announcing a settlement with LG, one of the world’s largest manufacturers of appliances and consumer electronics.  That’s a pity because the settlement sends an important message to manufacturers.  It also reveals how valuable LG thinks the Energy Star endorsement actually is.

The leading US consumer magazine, Consumer Reports (but reported in Home Energy Magazine almost a year earlier) found that LG refrigerators were designed to either circumvent the Department of Energy (DOE) test procedures or were tested in such a manner that led to a much lower energy use than what would actually occur in real kitchens.  Indeed, these measures reduced the energy consumption enough so that the refrigerators qualified for an Energy Star endorsement. LG’s methods had been an open secret for some time. Indeed, the Australian Government actually fined LG for a closely-related infraction last year.  Consumer Reports used this (and other) example to claim that “Energy Star has Lost Its Luster”.

The terms of the Energy Star settlement are stunning.  LG promised to replace a circuit board in each of the several hundred thousand refrigerators covered by the agreement.  The circuit board will (presumably) result in lower energy use though it’s not clear from the statement how this will be accomplished. Replacing the circuit boards will require an LG representative to visit every home with a refrigerator.   In addition, LG will reimburse owners for the additional electricity used caused by this design for the average lifetime of the refrigerators (but paid in advance).

How much is the settlement costing LG?  Let’s assume that settlement covers 300,000 refrigerators. I can’t imagine a home visit by an appliance technician to cost less than $80. The reimbursement for higher electricity bills will be $30 a year for 14 years (which will be made up front rather than in installments). Together, these actions cost about $500 per refrigerator and roughly 150 million dollars for the whole settlement.

What made LG offer this settlement?  Perhaps because the alternative would have been even costlier.  Apparently, DOE initially proposed to remove Energy Star endorsements from all LG products, that is, from refrigerators to TVs to washing machines.  LG evidently thought that the  potential damage to its reputation from loss of Energy Star on all products exceeded the certain cost of repairs and reimbursements for these refrigerators.

Voluntary endorsement programs are often considered the weak cousin of mandatory efficiency programs. But they still may be a valuable policy tool if the program is effectively marketed and managed (and Energy Star ranks among the best).  Manufacturers clearly find them useful and LG’s actions put a value on an Energy Star endorsement.

The views expressed in this column are those of the columnist and do not necessarily reflect the views of eceee or any of its members.

Other columns by Alan Meier