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Findings of qualitative focus group testing of

new energy labels

October 2015

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Inovact Consulting Pty LtdLevel 7, AMP Building1 Hobart PlaceGPO Box 2067Canberra City ACT 2601

P 02 6162 1621

www.inovact.com.au

ABN 17 587 520 145

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1.0 IntroductionThe Department of Industry, Innovation and Science (the Department), on behalf of the Equipment Energy Efficiency (E3) Committee, is responsible for a variety of energy efficiency activities, including Minimum Energy Performance Standards (MEPS) and the Energy Rating Label (ERL). Program objectives are achieved using a mix of regulatory and non-regulatory mechanisms. The main mechanisms used by the program include:• Minimum Energy Performance Standards (MEPS)- voluntary and regulatory;• Energy Rating Labels - voluntary and regulatory;• Compliance and enforcement activity for regulated products;• Research and information provision; and• Industry and community capacity building.

The E3 Committee is currently investigating introducing a new type of ERL for appliances for which performance, energy efficiency and/or usage patterns are dependent on the location they are installed. These appliances include air conditioners, space heaters and water heaters. A variety of factors can significantly impact on the performance and energy efficiency of these products, including air temperature, humidity, cloud cover, water temperature and frosting.

Out of these appliance types, currently only air conditioners are labelled by E3. The current air conditioner label shows a single rating, based on testing at one temperature only (35°C for cooling and 7°C for heating). While this information is useful in many circumstances, having additional energy efficiency and performance information available will mean consumers who live in warmer or colder areas can be more assured of a model’s performance.

A major issue with these types of appliances is that they are often not purchased in standard retail stores (with the main exception of split system air conditioners i.e. units with an indoor unit mounted on the wall and a unit outdoors). Because of this, energy efficiency and climate specific performance is something that is often not taken into account at all, and consumers may not see their appliance until after it has been installed. This can result in products being purchased that are unsuited to a particular climate and consumers can find performance and energy use are not as expected.

The European Union has adopted a label for air conditioners that can display energy efficiency information for three different climate zones – average, warm and cold. A similar label for water heaters and space heaters was introduced in the EU in September 2015. The E3 Committee has been undertaking research to inform consideration of a similar label for these appliances in Australia and New Zealand.

A selection of ‘zoned energy rating labels’ have been designed, splitting Australia and New Zealand into three climate zones – mixed, hot/humid and cold. Following several rounds of qualitative and quantitative testing of

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consumers and industry, a draft design for the label was finalised.

The Department sought additional testing to further refine areas of the label based on outcomes from these previous rounds of research.

Inovact Consulting was commissioned to conduct the research and fieldwork took place in July 2015.

This document reports the findings of the study.

Table of Contents

1.0 Introduction........................................................................iii2.0 Executive Summary..............................................................13.0 Research Design...................................................................33.1 Sample.............................................................................................................33.2 Methodology.....................................................................................................34.0 Main Findings.......................................................................44.1 Background......................................................................................................44.2 Response to the new label design....................................................................5

4.2.1Initial impressions.....................................................................................54.2.2 Relevance and use..................................................................................4

4.3 Air Conditioning................................................................................................4Usage............................................................................................................... 74.3.1 Air conditioning retailers and installers...................................................94.3.2 Retail sales staff....................................................................................114.3.3 New Zealand..........................................................................................13

4.4 Hot water.......................................................................................................13Usage............................................................................................................... 34.4.1Plumbers...................................................................................................54.4.2 New Zealand............................................................................................7

5.0 Conclusions and Recommendations.....................................105.1 Conclusions....................................................................................................105.2 Recommendations Against this background the findings indicate:................12Using Research.....................................................................................................13

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2.0 Executive Summary1. The Department of Industry, Innovation and Science (the

Department), on behalf of the Equipment Energy Efficiency (E3) Committee, is responsible for a variety of energy efficiency activities, including Minimum Energy Performance Standards (MEPS) and the Energy Rating Label (ERL).

The E3 Committee is currently investigating introducing a new type of ERL for appliances for which performance, energy efficiency and/or usage patterns are dependent on the location they are installed. These appliances include air conditioners, space heaters and water heaters.

A selection of ‘zoned energy rating labels’ have been designed, splitting Australia and New Zealand into three climate zones – mixed, hot/humid and cold. Following several rounds of qualitative and quantitative testing of consumers and industry, a draft design for the label was finalised.

The Department sought additional testing to further refine areas of the label based on outcomes from these previous rounds of research. Inovact Consulting was commissioned to conduct the research and fieldwork took place in July 2015. This document reports the findings of the study.

2. The study was conducted by means of 10 focus groups across Australia and New Zealand. The focus groups were stratified by product type and climate area, as shown in the table below.

Climate region Air conditioning Water heating

Hot (Brisbane) Group 1 Group 2

Mixed(Sydney and Perth)

Group 3Group 4

Group 5Group 6

Cool(Melbourne and Auckland)

Group 7Group 9

Group 8Group 10

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Separate interviews were also conducted with relevant industry members:

5 interviews with retailers across Sydney, Melbourne and Perth. 4 interviews with air conditioning retailers in Melbourne,

Sydney, Brisbane and Perth. 4 interviews with plumbers/suppliers of hot water in Sydney

and Melbourne.

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The qualitative data from this study indicates:3. Once the purpose of the zoned energy rating label was understood,

the idea of making energy consumption (and efficiency) data more specific to geographic areas resonated with respondents. Whilst few believed the new format would change how they used the label, there was widespread agreement that the additional information would assist in making a more accurate comparison between products and better choices. Most believed they would quickly check the number of stars for each product.

There was little difference in impressions of the labels for air conditioning and those for hot water, though respondents in the water heater groups (consisting primarily of those with instantaneous gas units) had less of an understanding of how the installed location would affect their particular water heaters and illustrated the importance of targeted education materials.

The tradespeople interviewed (plumbers, air conditioning installers and retail sales staff) were broadly supportive of the new design and agreed more precise information about the energy consumption of appliances in each climate zone was helpful.

4. The new design will be similarly effective in New Zealand and there was a high level of consistency in responses across the two countries. Two minor executional issues were raised with New Zealand respondents: showing only one climate zone when there was thought to be considerable differences between northern and southern points, and using the energyrating.gov.au URL when they preferred a NZ one.

5. The key elements of the design appear to be close to optimal and revisions were unlikely to significantly change usage or ease of comprehension.

The colours were thought relevant and provided continuity with the current label.

Respondents could identify the data for the area where they lived and found the star rating easy to understand.

kWh and dB(A) information was thought to be helpful.

6. The key issue to emerge was that without some introduction or explanation, the label initially looked busy and complex. It was overwhelming for some, and typically could require a couple of

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minutes to review and understand.

As such, the findings indicate consideration should be given to:

7. The development of communications to support the launch and to explain the label, the rationale for featured the selected information and its use.

8. Some minor revisions to executional elements on the label, i.e.

Helping users find a ‘starting point’ and logical pathway or sequence to read the various pieces of information.

Making the caption over the map (“climate changes the efficiency of this appliance”) more prominent and readable.

Review the phrasing of the caption so it does not appear to be ‘climate change’.

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3.0 Research Design3.1 SampleThe study was conducted by means of ten (10) focus groups across Australia and New Zealand, each with seven (7) respondents.The focus groups were stratified to permit separate sessions in each of the three climatic or geographic area for each of the two appliance types, i.e. air conditioners and water heaters, and as summarised in the table below:

Climate region Air conditioning Water heating

Hot (Brisbane) Group 1 Group 2

Mixed(Sydney and Perth)

Group 3Group 4

Group 5Group 6

Cool(Melbourne and Auckland)

Group 7Group 9

Group 8Group 10

Respondents were screened to ensure all were: Decision makers in the choice of appliance purchased.

All had purchased in the past six (6) months or planned to purchase in the next six (6) months.

Not simply buying the cheapest product available.3.2 MethodologyThere was no ‘warm-up’ discussion and the sessions commenced with respondents being shown the new design label relevant to the product they had bought/were planning to purchase (i.e. air conditioning or hot water) and asked to provide some initial impressions via a simple self-completion questionnaire.They were then asked to discuss their impressions and potential use of the labels.

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4.0 Main Findings4.1 BackgroundAll respondents were aware of the current label.

Familiarity with the label meant it was easily and quickly understood.

“Instant…”

“A quick glance and you know…”

The overall belief was ‘the more stars, the better’, i.e. the more efficient the appliance and the cheaper to use. There was also a clear sense that the stars related to the appliance (make, model, size etc) to which it was affixed and the purpose was to facilitate a comparison of products. However, familiarity also meant the label was usually quickly ‘scanned’ and few fully read or considered all the information. No one in the focus groups knew the background of the label, the rating system or how the efficiency (or number of stars) were calculated.Nevertheless, respondents felt comfortable with the label and its use. ‘Better’ (as in more stars) was generally described as requiring less energy to achieve desired goal (room temperature or hot water), which in turn, meant lower running costs.

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4.2 Response to the new label design

4.2.1Initial impressionsGiven respondents had no warning or insight into what to expect, unlike in a real world situation with relevant context and expectations, the new labels (for both air conditioning and hot water) were initially surprising, challenging and for some, a little unnerving.

“At first, a little overwhelming…”

They went beyond the simplicity and familiarity of the old labels and were seen to:

Contain a lot more information.

“There’s a lot of information and details…”

“A lot of information to take in…”

“Populated with a lot of data…”

“Much more detailed…”

Visually different.

Whilst recognising the basic colours had been retained, the new labels were thought to have a quite different appearance. The star rating was no longer in a curved or circular shape and a number of other elements had been introduced.

“I’m use to just seeing stars…”

“You have to focus on your area…”

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Once they became familiar with the horizontal bars respondents were comfortable with the format.

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Unlike the existing layout, the new labels needed to be ‘read’. The key information could not be quickly discerned with a cursory glance. The labels had more than one set of information and exacerbating the difficulty was the absence of a clear ‘starting point’.

“Where do I look first?...”

“No clear starting point…”

“Nothing draws your eye. There’s no clear starting point.I went to the stars but could not quite figure out what it

meant so went to the other areas…”

As such, initial impressions were often described as confusing or unclear.

“Busy, complex, colourful…”“Too much…”

“A little confusing…”

“Not used to working through this amount of detail…”

“Have to read it…”

“There are a lot of points to compare…”

“Information overload…”

Respondents explained they were first drawn to the stars as these were dominant aspects of the labels and more visual (compared to numbers and words). However, the three bars or rows of stars were not immediately understood and many compared the rows of stars (i.e. different cities or climatic areas) which added to the confusion.

“What’s the point of looking at Brisbane/Sydney/Melbourne? I don’t live there…”

“What’s the point of including other areas…I will only use it where I live…”

If they could not work out the difference between the rows they began to look around the label to find ‘clues’, often the map. Most eventually figured out the rows were based on climatic differences.

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When discussing this issue there were frequent comments that the caption over the map (climate changes the efficiency of this appliance) was not noticed. Further, many who did see the caption misread it; believing it said ‘climate change’ (as in the major political and environmental issue), i.e. a change in global or regional climate patterns due to manmade pollution and atmospheric carbon dioxide. This also slowed or impaired comprehension and understanding.However, most only needed a brief period (1 – 3 minutes) to work out the various elements and the meaning of each.

“You figure it out pretty quickly…”

Importantly, once the labels were read and ‘decoded’, they were considered an improvement on the current designs and more helpful.

“Says ratings differ by geography…”

“A star rating for where you live and how effective it is going to be…”

“More true…better information…”

“A significant improvement…great to see a comparison to my needs and situation…”

“Says performance in relation to geographic position…”

“Different ratings for different locations…”

“Once you read it, it is easy to understand…”

“There are lots of points to compare…”

“Attractive and interesting…for people who do their homework…”

“When you take some time, it is OK…”

As respondents' understanding of the label grew, they retained and appreciated:

The efficiency of products could vary by location, and with the new design they only needed to review the data for the zone in which they lived – something they thought they could comfortably manage after they understood the label.

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“Performance is related to geographical location…”

Not all were sure of the reasons why geography could impact on performance, and it was often assumed to be related to usage, i.e. people in warm areas would use air conditioning for more hours across a greater number of weeks or months and people in cooler areas would have greater use of heating appliances.

There was a lot of information and they could use as much as they wished or found helpful. For many, it was simply reviewing the number of stars (as they did with the current label) whilst others were interested in power consumption and estimating an annual cost.

“How efficient it is and the running costs…”

“When all the products are very similar it gives you something else to compare…”

There was little disagreement that ‘better’ or more accurate or precise information was preferable, and once they understood the label, it could be easily used. As such, the focus groups concluded with respondents having a positive impression of the labels.Consistently across the study respondents expressed the expectation and need for an introductory brochure to provide the initial explanation of the label and how to use it. Given there were many comments suggesting separate labels for each climate zone (so there was only one row of stars on each label), there could also be value in explaining why the labels contain all three zones.4.2.2 Relevance and useAttitudes to, and potential use of the labels varied by product type and it is appropriate to review the two labels (for air conditioning and hot water) separately.

4.3 Air ConditioningOverall, the most difficult element was thought to be grasping the three climates zones. Once these aspects had been understood, respondents generally felt they could ‘read’ the label and use the information contained.In terms of the individual elements:

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There were no issues with the heading. Respondents clearly understood the label was about the energy efficiency of the product.‘When tested in accordance with government regulations’ was not always read. Nevertheless, it was liked as it suggested there was a standardised process defined by the government and it was applied to testing all products which meant comparisons could be made.

The URL was noticed and the government reference (‘.gov.au’) was especially important as it provided an ’independent’ endorsement which added to the credibility of the information.Whilst respondents felt it was valuable for the government to provide a website devoted to the subject, not many thought they would visit the site. Most were happy to use the star rating as a guide, and as such, they struggled to think of any other information they would require and they seek to find on energyrating.gov.au.The QR code was also noticed though few thought they would use it, mainly because there was little perceived need to visit the site. A small group did not know about QR codes, whilst another small group had downloaded the app to their smartphones and had some experience of them. In approximately half the focus groups there was a respondent who was keen to try the code and delighted the other participants when the current site was easily accessed!The statement ‘A joint government and industry program’ was largely overlooked. Respondents really only commented when the text was probed by the moderator. Most thought it meant the industry (or manufacturers) were responsible for the testing, and in a focus group environment, this led to some speculation manufacturers could bias the results.

Overall there was a positive response to the above section of the label. It was seen to be a useful (recognisable or clear) key to the colours – blue for cooling and red for heating that were used for the stars and kWh guides. The snowflake and steam symbols were comprehended and thought obvious. For many they reflected the symbols used in advertising by real estate agents.

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Respondents also recognised the kW reference as an indication of the appliance’s capacity and the need to match the capacity to the size or dimensions of the room in which it was to be used.However, many were disconcerted by ‘CAPACITY (SIZING)’ appearing under ‘COOLING’ and ‘HEATING’. They were not sure if something was missing (e.g. at 4.5 kW this appliance is suitable for a room X metres by XX metres) or if they needed to perform a calculation, especially because the word ‘sizing’ was in brackets.Only about a third or possibly half the respondents understood why the heating kW (4.00 – 2.50 in the example shown) would vary and required others in the focus group to explain the reasons. Again, consideration could be given to including the explanation in any support materials developed.

Providing details of the brand of appliance and model number was viewed as important information and useful. It was considered clear and easy to read.Whilst respondents felt the map was not necessary for them (as they were in Melbourne, Perth, Brisbane and Sydney so one of the cities listed in the chart), they did recognise it would be relevant and useful for people living outside the major cities.As noted earlier, many did not notice the caption or misread it and therefore missed the key information and rationale for showing the different climate zones.

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There was a positive response to the star rating system and no major issues were raised with the approach or the graphic.The left hand column with the ‘key’ (cities and zones) was noticed and simple to use. Respondents could easily read the horizontal scale or rating and the colours were considered bright, clear, relevant (to cooling and heating) and easy to read. They also liked the consistency with the current labels.They understood the stars and the meaning of the number in the final star.The only minor issue raised related to the number of stars. There was a small group of respondents who thought the current label was based on five stars and were unaware it is actually based on six stars, with optional 10 star ratings for ‘super’ efficiency products. Therefore, the new design which shows ten stars caused a little uncertainty as they were not sure of the meaning – was there a bigger range of products, was testing more precise, or had differences shrunk?There was a less consistent response to the final column of kWh data. It was not understood by all respondents.Even when understood, not all thought they would use it and the largest group of respondents felt the star rating would provide sufficient information. There were comments or concerns that the kWh detail was an average or approximation and did not include the hours per day used as the basis of the estimate. These respondents would be more engaged with the kWh information of some details about the calculation was included or where such information was outlined on the website especially as it was not currently thought to be sufficiently precise to their circumstances to be helpful.

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A smaller group of respondents felt the kWh information was better than the stars as a guide because it was ‘real’ measure rather than a simple comparison. These people believed it related to consumption and they could use it together with their own cost per kWh to estimate the annual running costs. Interestingly, none of the respondents knew how much they paid per kWh with some believing they paid more than $1 - $1.50 per kWh.

About half the sample had unprompted awareness or understanding of the decibel reference – dB(A).However, once explained, there was widespread support for its inclusion. The noise from air conditioners was considered a major issue (especially in strata apartments) and a useful piece of information to have on each product. There were good levels of comprehension of the visuals, i.e. the graphic showed inside and outside noise levels. The key concern raised was in relation to the scale, few respondents knew if 55 or 70 dBs was high or acceptable. They sought a reference such as indicating the dB range for a lawnmower. This could be included in supporting communications materials.UsageRespondents indicated they expected to use the revised label in the same manner as the existing design. Whilst the new and more detailed information was considered helpful and would make them more informed, they did not expect it would change the overall use of the energy rating concept or materials.The comments made in these focus groups provide further evidence that whilst many talk about energy efficiency, consumption and cost being important, it is typically a secondary consideration when choosing an appliance.Very few made a ‘cost of ownership’ calculation, i.e. compared the cost of operating different products each year or for the potential life of the appliance.Instead, respondents indicated the hierarchy of aspects considered was generally:

Brand, especially the reputation for quality, i.e. reliability and durability. It was essential to prioritise the selection of a model which would do the required job.

Purchase price.

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Suitability, i.e. having a model the right size, or to fit the particular room.

Features, e.g. sensors, design or noise.

Energy efficiency.

Whilst many spoke about energy efficiency and energy costs being important, such attitudes did not always translate into action.Energy efficiency was often considered later in the process (or as a way of helping to decide between models on a short list) because:

As noted, the priority was achieving the desired outcome, cool in summer and/or warm in winter. Most believed it was worth ‘paying a little more’ in the purchase price and for running costs to ensure the system met such needs.

Seeking models with the highest number of stars often involved a significantly higher purchase price which most did not believe could be justified or would be ‘repaid’ by lower running costs.

They believed a small difference in stars (e.g. 1- 2) would not achieve a significant difference in running costs.

Many believed there was little difference in the energy efficiency of current or similar models from the major manufacturers, i.e. all units are within 1 – 1.5 stars of each other.

The majority of respondents had purchased split systems and most:

Had measured the size of the room in which the new unit would be located.

Spoke of giving consideration to the number of windows, aspect, e.g. north facing, doors or open hallways.

Visited major retailers such as Harvey Norman to view and purchase products.

There was widespread use of on-line calculators to convert room measurements into model size or capacity though this was often checked or reviewed with a retailer. Specialist air conditioning vendors had been consulted or used by a number of respondents, often because they were the only channel

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through which particular brands were available. In these cases (unless a major renovation or build where ducted systems were being considered), the vendor often calculated the size of unit required over the phone and did not believe a site inspection was necessary.Nearly all respondents indicated they conducted an on-line search which:

Invariably involved manufacturers’ sites. Key areas explored were model ranges and features. Energy efficiency was often included.

Often included review sites, especially consumer reviews. There was interest in other peoples’ experience of brands and models.

Family and friends were frequently consulted to learn of their experience and advice.Visits to stores was also widespread. Whilst the appliances were not functioning, many ‘liked to see them’. Few admitted to taking much advice from sales staff and claimed the dialogue focused on prices.Overall, the purchase process sought to narrow the selection to a short list of 2 – 3 units. Brand reputation, price or energy efficiency were used to make the final decision.There was no discernible pattern in terms of using the store’s installation service versus purchasing the unit and separately sourcing an installer. Some claimed a ‘package’ deal achieved a better price whilst others believed separate prices meant greater transparency and the ability to better negotiate each component.The order in which the various steps of the purchase decision were taken split into two main paths, as shown in the table below:

Approach A Approach B

Internet search and ‘homework’ or research

Discussion with friends

Store visits Store visits

Discussion with friends Internet search, especially review sites

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4.3.1 Air conditioning retailers and installersThe air conditioning retailers and installers interviewed were specialist companies and from all three zones (across four cities – Melbourne, Sydney, Brisbane and Perth). Providing split systems for individual rooms was part of their business, though it appeared attitudes and practices were heavily influenced by designing and installing ducted systems throughout houses and commercial properties. In one meeting it was necessary for the director being interviewed to take the moderator to the warehouse so he could check whether individual units still carried an energy rating label sticker!They indicated the key questions asked by customers were:

About size and capacity, i.e. what size unit would be required to achieve the desired level of cooling and heating. All explained they made a calculation on room size, aspect, number of windows and building materials. However, several did not believe they needed to visit the premises and could determine the size of unit from the description given by the customer.

Brand and price. All sought a recommendation on quality/reliability and sought a competitive/good price.

Noise. Customers would ask about noise and if the inside units were ‘quiet’. Those with experience in strata units or particular councils could also ask about the noise level of outdoor compressors.

Whilst many customers would conduct their own on-line search, respondents claimed few would change the recommendation offered.

Energy consumption (or efficiency) was usually raised after these other aspects had been discussed. All the air conditioning specialists interviewed suggested:

Customers ask about energy consumption and running costs rather than efficiency.

“Customers ask about consumption, not efficiency…”

“They want a good brand and which one is cheap to run…”

“Energy not a big deal, customers do not ask that often…”

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They believe the energy consumption of a unit is also influenced by the way in which it is used, and not just the efficiency of the product. They would explain that when a unit is set to a low temperature (in summer), the unit is likely to remain at maximum output for an extended period using a considerable amount of energy. However, if it is set at a temperature a few degrees higher, it is likely to operate below maximum output (using less energy) and cycle on-and-off to maintain that temperature and further reduce the energy consumed.

“Many set it at a low temperature [for cooling] then call up in horror

when they get the 1st bill…”

“We discuss how many areas will run together…whether they be mainly at

10% or 50% of capacity and we look at the coefficients…”

With ducted systems, they also talk about features such as zones and the ability to shut down the units in individual rooms when not used.

They make limited use of the energy efficiency labels.

Few have showrooms with products on display and customers do not usually visit their premises. When appropriate, brochures are used or customers are referred to manufacturers’ web sites.

“Customers do not look at it…”

“We usually have to sit them down and educate them…explain they can’t just look at a label…

they need to understand these other things…”

Additionally, they are aware of Minimum Energy Performance Standards (MEPS) and believe their carefully chosen brand offer good levels of efficiency. Possibly to support their specialist knowledge, they also like to talk about Energy Efficiency Ratios and the Coefficient of Performance (COP).

o EER and COP are the ratios of capacity output (cooling or heating) (in kW) divided by the power input (in kW). The higher the EER/COP rating, the more efficient the air conditioner.

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As such, air conditioning specialists could seek to use a number of factors, measures and features (beyond the star rating) when discussing energy efficiency with customers and making recommendations.The exception to this overall scenario is when an old system is being replaced and customers ask for ‘something better’ which can include a lower energy consumption. In these cases, vendors can provide prices for 4, 5 or 6 star models.

The new label design did not evoke a strong response from the air conditioning specialists interviewed. As with the other audiences surveyed:

It was initially perceived as busy and containing a lot of information. Unlike the current label which could be ‘quickly reviewed’, the new design would have to be ‘studied’. However, once the various elements were understood, the new format was considered straightforward to use. Respondents thought they would have to spend time explaining the label and the rationale for the climate zones to their customers.

“It’s more work as I’ll have to spend time going through it all…”

“There’s a lot of information…I’ll have to break it down for customers…”

“It’s good if they ask about energy…we can show them how much it uses…”

“It will help them compare…”

The colours were thought appropriate and a useful link to the current label.

Detailing efficiency by climate zone was endorsed, especially as this group claimed to be familiar with the concept or technical premise and sought to be more precise (than the current rating which is based on product performance at a single temperature point only) in their calculations.

They liked the sizing reference as it was considered such an important aspect of ensuring an effective and efficient unit was purchased.

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The kWh data was thought useful as it could help explain or approximate running costs.

There were no major issues raised regarding the map.

The reference to dB(A)s was also liked as it was an issue raised by customers.

Overall, it was thought more relevant to ‘retail’ purchases, and if explained, provided better information to help compare different products.4.3.2 Retail sales staffThe retail staff interviewed suggested:

Customers tend to ‘bone-up’ and do their on-line research before visiting a store. They have a range of ideas and beliefs from what they have found from their research and from friends’ advice and experience.

Choosing the size or capacity of an air conditioner appeared to be based on a very imprecise approach. Some had a sense of the size of their room or the capacity of existing units whilst others followed the advice of friends (e.g. ‘you need X kW…’) and others asked the sales staff.

Brand and appearance or styling were usually the first aspects reviewed.

That whilst a large number of customers ask or talk about energy efficiency, few are diligent in assessing this aspect of an air conditioning unit.

As such, sales staff believe the energy efficiency (and use of the energy label) was a secondary consideration in the decision or purchase process.

“They see something they like and the energy efficiency (or a high star rating on the label) is a bonus…”

“The energy rating or label is secondary…”

In their view (or experience), customers who focused on price will not pay extra for a more energy efficient product, and customers seeking more premium products usually select from a range of products with small differences in energy efficiency – something sales staff may

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reinforce by advising customers one or two extra stars would make little difference to running costs.

“They ask us ‘what is the best unit’, ‘which is the best-selling’ or what deals do you have…”

“If we say it is efficient they trust us…”

Notwithstanding these points they believe the current label is simple, clear and effective; customers can quickly and easily understand (and be reassured about) the rating of a product from a brief glance at the label.Against this background there was a qualified response to the new design.Sales staff felt it was obviously ‘busy’ and contained a lot more information than the current label requiring a more careful read (rather than a quick glance) to gain the key information. They generally supported the use of the three climate zones as it was difficult to argue against more accurate information.In terms of the various elements:

The heading was clear. The URL was noticed and understood. One sales person had visited the site to check the rating of a product and thought it easy to navigate and use.

There were no issues with the colours which were again recognised as a link to the current label.

The climate zones were clear.

There were no issues with the star rating. All felt the stars were clear, and it did not take too long to identify the rating for the area where they lived.

Sales staff did not believe the kWh information was widely used, and questioned the need for its inclusion.

As with other respondents the caption over the map was considered an important element but thought it was not easily read.

The dB(A) data was thought to be a valuable addition; inside and outside noise was a topic frequently raised by customers. Staff understood the symbols and thought they could explain it to customers.

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Whilst believing the new design would require more work by customers and them (in explaining it), sales staff were not opposed to the new design.

4.3.3 New ZealandThe impressions of new the label design recorded in New Zealand reflected those received in Australia, i.e.

Compared to the current label it was more complex and with more information which made it appear busy and harder to read.

After a few minutes study most respondents had figured out the key aspects, i.e. different ratings for hot, average and cold climate zones. Some required the rationale to be explained.

“You have to focus on your area…”

“Get the stars and compare to other products…”

The various elements were noted and understood.The main issue to emerge related to the map. Respondents questioned the need for the map, especially as all of New Zealand was in the one zone. Additionally, there was some disagreement that the climate in Auckland was similar to the south island. Many believed there was a significant difference in temperature between cities such as Dunedin or Queenstown and Auckland.The findings also indicated education materials would be required to make interested parties aware of the localised information available through the label’s QR code to obtain efficiency information specific to their area (in Australia the 69 Nationwide House Energy Rating Scheme (NatHERS) zones and in New Zealand the 18 Home Energy Rating System zones) will be required.

4.4 Hot waterRespondents’ recent or planned purchases were dominated by gas powered units. Possibly a third of participants had electric hot water and only one or two (in Brisbane) had heat pump water heaters.Indeed, awareness and understanding of heat pump water heaters was extremely low; in most of the focus groups it was necessary for a respondent or the moderator to provide a basic explanation. Even after a brief outline many struggled to comprehend how it worked and the benefits offered. As such, there was uncertainty and reluctance to

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consider an appliance which was unknown and with which few friends had experience. Overall respondents thought the basic concept (the efficiency of appliances can vary by geographic area) was only applicable to electric systems rather than gas powered heaters. As such, they reviewed and discussed the labels largely as something that would be limited to electrical hot water units. This highlights the need for further education through communication campaigns to help enable better understanding of all water heater technologies and the importance of being able to compare across different product types. While for solar and heat pump water heaters it is more obvious how location can impact on performance, there are factors that will affect all technologies. Water inlet temperature varies greatly across Australia and New Zealand and will have an impact on all water heater types – an instantaneous gas water heater in Darwin might only have to heat water a couple of degrees in summer, where the same product may have to raise the temperature of water in Canberra in winter by over 30 degrees. Additionally, water usage patterns vary across climates which impacts the volume of hot water used and therefore the energy required to supply it. The few respondents who were aware and understood heat pump water heaters appreciated the labels could highlight significant differences in products.

“Feel confident I could compare the energy efficiency of different machines…”

“Lots of things can vary like how long people are in the shower but it’s a good guide…”

“It’s about making comparisons that could help…”

In terms of the individual elements:

The responses to the heading block were consistent with the groups for air conditioning, there were no issues with the various elements.

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The sizing illustration or guide stimulated some discussion and opinions appeared to be largely driven by personal preferences or circumstances.Showing the number of taps, showers or bathrooms was really only relevant to the buyers of instantaneous hot water systems. There was a widely held belief that an instant hot water unit could only supply a limited number of outlets, so it was necessary to know the number of bathrooms to calculate how many units would be required.Whilst the number of bedrooms was viewed as an indication of the size of a house, it did not account for the number of people in each bedroom and was therefore not thought a reliable measure of the hot water requirements.An analysis of the discussions suggests showing the number of people (as indicated in the second example above) to be the most easily understood guide; all respondents could relate to the people in their household irrespective of the number of bedrooms or bathrooms.

Providing details of the brand of appliance and model number was again considered valuable.The map was thought to be helpful to people who lived outside the cities listed as it would help them identify the zone most relevant to their location. However, respondents in these sessions also found it difficult to read the text over the map with many failing to notice (or misreading) the caption.

However, the discussion about the map further reinforced the need for communications to explain the way in which all water heating technologies are affected by factors such as frost, ground and air temperature (as noted on page 19) and more broadly the ability to compare between water heaters of different technologies. Few

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respondents understood or gave any thought to the ambient temperature of water in different parts of the country or at different times of the year and how this would impact on the energy required to heat water and the overall efficiency of the system used.

There was a positive response to the star rating system. Even among respondents who were unsure of heat pump water heaters or why rating may vary in different parts of the country quickly grasped the main message, i.e. more stars the better and the rating varied across key locations.

“It categorises performance in terms of the geographical position…”

No major issues were raised with the approach or the graphic.The list of cities was noticed and members of the focus groups could quickly and easily identify which rating to use. They understood the stars and the meaning of the number in the final star.Again the colours were considered bright, clear and easy to read. They also liked the consistency with the current labels.There was good comprehension of the final column. Most knew kWh and understood it was a measure of the energy consumed and could be used (with the price per kWh) to calculate the cost of running the appliance. Whilst many believed they would simply use the star rating, it was nevertheless considered beneficial to have the estimate of kWh for each area.As in the focus groups for air conditioning, there was little knowledge of their own energy tariffs.

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Awareness and understanding of the decibel reference – dB(A) was similar to the air conditioning groups, i.e. around fifty percent. Respondents found its inclusion a little disconcerting. As gas and electric storage were the dominant systems used (and considered silent), noise and a need for a noise rating was not something they associated with hot water.However, once explained, there was widespread support for its inclusion for heat pump water heaters, especially for those in apartment buildings.The basic visual was well understood, though these respondents also sought a reference for a decibel level to understand the measurement provided.UsageWhilst acknowledging the new label provided more detailed information, respondents believed they would use it in a similar manner (a quick glance) as with other labels, e.g. those for air conditioning or appliances such as washing machines or dishwashers. Indeed, some believed there were already energy labels on water heaters, possibly mistaking the industry gas water heater label for an E3 version and thinking it covered all technologies.When choosing a product the priority was consistently described as ensuring there was sufficient hot water, and most were prepared to sacrifice a little in terms of energy efficiency and usage (and pay a higher price) to make sure they did not run out.It also emerged there were four core purchase occasions for hot water systems:

i. Replacement.

By far the most frequent occasion described.

In these circumstances, the priority was speed and to have a new unit installed as quickly as possible. As such, many simply ordered a replacement for the failed unit – the same make and model if still available. These were known, and unless there was an issue (such as being too small for growing families), people erred in favour of familiarity and experience. Importantly, replacements were ideal for the space available to position the unit, current pipes and power.

Nearly all asked the plumber for advice, i.e. to recommend a similar unit. They sought his experience and knowledge in terms of reliability, durability and value (in terms of purchase price). Typically, energy efficiency was a secondary consideration – ”Oh yes, is it energy efficient?...”

In terms of sequence of events, the first decision was calling the plumber and therefore he became very influential.

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In a few instances people would conduct their own search and evaluation, invariably on-line to look at the models available (similar to their current system), reviews and other people’s experience. They would also search for prices and many who had purchased gas water heaters had noted an energy efficiency rating (from the industry gas label) for the products considered. After choosing a system they would call a plumber to arrange installation.

Only a few took the opportunity to change formats, e.g. go from electric to gas.

ii. There was a small group who planned a change or up-grade, e.g. as their family grew or after purchasing a house and deciding the hot water was inadequate.

These people would spend more time exploring options, including talking to friends and plumbers, going on-line and visiting stores. Without the pressure of a broken water heater and looking for a more optimal system, they were more inclined to consider energy consumption and efficiency. They spoke of reviewing the rating and energy aspects on manufacturers’ web sites.

iii. Across the focus groups there were people who had completed the building of a new home or a renovation. This group also had time to consider various options as they were not as constrained by space, existing pipes and other logistics. They were often motivated to consider energy efficiency given the ambition to meet targets such as the NSW BASIX. As such, they would seek advice from architects and stores as well as going on-line seeking to understand the energy usage of different fuels and products.

iv. Rental properties were the fourth category. Property owners spoke of seeking the most reliable unit with the lowest purchase price. Energy consumption and efficiency was not a concern as they were not responsible for such expenses.

With the opposite requirements, several tenants explained they had negotiated with property owners to replace the hot water system with a unit that had lower energy costs.

Very few made a lifecycle ‘cost of ownership’ calculation by estimating the energy use and multiplying this by the cost of gas or electricity and considered this alongside the capital cost of the product.Across the focus groups there was also a view that there were only a small number of brands and a limited range of models within each size. Therefore many believed there would be few opportunities to choose on the basis of energy efficiency.Few respondents thought they would visit the Energy Rating web site. The star rating was considered a quick and sufficient reference (even

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though it only applies to gas hot water systems and is not a government overseen rating), especially when they rely heavily on their plumber and in the time available, may only check details on a manufacturer’s web site or some expert or consumer reviews.4.4.1PlumbersThe plumbers interviewed for this survey (from Melbourne, Brisbane and Sydney) corroborated the overall explanation gathered in the focus groups, i.e.

Customers invariably call requiring the quick replacement of a failed unit.

Few wanted a major change such as swapping to a different fuel.

The priorities are a reliable and durable unit, purchase price, speed and ease of installation.

The tradesmen interviewed indicated they were usually asked for a recommendation based on their experience and for a deal or the best price they could negotiate. It was also their practice to ask customers some basic questions, e.g. how many people in the house or have they run out of hot water. Based on the responses they may suggest a different size unit.All the plumbers appeared to have 2 – 3 ‘favourites’, i.e. units with which they had experience and endeavoured to steer customers towards these products. The familiarity created a sense of trust and made the set-up easier as they knew the pipe sizes and other details and ‘tricks’ for a quick installation.

“You stick to what you know…”

The plumbers explained it was when discussing their recommendations (or a short list of potential units) that customers asked about running costs, i.e. ‘is it expensive to run’ or ‘are the running costs any different to the old one’. It was at this stage and within the context of energy consumption (and costs), they were asked about (or searched) the energy efficiency of the products.Whilst aware of the gas rating label being used on gas hot water they were not heavily used by the plumbers participating in this study. They believed:

They knew the energy efficiency (or star rating) of the products they recommended.

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Their customers were happy with product models that had a ‘good’ rating, (e.g. 4+ stars) and few were willing to pay a significantly more to buy a unit with the highest star rating. Overall, plumbers appear to support this view, especially given their bias towards gas systems. Their general advice to customers is that the price premium associated with high efficiency hot water systems would not be recovered through lower running costs.

“You never get a ROI…”“Most are very close…”

Several plumbers believed there was an energy label for all water heaters, implying gas and electric. Especially with electric water heaters they spoke of advising customers to check they were on the best tariff. Most of them believed the electricity tariff could have a bigger impact on costs than the difference between a 4 and 5 star rating.

Against this background they liked the format of the current label (as shown in the interviews) for its simplicity, especially the need to only check one number (of stars). There did not appear to be much use of the kWh data. Instead, as noted above, the discussion was more general and in terms of ‘expensive to run’ or a comparison to the product being replaced.Overall, the plumbers did not believe the new design would change their use of energy labels (where they existed). Labels would continue to be principally a reference (especially the star rating) as a way of giving customers reassurance (if needed) about their recommendation.Whilst used to reading complex architectural drawing and technical manuals, the plumbers found the new labels busy and containing a lot more information.

“There’s a lot more to take in…”

“It’s not as simple as the old one…”

With the benefit of a few minutes to acquaint themselves with the new design, the plumbers believed:

The information was clear and easy to read.

“It’s quick to read when you know what it is about…”

“Just look at the row for where I live…”

It was beneficial to localise the information.

Plumbers understood the product was a heat pump water heater

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and the air temperature could affect the efficiency of the compressor.

“It’s about being a bit more accurate…”

However, there were concerns some customers would struggle to understand the technicalities and the reasons for the variation by climate zone.

It helped choose between products.

“It’s not too hard to do a comparison…”

It would give people (customers) greater confidence when choosing between products, though this was principally heat pump water heaters. They were not sure there would be a great difference with gas hot water.

“It would help decide when units are the same size and price…”

In terms of the individual elements:

The plumbers liked the way the new label retained the colour scheme from the current design. It was seen as clear and familiar.

There were no issues with heading block (‘ENERGY RATING’, URL and reference to testing via government regulations) though none of the plumbers thought they would have a need to visit the website.

The sub-heading ‘WATER HEATING’ was considered clear. The plumbers liked the reference to ‘size’ and preferred the graphic showing a number of people as it was how they discussed size or unit capacity with their customers.

The map was understood and the various zones appeared ‘common sense’. The plumbers believed the caption contained important information and could be clearer or more prominent.

The dB(A) graphic was clear and considered important as plumbers understood heat pump water heaters had the potential to be noisy.

The star rating was also liked and no issues were raised with moving to a horizontal display or to a ten star scale. They did not believe they would use the kWh data and thought it would only be of interest to a small number of customers.

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Heat pump water heaters were probed in the interviews and the plumbers indicated they were familiar with the products though generally advised against such systems:

Heat pump water heaters were seen to be expensive.

Few had much experience with these systems and had seen or heard of problems with older products.

Believed they were more complex and would require two trades (refrigeration technicians and plumbers) if in need of repairs.

4.4.2 New ZealandOverall, there were few differences in the usage or purchasing of hot water system between Australia and New Zealand, i.e.

Most purchases were driven by a failed unit and the need for a fast replacement via the selection of a similar unit.

More thought and consideration was given when renovating or for new builds.

The priority for unit selection was sufficient and reliable hot water and the purchase price.

Energy consumption (and efficiency) was a secondary consideration, often used to help decide between units on a short list.

Plumbers were the key influencer group.

“I went with what the plumber recommended…”

However, some differences emerged:

Gas supply was less extensive and therefore not an option for many people.

As electric powered hot water was more common, there was also greater awareness of heat pump water heaters with several respondents actively considering such systems. Associated with this was the suggestion of growing knowledge of the technology and some of its benefits, especially lower energy consumption or improved efficiency.

The response to the labels was also consistent across the two countries. Respondents in Auckland found it required more than a quick glance.

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“At first it is complicated….but eventually you work it out…”

“It’s busy and takes some effort to make sense…”

“Have to focus on your area…it gives stats to compare to other products…”

“It is a product you use for a long time so this sort of information is helpful…”

However, after finding their way around the new design the Auckland respondents also found the ratings by zone easy to follow, liked the information being localised and felt it would provide better information when comparing products. The inclusion of the dB(A) rating was thought especially helpful for heat pump water heaters.The key issue to emerge related to the URL. Respondents sought a .co.nz site as they questioned the relevance of an Australian site in providing information about New Zealand. Energy Rating is however the official website for E3 (which already covers Australia and NZ) and contains the database of registered products and enables product comparisons across both countries.As part of this discussion there were comments about preferring the existing label’s reference to the Australian/New Zealand test standard (current labels state the standard the appliance is tested to – for instance When tested in accordance with AS/NZS 3823.2, which has been replaced with ‘government regulations’ in the zoned label) as it acknowledged both countries’ role.The focus group in Auckland provided further evidence that water heaters are an infrequent purchase, and even having completed a product review and selection, there is generally limited knowledge or understanding of the various technologies and the energy consumption or efficiency of each. From the discussion it became apparent many had assumed or thought they had seen or checked energy efficiency labels and spoke about ‘star ratings’. As such, there appeared to be some confusion with labels as respondents spoke about their water heater purchase and described the energy labels found on other household appliances such as washing machines or dishwashers. These comments reinforce the need for communications and other forms of education to help households learn about the different types of water heaters and their energy efficiency.

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5.0 Conclusions and Recommendations5.1 ConclusionsThe qualitative data from this study indicates:

1. After some initial consideration (and possible explanation), the new design is considered a positive evolution of the energy rating label.

It is recognised to contain more information which can help make a better decision, i.e. assist in comparing products to understand the difference in energy consumed by each and the potential cost implications.

Once understood, respondents were comfortable in using the data (especially the star rating) for where they lived. Overall they accepted and valued an assessment determined by the specifics of their area rather than one based on a single calculation.

2. The design will be used in the same manner as the current label, i.e. a brief look at the number of stars to provide a quick and simple comparison (though with improved information) of different products or models. Some respondents thought they would also consider the kWh information as part of their assessment of different products.

3. The key elements of the design appear to be close to optimal and revisions were unlikely to significantly change usage or ease of comprehension.

Respondents noticed and liked the colour scheme (yellow background, red and blue stars) being carried across from the current label. The sense of familiarity helped label recognition and encouraged use.

There was good comprehension of the headings and symbols used for cooling, heating and hot water.

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There were no issues with the stars being on a ‘horizontal scale’.

There was good understanding of the column with kWh.

The climate zones and map were thought common sense.

Whilst not all respondents immediately recognised and understood the dB(A) symbol, information about noise was considered important and useful, especially for air conditioners and heat pump water heaters.

4. The key issue to emerge was that without some introduction, the new label was initially perceived to be complex and busy. Respondents referenced the current design which is simpler, familiar and well used.

Importantly, respondents commented their eyes were not drawn to a ‘starting point’, i.e. there was no obvious place to begin reading the label or an order in which to review the information. Most started with the stars as they were the large and more noticeable shape (when compared to text or numbers).

Additionally, the caption over the map was not easily noticed or read and it was misunderstood to be a comment about climate change or broader environmental matters.

5. There were no major differences in the responses to the labels for air conditioning and hot water, though respondents in the hot water groups showed less understanding of water heater energy efficiency and usage and may require more targeted communication materials. In addition, there was more confusion over existing regulations and labels and it was unclear whether the difference between the government E3 energy rating label and the industry gas label was understood.

6. The key trades interviewed for the study (plumbers, air conditioning installers and retail sales staff) were broadly supportive of the new design and agreed more precise information was helpful. They also believed it was more complex, customers would require more time to read and understand the information as well as their assistance. Overall, they did not believe it would change their approach or use of the energy efficiency labels.

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7. The new design had similar feedback in New Zealand and there was a high level of consistency in responses across the two countries. Two minor executional issues were raised with New Zealand respondents questioning:

Standardising New Zealand as one climate zone when, in their opinion, there was considerable variation between the north and south islands and the need to show the map if there is only one zone.

Using a .gov.au URL. There was a preference for a co.nz link.

8. Without any introduction or context, the major issue to emerge is that the design label and key aspects require some explanation. They contain considerably more information (compared to the current and familiar label) and are seen to be busy, complex and initially overwhelming when presented unexpectedly.

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5.2 RecommendationsAgainst this background the findings indicate:

1. The development of communications to support the launch and to explain the label, its use and the data and assumptions that underpin it. Given the limited understanding by consumers and installers about available water heater technologies and associated energy efficiency issues, a particular education focus appears to be required for this sector. A single consistent label across all water heater types may also help assist with the existing confusion.

The key pieces of information required by respondents were:

The significance of different climate zones on the efficiency and energy consumption of key appliances such as air conditioning and heat pump water heaters as such background and technical aspects were not widely known or understood.

Also, how the zones impact (if at all) on electric storage hot water and gas fuelled hot water.

Background to the zones, i.e. how they were determined and why some broad variances are included, e.g. Brisbane and Darwin or all of New Zealand. Clear information to point them to the more precise data based on their local area (69 zones in Australia and 18 in New Zealand) available through the website or QR code on the label.

Why an air conditioning product may have different kW output for cooling and heating.

2. A scale for dB(A) so users can understand what levels are quiet and noisy.

Importantly, it is not something that can be easily addressed by executional elements on the label.

3. There were no major communication issues which should inhibit the progress of the new design to the next stage in the Department’s development process.

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Some minor revisions to executional elements be considered:

Helping users find a ‘starting point’ and logical pathway or sequence to read the various pieces of information contained on the label. For example, a small ① to draw the reader’s eye to the map and caption.

Making the caption over the map more prominent and readable.

Review the phrasing of the caption so it does not appear to be ‘climate change’

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Using ResearchThis document reports the findings of qualitative research and a small scale quantitative research study. Qualitative research by its very nature seeks to explore participants’ impressions and opinions and that element of the study is in no way a prediction of opinion or future behaviour. Even within the quantitative stage there are some margins of error. The commercial risks involved in applying these finding lies solely with the user.