Market transformation describes both a policy objective and a program strategy to promote the value and self-sustaining presence of energy-efficient technologies in the marketplace. It is a strategic process of market intervention that aims at altering market behavior by means of barriers and leveraging opportunities to further the internalisation of cost-effective energy efficiency. Market transformation has rapidly become the objective of many privately and publicly funded energy efficiency programs in the United States and other countries.

First coined in a paper presented at the ACEEE Summer Study in 1992, 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. . In the energy efficiency market, however, they are often rendered inefficient because of structural market barriers like split incentives, asymmetric information, distorted market power, and hassle costs. Market transformation targets these barriers to optimal efficiency with strategies for shifting market segments 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,

The goal of market transformation is to produce new business-as-usual concepts for all actors in the marketplace. Programs by reducing or reducing costs, or by lowering transaction and uncertainty costs. Market transformation program strategies can resemble demand side management (DSM) as well as providing innovation interventions, but with the added goal of long-term energy saving and changing standard business practices.