Energy services present a growth market for electrical contractors (ECs). Your customers need to control their rising energy expenses, and that need is driving the emerging energy services market. The rising energy expenses your customers face are due to both the unrelenting increase in costs for energy and the growth of energy use in their business.
Your customers encounter rising energy prices frequently in the news and at the gas pump. At the same time, businesses are becoming increasingly energy-intensive with an expansion into new products and services and new and additional information processing and control technologies used in production and management functions.
The energy services market is about the EC using its knowledge and expertise to help customers control their energy expenses, accounting for each customer’s unique economic, environmental, and social business objectives and values.
Consider the opportunity
There are approximately 5 million commercial buildings in the United States. Retail, healthcare, dining and warehouse properties comprise a significant portion of that commercial building stock. In performing the 2003 Commercial Buildings Energy Consumption Survey, the Energy Information Administration (EIA) found that more than 90 percent of the commercial buildings currently in use were built before 2000. The EIA also found that the median lifetime of commercial buildings in the United States is 75 years. This means a significant portion of the commercial buildings currently in use in the United States are more than 75 years old. Furthermore, greater than 70 percent of commercial buildings are 10,000 square feet or smaller.
Now, consider the energy use of a typical commercial building. According to the U.S. Department of Energy (DOE), lighting is 30 percent of a typical commercial building’s energy use. Heating, ventilating and air conditioning (HVAC) systems take up approximately 43 percent of the typical commercial building’s energy use, and the remaining 27 percent results from office equipment and other loads to conduct the day-to-day business. These statistics represent a tremendous opportunity for ECs to help their customers adopt the latest technology to reduce energy use, which will increase profits and benefit the environment.
The opportunity for electrical contractors is not in new construction, but in the retrofit market, where energy services build on the EC’s design/build and service/maintenance capabilities. Moreover, electrical contractors should focus on commercial buildings that are privately owned and operated by small businesses in their market area. These businesses are typically already the backbone of ECs’ service business and not served by energy service companies (ESCOs) that are focused on large private and public institutional buildings as well as national retail chains.
Many of the owners and operators of these buildings are not aware of the fact that investments in energy management can have a quicker payback and higher return on investment (ROI) than investing in market expansion, adding products and services, or reducing direct production expenses to improve gross income. In addition, while there is always a great deal of risk and uncertainty associated with investing in expanding business revenues or reducing direct production expenses, the payback and ROI on investments in energy management can be predicted with a high degree of certainty and are almost risk-free for the customer.
What is involved?
The EC’s energy services should be built on the following four pillars:
Energy conservation addresses reducing energy waste by helping the customer curtail unnecessary energy use and includes a variety of strategies, such as educating building inhabitants about saving energy by manually turning off lights, personal computers and other equipment when not in use. Conservation also includes the installation of occupancy sensors, daylighting controls, and other distributed energy-control technologies that may not have been available or economically feasible when the building was built or last renovated.
Energy efficiency is the next step up from energy conservation, where the customer reduces its energy use by replacing old equipment with newer, more efficient mechanical and electrical equipment and control systems. For example, an energy-efficiency strategy might be to replace existing metal halide luminaires in the customer’s warehouse facility with new T5 high-output fluorescent luminaires that could also include integrated occupancy sensors.
Energy supply involves the installation of distributed generation on the customer’s premises. Distributed generation technologies include photovoltaics, fuel cells, small wind turbines, and other alternative-energy sources. Alternative-energy technologies, particularly those considered sustainable or green, often qualify for government, utility, or other incentives, rebates, and grants that can improve their payback period and ROI for the customer.
Lastly, energy services must take into account the energy reliability that the customer needs to conduct his or her day-to-day business without interruption due to blackouts, brownouts and other unplanned utility service interruptions. This includes ensuring that the customer’s facility and equipment get the necessary energy to operate properly, no matter the source. In the case of electrical energy, a customer’s facility and equipment must receive energy at the requisite rate (power) and a supply voltage with acceptable characteristics, including magnitude, frequency and waveform. Deviations may necessitate the installation of transient voltage surge suppressors, harmonic control systems, voltage stabilizers, uninterruptible power supplies, and other strategies.
Entering the energy services market
Profitably entering the emerging energy services’ market is easier that it may seem. You will need to invest time and money in marketing and business development, personnel education and training, and the acquisition of specialized tools and test equipment. However, for most ECs that have a good service business and offer design/build services, the groundwork for entering the energy services market is already in place. For these contractors, market entry is about developing a strategy for the energy services’ market, putting the needed infrastructure in place in terms of people and equipment to implement this strategy, and then executing the strategy through marketing and business development, focusing first on educating the EC’s existing service customer base about its energy services.
This article begins a series aimed at helping ECs enter the emerging energy services market. Future articles will address developing an energy services strategy, building the energy services infrastructure to implement that strategy, and executing the strategy. Future articles will address the four pillars of energy services in greater detail.
This article is the result of a research project, “Energy Roadmap: Electrical Contractor’s Guide for Expanding Into the Emerging Energy Market,” sponsored by ELECTRI International Inc. (EI). Thanks to EI for its support.
GLAVINICH is director of Architectural Engineering & Construction Programs and an associate professor in the Department of Civil, Environmental and Architectural Engineering at the University of Kansas. He can be reached at 785.864.3435 and firstname.lastname@example.org.