EE funding: The cascade begins

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By Elisa Wood

March 25, 2010

It’s been a heady time for the energy efficiency businesses, with the federal government last year announcing financial support never before seen by the industry. But months after the initial hoopla many of the smaller companies – which make up a large swath of the marketplace – say they still have not seen dollars come their way.

That’s changing now, according to the National Association of Energy Service Companies, which held a recent workshop in Washington, DC to discuss federal energy efficiency initiatives. Donald Gilligan, NAESCO president, and James Dixon, NAESCO, vice chairman, took a few minutes away from the action to talk to me about their view of the marketplace.

Dixon, who is also a vice president at ConEdison Solutions, says his company has been seeing a lot of business spurred by federal stimulus dollars. The funds are now flowing from the energy service performance contractors and energy service companies (ESCOs) down to the general contractors, lighting contractors, manufacturers and others in the chain of services. “It’s a huge cascading effect with far ranging impact throughout the country,” Dixon said.

Gilligan expects this cascade to flow even faster in the second quarter. “It is ramping up quickly. We expect most the money to be committed in a few months.”

How do you stay on top of the action?

The federal government is engaged in a large-scale effort to bring more efficiency to its buildings. Those contracts tend to go directly to the “super ESCos,” sixteen companies that were awarded special umbrella energy savings performance contracts by the U.S. Department of Energy late last year.  A list of the super ESCOs and contacts is here:  http://www.nema.org/gov/economic-stimulus/upload/Fact%20Sheet%20and%20Contact%20Info%20for%20ESCOs.pdf

Super ESCos often subcontract work out to the smaller energy companies. Smaller players also can keep an eye on the significant increase in energy efficiency spending by state governments, particularly in the Northeast. Much of the state money flows directly to utilities who in turn subcontract projects to energy service companies.

Those who have been in the industry for decades have seen interest in energy efficiency ebb and flow. What’s the impetus this time?  And how long will efficiency hold society’s interest?

“If you go back four to five years, then you begin to see the trend toward increased energy efficiency. That was also the time when you began to see utility companies propose to build new power plants,” Gilligan said.

“Those new power plants are phenomenally expensive. What happened across the country, at the state level, at the public utility commissions, when they were asked to review the applications for those power plants, they said, ‘What else is there? There has got to be something less expensive than this.’ You saw a real renewed interest in energy efficiency in parts of the country that had not show interest in energy efficiency for 10 or 15 years. That trend is not going to stop, as the country continues to grow, as we continue to need more power supplies. Energy efficiency is always less expensive than new power plants,” Gilligan added.

Dixon concurred: “I‘ve been working the utility industry for about 28 years, so I’ve seen this ebb and flow. I think this is a long term trend.”

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So if you’re in the energy efficiency business and haven’t yet seen increased action yet, hang on, it’s coming soon. And it looks like you’re in for a long ride.

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

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Elisa Wood About Elisa Wood

Elisa Wood is the chief editor of MicrogridKnowledge.com. She has been writing about energy for more than two decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.

Comments

  1. I hope your comments about the coming “cascade” are accurate.

  2. Mark Case says:

    Connecting two of your blogs. `the Cascade Begins’ and `EE risk’.
    Having been in the EE business for more that twenty years, I have great concern about the risk of pumping so much of the EE funding into the ESPC sector. Our experience shows this is at best a very expensive way of obtaining real energy reductions and at worst a complex numbers game that either doesn’t deliver energy savings or if it does it doesn’t deliver cost savings. The savings stream is earmarked to repayment for a term that equals or exceeds the real lifetime of the efficiency upgrade.
    I’m worried about the potential backlash from regulators and and government policies. If the savings aren’t real, and there isn’t free cash generated, why not just build new capacity.

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