The business of increasing energy efficiency is quickly growing, leading to many new job opportunities.
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New Business Opportunities in Energy Efficiency
By Grégoire Mazars October 10, 2017
You might be on the lookout for trends in renewable energy production if you’re interested in sustainable business. In fact, clean energy talks cast a shadow on many other sustainability topics in the classrooms here at BU. However, the most cutting-edge business techniques in the sustainable sector appear in energy efficiency -- and graduate business students know it. Many creative business models have captured the value of reducing customer electricity consumption in increasingly complex ways these past years. The majority of the leaders on this front are non-profits and operate with the goal of reducing national greenhouse gas emissions. As such, their precious insight into energy efficiency is sold to public utilities or governments, making research the main activity of these businesses.
Electric utilities are increasingly required to offer energy efficiency solutions to their customers, yet seldom understand the mechanisms behind it. Hence the help from specialized firms, such as Opower in our vicinity who offer insight on customer experience to those who need it. Energy efficiency is largely based on behavioral methods, as the end-users of electricity are in charge of their own consumption levels. The understanding of this customer psychology when it comes to electricity consumption (when do households crank up their appliances, and how can these habits change?) has been largely gained by those energy efficiency firms who decided to put their money where their mouths were. Three main forces drive consumer behavior,which are: incentives (read: financial ones), information and education (on the energy issues) and social and psychological forces. The latter refers to the leverage of social norms to capitalize on the consumer’s desire to help the environment. Normative comparisons consist of sending home energy reports, which compare a household’s consumption with its neighbors’ (and invites to do better if the consumption has been high, particularly during peak demand). Another tool consists of randomized controlled trials, during which households benefitting from energy efficiency programs are matched and compared over several years against control households without programs. Thus, results over time show which efficiency measures actively helped reduce consumption.
Some businesses, such as the Northeast Energy Efficiency Partnership (NEEP) and its sister companies across the country, exclusively prepare reports on the best available strategic electrification methods for governments to purchase. The city of Boston might want to know what the best way to electrify trucks and/or light vehicles is. A strategic electrification company could answer: trucks and similar fleet-based markets are liking biofuels but the latter are not developing fast enough. The Commonwealth needs to find out how it can achieve a certain percentage of electrification, and what energy efficiency methods it can use to reach that goal -- and what its limitations are. The answer could be: adopting fuel cells could help the market reach its target goal of 85% reductions in emissions by 2050. Similar companies that research the possibilities of energy efficiency adoptions to sell their expertise are becoming more frequent.
A third type of business model for energy efficiency-- less cutting-edge but more thoroughly proven than the aforementioned two-- consists of developers called Energy Service Companies (ESCOs). These companies offer consulting, sell the hardware, or implement the efficiency program from scratch to receive shared profit (“shaved savings”) off the savings made over time. Several of these tools are developed in partnership with governments and are called Energy Conservation Measures (ECMs). Siemens and Honeywell are examples of shared savings contractors. They might retrograde a building entirely and get a percentage of the savings calculated each month as the building will need less heating. More drastic ECMs, mandated directly by governments, will entail forcing retail energy customers to change their equipment (hardware in the case of traditional household equipment, or software that controls the hardware) so they get consume less while getting the same quality of service. Either way, conservation measures are meant to be cost-effective as they offer enough savings over time to absorb the initial expense.
These business models are still being built on. We don’t know what the negative effects of behavioral energy efficiency might be on social welfare as it arguably influences consumer’s habits in uncharted ways. It is not necessarily sustainable either, as households have shown that they fall back into old energy consumption patterns once their efficiency programs end. Consultants in energy efficiency such as Opower and NEEP or perfecters of energy conservation measures like Siemens and Honeywell have yet to work more to perfect their predictions, assist governments and understand customers. And in return, they rely on governments to refine statutes and regulations that will help foster cutbacks in electricity consumptions. They internally develop technologies at the forefront of data transfer and cloud storage to enhance their interaction with households. Examples of energy efficiency businesses vary and are? destined to prosper as governments pursue emissions reductions goals and ask their utilities to help them by offering energy efficiency options to their customers. Whether the work consists of researching the best methods to implement or offering to kickstart these works, the income stream will come from mandated utilities or local governments. Because there are many ways firms can assist them to this task and many ways they can earn profit, there are as many variations of these business models.
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