Rebecca Foster, senior consultant with Vermont Energy Investment Corp., is piloting research for the National Association of Electrical Distributors (NAED) on how electrical distributors might better work with energy service companies (ESCOs). While the research project is not yet over, she presented some statistics, ideas and details in a 90-minute session at NAED’s National Meeting last week.
ESCOs are important now, Foster said, and perhaps will triple in gross size in the next few years:
In learning about the way the ESCOs do business, two concepts, “The Super 16” and MUSH, were the two most important concepts she presented.
Among “The Super 16” are:
- Independents and energy/engineering firms: Ameresco, Noresco, Benham Companies, Chevron Energy Solutions, Clark Energy Group, Lockheed Martin Services and McKinstry.
- Utilities or related companies: Con Edison, Constellation Energy, FPL Energy Group, and Pepco Energy Services.
- Manufacturers that function as ESCOs: Honeywell, Johnson Controls, Schneider Electric, Siemens Government Services and Trane.
These companies are the dominant players in the ESCO business. In 2008, just 12 of them grossed more than $100 million each. Together, they accounted for 88% of the activity in their industry. These days, Foster said, this ESCO group combined probably has a 75% market share.
Municipalities, universities, schools and hospitals (MUSH), as seen in the graphic below, are a well-liked sector for ESCOs:
Foster revealed some distributor comments on ESCOs and obtained more from those in her audience. Among the distributor concerns voiced:
- “[ESCOs] typically use low-cost, low-performance products.”
- Much was made of the ESCO’s habit of buying direct. One attendee noted that his company had showed an ESCO some products, only to find that, after a couple of projects, the ESCO went around the distributor to get unmatchable prices directly from manufacturers.
- Foster noted that the ESCO sector did not really understand what electrical distributors do, and how they can add value. While the research is continuing, one thought she voiced is that ESCOs would be helped to see more clearly the value that distributors offer in supply chain logistics, warehousing, and more.
However, as seen in the graphic above, of 72 NAED-member distributors surveyed, there is work to be done internally. In response to the question, “are you currently targeting ESCOs as customers/partners?” 31 NAED members said yes, while 40 said no.
Foster indicated that additional phone conversations were yet to be held with NAED members on the subject of ESCOs. The project, she indicated, should be wrapped up this summer and then the results will be communicated to electrical distributors.
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