The Energy Service Market and the New Economy

March 14, 2001
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LAS VEGAS, NV — “Utilities used to be easy to define.” Those were the words of Frank Shepard of The Trane Company as he addressed attendees of ACCA’s recent convention here. “I grew up in Tennessee and thought utilities were part of the government because of the TVA project.”

With deregulation of the energy market becoming more commonplace, confusion abounds about who the “new” providers are and what services will be available — and what role utilities play as energy providers.

The unregulated portions of utility companies, known as energy services companies (ESCOs), are providing opportunities for hvacr commercial contractors that didn’t exist before, according to Shepard, director of ESCO marketing for Trane.

The “partnering opportunities” would benefit contractors for several reasons. “ESCOs value contractors because of their project development capabilities, their knowledge of facilities and hvacr systems, their skilled labor force, their service/maintenance capabilities, and their experience,” said Shepard.

Shepard gave an example of how ESCOs and contractors could partner. “Here is an example of asset monitization,” he said. “An ESCO partners with a contractor to design, build, and maintain a chilled water plant within a casino. The casino owns the plant but the chilled water is sold back to them by the ESCO [and] serviced by the contractor.”

Shepard cautioned contractors to study partnering concepts. “Be careful because sometimes the plan-and-spec process is better than the partnering process.”

Although the new energy services market has spawned new business models and exciting opportunities, it has also magnified the importance of cooperation and partnerships, because, according to Shepard, one of the former strengths of a business, exclusive access to information, has been weakening.

“Information has always been the glue that held a business together,” he said. “But with the instant availability of information, the glue has begun to dissolve.

“Information and knowledge is what drives competitiveness and drives businesses into the marketplace.”

In other words, the new economy and energy service market will require careful study before its effective use as a business model can be determined. Understand-ing one’s value in this new economy depends on information and more information, he said.

Shepard summarized his presentation with “tactics for success in the energy services market.” Contractors working with business owners should consider partnering, maintain flexibility, and maintain a market position.

Contractors working with customers indirectly through an ESCO should know how to qualify an ESCO; understand one’s value to an ESCO; and know how not to give away that value.

Publication date: 03/19/2001

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