6 ESCo Solution Development Strategies that WORK
Updated: Dec 7, 2022
I have been in and around the energy efficiency industry all my professional career. Most of that time has been spent walking through buildings, analyzing utility bills, and coming up with creative energy solutions for building owners. I was attracted to the Energy Performance Contracting (EPC) industry early on because it seemed like using guaranteed energy savings to pay for improvements was a “no brainer”. Who wouldn’t sign a contract that cost nothing?
After working in the green industry for decades, several different truths emerged that contradict the EPC model. Understanding these truths can be the difference between success and failure in the energy efficiency industry. Especially, if you work for an Energy Service Company or ESCo. Here is a list of six solution development strategies that you can take to develop a successful energy project for your customer no matter what their situation.
You can tell a building is sick when you first enter it. The building emanates odors left there from five years ago. The building maintenance person tells you that they boarded up the outside air intake to help with heating and cooling costs. You notice that some fans have been turned off for decades. Indeed, their energy bills are low, but not lower than the morale of this building’s occupants.
The truth is that this building is sick. If you fix the building, it will use more energy than when you found it so there’s no opportunity for an energy savings project that pays for itself. Right? Wrong. The key is education. Inform the building owner what is going on with the building and create a case to make the needed repairs and upgrades. As a quality ESCo, you can get this building running properly and as efficiently as possible.
Think about it this way. If a school district pays $10,000,000 per year in teacher’s salaries; and the energy bill for that same school district is $400,000 per year, which financial consideration is most important? If you spend an additional $100,000 per year in energy and capital costs to improve teacher moral, most school districts will gladly make the investment.
New Building Surprise
Your college customer tells you that you can audit all their buildings on campus, but there’s no need to audit the brand-new science building. It was designed by a renowned architect and received a LEED Silver certification.
Please, please, please… audit that new building. While some new buildings are built to be easy to operate with the lowest energy cost possible, most are not. In fact, many new building owners are shocked when they pay the utility bill for their new building and find that it costs 5X as much as their older buildings. There are several factors that lead to this problem.
The good news is that most energy savings measures with new buildings are relatively inexpensive; and can yield large amounts of savings to help pay for capital improvement projects for other buildings.
You are assigned to audit a group of buildings and find that one of these buildings is one of the biggest energy users of the bunch. You spend weeks coming up with brilliant solutions to fix this building that cost over $1,000,000 and save $400,000 per year. It’s an ESCo gold mine! When you present your brilliant ideas to the customer, they inform you that they plan to demolish that building in the next five years, so there’s no use making any facility changes.
While this is an extreme example, many engineers get tunnel vision on utility bills and energy savings opportunities without understanding the “big picture”. This “big picture” view will help you focus on the best opportunities for your building owner customers. School districts will shift occupancy of schools based on population demographics. Data centers will relocate or collocate to improve cost efficiency of their online servers.
Manufacturers will move facilities overseas to reduce manufacturing costs. Office staff will shift to home offices for remote workers to improve work flexibility for their employees. All of these changes have nothing to do with energy, but everything to do with how buildings will be used by your customers and how long your customers are willing to wait for energy savings investments to pay for themselves.
You look at your customer’s utility bills, and they are spending three times as much as they should to heat and cool their building. You walk through their building, and you quickly see why their utility bills are so high. It’s easy to put together an energy savings project that pays for itself in a few years. You are so overjoyed; you can’t stand it.
I’ve audited several such buildings. Like anyone in this industry, I got excited about the opportunity and was looking forward to presenting my “slam dunk” project to the customer. I was heartbroken and bewildered when they didn’t go forward with the project.
Why these projects don’t go forward is still a mystery of sorts. However, here’s my best guess on why this happens. If you see a guy driving a V8 diesel pickup with nothing in the bed of his truck, you may think, “this guy could trade his pickup in for a Toyota Prius and come out ahead financially”. Money is not the only reason that people do what they do. The guy driving the truck may want to look macho; or he feels like he may need his pickup to haul something someday. I’m not condemning either of these reasons. However, it is important for you to understand why your customer is having you audit their buildings. If it is purely for energy savings, then your energy waster is truly your gold mine. If they have other reasons, understand what those reasons are so that you can use the right language and make your best project presentation.
We live in a very political industry. Building owners cannot escape creating goals for “climate change”, “ESG” (Environment Social Governance), “carbon neutral”, or “net zero”.. or other environmental fads. At the executive level of an organization, well-meaning executives commit to achieving environmental goals with their company. At the building operator level of the same organization, they believe such goals are unrealistic. It is common for an ESCo to get trapped in this tug-of-war with your customer.
The fact is that you can mediate both perceptions with truth. In most cases, ambitious environmental goals are achievable with a large investment by your customer. In some cases, reaching such goals can provide a benefit to the operation of the facilities at the same time they improve the environment. You won’t know any of this until you audit the buildings and do the work. Regardless of what truth you uncover, it’s important to not pick political sides; and gently educate both sides on the truth of their situation.
Unaware Building Owner
Most building owners do not fully understand their facility situation as it relates to energy use or other factors. As an ESCo, it is your job to: 1) listen to your customer’s perspective; 2) do your due diligence in studying and auditing their buildings; and 3) gently and honestly educating your customer on the building improvement opportunities that exist.
This is known as “educational selling”. In fact, an ESCo project development team is pursuing “solution-based selling” and “educational selling” at the same time. Before you do a feasibility study, you have no clue what a project solution will be. In this process you will be educating the customer on cost, benefits, and application; the customer will be educating you on their needs. If done well, the truth will emerge. This truth is what allows you and your customer to make your best decisions. That decision may be that you don’t get a sale. Or it could mean that your sale is 10X bigger than what you thought initially.
The key to building awareness is that you don’t assume that this TRUTH is known until you do your discovery work. After this work has been done, create an energy, financial, and facility story that collectively illustrates a TRUTH that allows your customer to act.
I hope that these solution development approaches have helped you better understand how to create projects that are meaningful to your customers, impactful for the environment, and profitable for you and your ESCo.
About me. I have been actively engaged in the energy efficiency, renewable energy, and energy conservation industry all my professional career from 1987 until now. I was a licensed Professional Engineering in six states and a Certified Energy Manager (CEM). I worked as a sales executive, energy engineer, sales manager, and entrepreneur. I started, grew, and sold an Energy Service Company (ESCo) called Ennovate Corporation (1997 to 2013). I now coach business owners, engineers, and business development executives in the energy efficiency industry.