What Worries Big Energy Efficiency Companies

Oct. 8, 2013
Energy efficiency companies, or ESCOs, are poised to soar with healthy growth predicated through 2020. But some detractors are throwing darts at the rising industry. A leading industry association describes who’s taking aim and why.

As prospects soar for big energy efficiency companies, some detractors are throwing darts.

A recent bill in Ohio, for example, aims to deflate state goals for both renewables and energy efficiency. For the National Energy Association of Energy Service Companies, an organization whose members include many of the largest US energy performance contractors, the  legislation (SB 58) is a worry.

It turns out that the Ohio bill is about more than Ohio, as NAESCO President Donald Gilligan explained in a recent interview about his organizaton’s current legislative priorities.

“This year there has been a significant push across the country by conservatives, many of them aligned with ALEC (American Legislative Exchange Council). They have something called the Electricity Freedom Act, which is designed to rollback renewable portfolio standards and to a certain extent energy efficiency standards,” he said. “They have not been successful; they really have not won in any state. But there is a new effort this fall in Ohio.”

The bill is pending before Ohio’s Senate Public Utilities Committee. Its chief sponsor is Sen. Bill Seitz, a Republican who is chairman of the committee and also is listed on ALEC’s site as a member of its board.

Gilligan – and others – were surprised by the extent to which the Seitz bill takes on energy efficiency. During hearings in the spring, the legislation appeared more focused on renewable energy. But the latest version would cap energy efficiency expenditures and realign incentives to favor utility programs, according to Gilligan.

“Some of the provisions are pretty egregious,” he said.

The legislation would cause energy efficiency costs to rise, “creating a barrier to energy efficiency growing to the appropriate place in the portfolio,” he said. “If you make energy efficiency expensive, it doesn’t have the same sort of economic advantage over generation.”

The industry attacks come as the ESCO industry readies for  healthy growth through 2020. Gilligan envisions more Ohio-like battles erupting as energy efficiency increasingly reduces electric demand and drives down power prices. This threatens those utilities or companies that want to continue to make their profit from building and operating power plants.

He noted that power prices dropped by more than 50 percent in the last annual PJM Interconnection capacity auction, in part because of flat demand growth.  (In all PJM, secured 169,160 MW of capacity in the May auction. Of that, 12,408 MW was from demand response. Energy efficiency accounted for 1,117 MW, about 21 percent more than last year. )

“And that’s was just a warning shot of what’s to come,” Gilligan said. “If energy efficiency continues to grow as a percentage of bids into PJM, then new capacity isn’t going to be worth much of anything. There are people in the utility business that are going to fight like hell to stop that.”

Some of NAESCO’s other current legislative priorities include:

  • Securing a five-year extension of the $2 billion federal Better Buildings Initiative, which runs through the end of 2013
  • Correcting the method used by the Congressional Budget Office to score federal energy performance contracting. The current approach takes into account the cost of the contracting, but not the savings achieved
  • Removing state bureaucratic barriers to energy performance contracting
  • Supporting utility ratepayer funded energy efficiency programs

These are likely to be some of the hot topics as ESCOs gather in Orlando, Fla., November 12-14 at the NAESCO 30th annual conference and vendor showcase, “Charting the Future Course of Energy Efficiency”.

Want to get in on the discussion about this article? Please come on over to our LinkedIn group, Energy Efficiency Markets.com  and introduce yourself!

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is an award-winning writer and editor who specializes in the energy industry. She is chief editor and co-founder of Microgrid Knowledge and serves as co-host of the publication’s popular conference series. She also co-founded RealEnergyWriters.com, where she continues to lead a team of energy writers who produce content for energy companies and advocacy organizations.

She has been writing about energy for more than two decades and is published widely. Her work can be found in prominent energy business journals as well as mainstream publications. She has been quoted by NPR, the Wall Street Journal and other notable media outlets.

“For an especially readable voice in the industry, the most consistent interpreter across these years has been the energy journalist Elisa Wood, whose Microgrid Knowledge (and conference) has aggregated more stories better than any other feed of its time,” wrote Malcolm McCullough, in the book, Downtime on the Microgrid, published by MIT Press in 2020.

Twitter: @ElisaWood

LinkedIn: Elisa Wood

Facebook:  Microgrids


Design for Purpose Microgrids – Water and Wastewater

Nov. 3, 2023
Michael Boswell, vice president, power & infrastructure at Concord Engineering discusses microgrid designs for water and wastewater.

Get the full report

Energy Modeling: An Essential Step in Microgrid Projects

Learn how energy modeling can be used to determine the best energy mix for your microgrid, as well as determine how big it needs to be to achieve your project goals.