By Elisa Wood
July 10, 2008
With energy demand high and supply tight, the only thing in abundance these days is uncertainty. So says a recent Standard & Poor’s report: “The Credit Impact of Rising Energy Costs on Industry Sectors.”
“Whether energy production can keep up with demand growth is a major question,” says the credit rating agency. “Where the energy will go is easy to estimate. The harder question is where will it come from?” Even if oil prices dip in the short-term, S&P says they are “cycling around a rising trend.”
High energy prices and uncertainty cripple business growth. The auto industry is expected to end 2008 with the lowest sales in 15 years, says the report. The airline industry is squeezed between consumers demanding cut-rate fares and fuel prices that now gobble up as much as 40% of operating expenses. Meanwhile, stores and other retail businesses find customers lack discretionary cash for merchandise.
But buried deeper in the report is some good news, and it is about capital goods aimed at improving efficiency. Specifically, S&P tells the tale of Sweden-based Alfa Laval www.alfalaval.com, a leading global supplier of heat exchanges, pumps, valves and other equipment aimed at improving efficiency in industrial processes. Company sales are up 50% since 2005. The company’s credit rating has improved because of the demand for energy efficiency products — Alfa Laval saw a one-notch upgrade in April. S&P says prospects are good for the company because it is stepping up product development and increasing capacity to capitalize on the strong market in the efficiency sector.
For companies like Alfa Laval, the challenge is to “maintain and improve market share, while at the same time keeping control of costs and avoiding over-expansion,” S&P says. The credit-rating agency doesn’t say this, but inherent in this strategy is attracting workers to support expansion.
We’ve heard from industry insiders who say a shortage of workers is becoming a very real problem in the energy efficiency arena. We suspect we’ll hear more talk about this need in the near future as states and utilities ramp up spending on efficiency programs.
Compared with much of today’s bad economic news, worker demand is a good problem to have. But it is a problem nonetheless, and one that requires immediate attention if the industry is to fulfill its mandate as the near-term solution to our energy supply and demand woes.
The solar industry has made clear its need for installers, and policymakers have responded with training programs at community colleges. What does the efficiency industry need to do to attract the same attention? And will policymakers listen? We welcome your thoughts.
Visit energy writer Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets newsletter and podcast.