This is the second article in a three-part series on energy services for commercial HVAC contractors. In the first article (See Energy Services for Commercial HVAC Contractors, Nov. 2009, or http://bit.ly/44NWc7), we explored the business opportunity of expanding your service offering to include energy services. We identified why commercial HVAC contractors are uniquely positioned to succeed, and introduced the concept of an Energy Service Agreement™ as the mechanism by which you can most effectively take this offering to market.
Creating a successful energy services program is not difficult, but it requires a few key skills and a clear definition of what constitutes your service offering. This article will detail the steps that need to be taken to quickly begin realizing the financial benefits to your business.
Creating an Energy-Savvy Salesforce
The process of implementing an energy services offering needs to be treated like a sales initiative. As such, the first step in the process is to make sure your sales team has a command of basic energy skills and knowledge. They must become energy-savvy, including the ability to confidently engage customers in discussions about energy and operating costs. They need to understand how buildings use energy, to start conversations.
Here are some examples of building owner-relevant facts that can get the discussion rolling:
- Energy costs are the single largest controllable operating cost in a building
- HVAC and lighting typically accounts for 75% of a building's total energy use
- According to the Building Owners and Managers Association (BOMA), simple low- and no-cost energy conservation measures can generate up to a 27% reduction in energy costs
- A 10% decrease in energy use will generate savings that usually exceed the entire cost of a typical maintenance service agreement
- ENERGY STAR® certified buildings have, on average, 3.6% higher occupancy, $2.40 per sq. ft. higher rent, and $61 per sq. ft. higher sales values than standard buildings, according to CoStar, a Bethesda, MD-based commercial real estate information company.
This is the one technical skill that every energy services salesperson must (and can) master. Knowing how much a customer spends on energy, and how that compares to their peers is critical information for a salesperson. This can be done by reviewing the last 12 months of utility bills, and accessing energy databases like the U.S. Department of Energy's Commercial Building Energy Consumption Survey (CBECS), or by using software tools such as the U.S. Environmental Protection Agency's (EPA's) ENERGY STAR® Portfolio Manager.
Complete an Energy Benchmark
Several states, including California, Washington, and the District of Columbia have recently passed legislation that requires energy benchmarking information to be provided as part of the public disclosure for the sale, lease, or refinancing of certain commercial buildings. This will only serve to accelerate awareness and create demand for energy benchmarks. The good news is that the tools provided by government agencies are just complicated enough that building owners often find the process difficult, and as a result, may not ever generate benchmarks for their buildings. However, an energy-savvy salesperson with the experience of generating a few energy benchmarks, won't find the process difficult at all. This creates the ideal situation for delivering added value as part of your energy services offering.
Communicate the value of Energy Service Agreements-Selling energy services will require selling value, not price. An Energy Service Agreement will sell for a higher price than a standard preventative maintenance agreement. That's good, right? It increases your revenue per service contract which is the whole point of this. Virtually all of the contractors that we work with are already more expensive than their competition. Integrating energy services into their service offering raises the price even further, but it provides additional value that far outweighs the incremental cost. In the end these points of differentiation reduce price pressure, not increase it.
Once your salesforce is energy-savvy, they need to have something to sell. Figure 1 illustrates a simple model for the delivery of energy services. It identifies a few key elements of an energy services offering that provide the foundation for driving revenue for your program. It's important to note that this process doesn't necessarily require in-depth engineering resources such as energy engineers or certified energy auditors. If your company has such resources, that's an effective addition, but isn't a prerequisite for getting a program started.
Define Your Energy Offering
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The key elements of the offering include:
- Energy Benchmark
Providing energy benchmarks is the most important step in the process. It's the on-ramp to all other energy-related services. It qualifies customers and maximizes the productivity of your salesforce. It should be offered to every service customer you encounter as a way to start the conversation about energy and determine their level of interest in engaging with you in an energy program.
- Monitoring and Verification
Monitoring and verification (M&V) services track the savings generated from conservation measures you implement. This is a critical element of the program because it provides a way to continually show your customers the value you're delivering. An important first step in the M&V process is to baseline the current energy performance of the building. This should happen early in the process, before any energy assessments or audits are conducted. Then, as energy conservation measures are implemented the savings generated can be quantified by comparing the new energy use profile of the building to its previous baseline.
A good M&V system can also serve to monitor the ongoing long-term performance of the building, to identify changes from the expected performance. Studies have shown that 5 to 30% savings can be realized through tight control of a building's operations and maintenance practices. There are low-cost M&V tools available that provide a simple way for contractors to provide this high value service. (For more information, visit the website listed in the “Take Action - Next Steps” sidebar pictured above.)
- Energy Assessments/Audits
While the energy benchmark provides a high level gauge of the savings opportunity, the energy assessment or audit identifies specific energy conservation measures that, when implemented, will reduce energy costs in the building. A wide range of techniques and tools can be used, but according to ASHRAE the basic steps should include:
- Collect and analyze historical energy use
- Study the building and its operational characteristics
- Identify potential energy conservation measures
- Perform a return on investment analysis
- Prepare a rank-ordered list of recommended measures
- Prepare a report to document the process and results.
Typical tools used will range from simple checklists, data loggers, and analysis spreadsheets, to fully integrated data collection, analysis, and reporting software. Software can be a major factor in increasing the ability of contractors to cost-effectively deliver energy assessments and audits in a broad range of building sizes. Software can can also simplify the process, and contribute to the success of the program, especially if the customer doesn't have energy engineers on staff.
- Propose and Implement Retrofits
In addition to the service revenue opportunities, selling retrofit solutions that save energy is the other significant revenue producer of an energy services program. The information learned in the energy assessments and audits will identify simple low and cost changes to building operations, as well as larger capital projects that, when implemented, will reduce the energy costs in the building. A well-written energy assessment or audit report that focuses on the financial benefits of the project is an essential part of the retrofit proposal.
Tim Kensok is vice president, market development for AirAdvice, makers of diagnostic technology and programs that enable service providers to improve the energy efficiency and mechanical systems operations of their customers' buildings. For additional information, visit airadvice.com/commercial.
Taking Action - Next Steps
To help you get started, visit http://bit.ly/ZmHkc, a special web page exclusively for readers of Contracting Business.com. On this page, you can access free downloads of valuable resources and articles related to this entire series of articles on energy services. Start taking action to grow your business through energy services today.