The single largest mega-market in the U.S. economy for future energy efficiency sales is the Industrial Sector.

This fact was outlined in a research report produced by the American Council for an Energy-Efficient Economy (ACEEE). In September, the non-profit organization released Trends in Industrial Energy Efficiency Programs: Today’s Leaders and Directions for the Future which underscored both the scope of the Industrial market’s energy consumption as well as the special challenges one faces in selling energy-efficient solutions to the Industrial sector. 

The report was prepared primarily to help government agencies, utilities, and energy-related NGOs guide the development of more effective energy efficiency programs to help stimulate wider adoption of energy conservation within the U.S. Industrial sector. But the underlying facts discussed by the report authors can also aid electrical distributors better understand the opportunities for increased energy efficiency presented by the Industrial Sector, as well as the challenges they face in realizing increased Green Industrial sales.

Industrial-Strength Market Opportunity

Over the past three decades, the Industrial Sector has actually decreased the amount of energy it uses to produce each dollar’s worth of goods by 50%. Yet, the total energy consumption for industrial use has increased dramatically. In fact, in 2007, the U.S. Industrial Sector was responsible for nearly 32% of the country’s entire energy consumption. Electricity represents the single largest percentage of the consumed fuel that powers industry – accounting for 33% of all industrial energy sources.

This means that the future holds incredible opportunity for the sales and implementation of new energy-efficient solutions. The ACEEE report says this about that opportunity:

“The potential for energy efficiency in the industrial sector show tremendous opportunity in a variety of states.” Examples given include Virginia, Pennsylvania, and Ohio where the potential for economic savings from greater energy efficiency range from 20 to 25% by 2025.

The report states some very encouraging reasons to focus on industrial customers:

• Typical industrial facility can achieve energy savings of 10 to 20%.
• An estimated 57% of all Industrial Sector energy used is wasted without actually being applied to the process work.
• And as the report indicated, “Industrial customers are often predisposed to be receptive to the idea of making energy efficiency investments for the impact such investments have on a firm’s bottom line.”

Industrial-Strength Market Challenges

If your company is interested in gaining a larger portion of your future business from industrial customers, it’s imperative to be aware of the key challenges service vendors face when interfacing with manufacturing and processing companies.

• The Industrial Sector is large, heterogeneous and complex – no “one-size-fits-all” sales approaches will work across the diversity of industries.
• Many manufacturers still view energy costs as a fixed overhead cost – they may need facts such as case histories that show how energy cost savings generate bottom line results.
• Individual plant’s operational cycle average between 4 and 7 years – knowing the customer’s cycle determines the ability to propose new equipment upgrades.
• Often, additional ancillary benefits from increased energy efficiency, such as decreased maintenance costs, are not figured into the buying decision-making.
• Companies operate under annual capital budgets with absolute limits – projected projects need to be worked into budgets in advance.
• Add in the current recession that has slowed demand causing plant closings and layoffs which reduces the opportunities for new “greenfield” projects.

Despite these realities, there are huge opportunities to boost the amount of Green Electrical solutions sold into the Industrial Sector. For those businesses determined to expand their energy-efficient industrial electrical sales, it is critical to understand that buying decisions are predicated on complex considerations.

Some firms are concerned about the simple payback period for a specific investment. Other companies will use more sophisticated financial measurements, such as ROI calculations, in their decision-making. 

What remains consistent for the distributor is the need to become intimately engaged with the industrial customer’s business operations and business cycle, either by developing a direct relationship with plant energy manager (if such a position exists, plant MRO management, or by partnering with an energy consulting group that can provide industrial customers with energy audits/assessments.

These three avenues can lead the determined distributor to closer relationships with industrial customers in order to be part of the discussion about improving plant energy efficiency.