the market opportunity for energy improvements

Gain a sustainable advantage1

Tennessee Energy Education Initiative Telephone Study

July 17, 2013


Objectives

Shelton Group conducted a comprehensive survey of Tennessee businesses in selected industries in order to :

• Assess overall awareness of energy efficiency, behavior drivers, and attitudes related to energy efficiency improvements

• Determine which types of energy efficiency improvements have been completed and which they think they need/plan to do

• Determine motivations for conducting energy efficiency improvements

• Gauge reaction to the program and financing options

• Validate the best targets and measures to prioritize with each


Methodology

• Telephone study of TN organizations in selected industries (see next slide for distribution of interviews by industry)

• Sample list initially pulled from Hoovers database, and supplemented with lists from Hoovers Premier and MelissaData

• To qualify for the study, respondents had to be primary decision makers or influencers for energy-related facility improvement

• Interviewing conducted May 6–30, 2013

• Average interview length of 11 minutes

• 200 completes with margin of error +/- 7.1%


Distribution of Interviews by Industry (Key sectors determined by secondary analysis)

Industry Sector # Completes % TotalAutomotive 6 3%Healthcare 30 15%Private education 30 15%Real estate 8 4%Transportation and logistics 15 8%Wholesale distribution 20 10%Chemicals and plastics 10 5%Hotels and motels 7 4%Food manufacturing 5 3%

Subtotal Tier 1 Sectors: 131 65%Restaurants (location owned) 3 2%Business Services - accounting, legal, marketing, architectural, etc. 26 13%Technology and science 10 5%Retail 30 15%

Subtotal of Targeted Tier 2 Sectors: 69 35%Grand total: 200 100%


Organization characteristics

East40%

Middle38%

West23%

n=200

Region

Locally 89%

Nationally 10%

Internationally1%

Decision Making

57%

26%

7%

10% One

Two-Four

Five-Nine

10+

52%

15%

33% 10 to 49

50 to 99

100+

Organization Characteristics

Number of Facilities in TNNumber of Employees

*Median sq ft = 36k

Less than 2.5k

2.5-10k 10-50k 50-100k 100k+

6%

19%

38%

17% 16%

Square Footage

Own71%

Lease29%

% Own vs. Lease Facility


Average Age:

52

Respondent Characteristics

Influencer 47%

Decision Maker53%

Male 76%

Female 24%

n=200


Executive Summary


Importance of Energy Conservation

• Eight out of ten organizations consider energy consumption/conservation important to daily business purchase choices and activities.

• Respondents in organizations with more than one facility were more likely to consider energy consumption and conservation important than those with only one facility (83% vs. 73%).

• In contrast, organizations in newer facilities (less than five years old) were more likely to consider energy consumption and conservation unimportant than those with older facilities (38% vs. 5%).


Energy Efficiency of Current Facilities

• About two-thirds of the TN organizations surveyed consider their current facility(ies) energy efficient.

– Regionally, organizations in East TN (75%) and Middle TN (63%) were more likely to consider their facilities energy efficient than those in West TN (51%).

– Organizations in facilities over 20 years old were more likely to consider their facilities inefficient than those with newer facilities (19% vs. 3%).


Energy Efficiency Improvement Activities

• Average number of completed EE improvements per organization: 3.3

– Facility owners were more likely to have made EE improvements than leasers (3.6 vs. 2.8)

– Companies with multiple facilities have done more (3.5) vs. those with one facility (3.2)

– Average EE Updates by Sector:

• Education (4.3)

• Manufacturing & Distribution (3.4)

• Business Services (3.1)

• Healthcare (3.1)

• Hospitality/Retail (3.0)


Energy-Related Priorities

• While 11 of the 13 industries surveyed considered lighting a priority, more than half also listed HVAC as a top energy priority.

• Organizational improvements generally paralleled industry priorities, with 76% of those surveyed reporting that they have already installed lighting improvements, and 56% having installed a more efficient mechanical or HVAC system.

• Energy management, insulation, and renewable energy top the list of activities that companies recognize they need to do.


Top Motivators/Drivers

• “Spending less on energy and more on other priorities” and “save money” are the top reasons cited for participating in energy-related improvements.

– Facilities that were 20+ years old were less likely to select “save money” than were newer facilities (22% vs. 39%).

– Regionally, organizations in West TN (42%) and Middle TN (31%) were more likely to select “save money” than those in East TN (19%).


Key Challenges/Barriers

• Overall, “lack of budgets/funds” and “lack of time/too busy/other priorities” top the list of challenges/barriers.

– When it comes to size, however, facilities that were under 50k square footage were more likely to say their organization “isn’t sure what to do to save more energy” than were larger organizations (30% vs. 8%).

– In addition, influencers were more likely to say “implementing energy-related improvements is too complicated, inconvenient, and/or too disruptive” than were decision makers (23% vs. 12%).


Reaction to Funding Options

• When asked, “If there was a program that offered 5-year loans with a 2% interest rate for energy-related improvements and retrofit projects ranging from $20,000 to $5 million, how would this impact your plans for facility improvement?,” 37% of TN organizations reported they would be more likely to complete facility improvements if they were offered this program.

• In addition, when asked, “If there were a program that offered 10-year loans with a 5% interest rate for solar generation systems, how would this impact your plans for installing such a system?,” 26% of TN organizations indicate they would be more likely to install solar if this program was offered to them.


Detailed Findings


Attitudes Toward Energy Efficiency


Almost eight out of ten organizations surveyed consider energy usage important.

Unimportant

Neither important nor unimportant

Important

8%

16%

77%

Q10 - How important is energy consumption and conservation in your organization's daily business purchase choices and activities?

n=200

Respondents in organizations with more than one facility were more likely to consider energy consumption important than those with only one facility (83% vs. 73%).

In contrast, organizations in newer facilities (less than five years old) were more likely to consider energy consumption unimportant (38% vs. 5%).

While not statistically significant, respondents in the technology & electronics segment were more likely to consider energy consumption unimportant.


About two-thirds consider their facility efficient.

Don't know / Not sure

Inefficient

Neither efficient nor inefficient

Efficient

1%

13%

21%

65%

Q11 - Overall, how would you rate the energy efficiency of your current facility(ies)?

n=200

Regionally, organizations in East TN (75%) and Middle TN (63%) were more likely to consider their facilities energy efficient than those in West TN (51%).

Organizations in facilities over 20 years old were more likely to consider their facilities inefficient than those in newer facilities (19% vs. 3%).

While not statistically significant, respondents in the technology & electronics segment were more likely to consider their facility inefficient (30% vs. 13% overall).


Energy-Related Priorities


Lighting and HVAC top the list of energy-related priorities.

Other energy-related prioritiesSmall motors/conveyors

SolarManufacturing furnaces

Co-generation equipmentFleet cars/trucks/buses

RefrigerationReflective/cool roofing

Compressed air systemsData center power and cooling

Geothermal heating/coolingPC power management solutions

Building envelope upgradesWater heating

Energy management/system monitoringLighting (exterior)

NET Energy/PC Power ManagementHVAC

Lighting (interior)NET Lighting (interior/exterior)

4%3%

6%7%8%9%9%9%10%11%13%

15%19%20%

24%34%

37%43%

56%67%

Q13 - What are your organization's top three energy-related priorities?

n=200

Respondents w/newer facilities (less than five years old) were more likely to select PC power management (63% vs. 15% overall).

Respondents who lease were more likely to select energy management systems than those who own (35% vs.19%).


While 11 of the 13 industries surveyed considered lighting a priority, more than half also listed HVAC as a top energy priority.

Industry Sector (n size)Most frequently mentioned energy-related priority

Real estate (8) Interior lighting (75%), exterior lighting (63%)

Retail (30) Interior lighting (67%), exterior lighting (43%)

Transportation and logistics (15) Interior lighting (60%), exterior lighting (40%)

Chemicals and plastics (10) Interior lighting (60%), exterior lighting (40%)

Wholesale distribution (20) Interior lighting (60%), exterior lighting (35%)

Automotive (6) Interior lighting (50%), exterior lighting (50%)

Healthcare (30) Interior lighting (60%), HVAC (53%)

Restaurants (3) HVAC (100%), interior lighting (67%)

Hotels and motels (7) HVAC (71%), interior lighting (43%)

Private education (30) HVAC (70%), interior lighting (47%)

Business services (26) HVAC (62%), interior lighting (58%)

Technology and electronics (10) HVAC (50%)

Food manufacturing (5)

Cogeneration (40%), compressed air systems (40%), interior lighting (40%), manufacturing furnaces (40%), refrigeration (40%), water heating (40%)

Lighting

HVAC

Other


Companies surveyed have completed an average of 3.3 of these improvements.

Added an energy management system or controls to make the facility more energy efficient

Installed a more efficient water heating system

Installed more efficient appliances or refrigeration

Installed a more efficient mechanical and/or HVAC system

Installed more energy-efficient light fixtures, controls or occupancy sensors

34%

37%

38%

56%

76%

32%

17%

16%

24%

14%

Q18a - Which improvement(s) has your organization completed on your primary facility in the past five years? Q18b - Does your primary facility need any of

these improvements? Q18c - Does your organization plan to do this in the next 12 months?

Already completed

Need to do

n=200

Measure with highest perceived need


Perceived need for insulation/sealing, cool roof and renewable generation is also high.

Added a renewable energy generation sys-tem

Installed a reflective / cool roof

Installed more efficient manufacturing equipment

Added insulation, air sealing or ductwork

13%

19%

30%

33%

29%

27%

9%

29%

Q18a - Which improvement(s) has your organization completed on your primary facility in the past five years? Q18b - Does your primary facility need any of these improvements? Q18c - Does

your organization plan to do this in the next 12 months?

Already completed

Need to do

n=200


Insulation/air sealing tops the list of activities companies think they need to do and are most likely to do.

Install more efficient manufacturing equipment

Install more energy-efficient light fixtures, controls or occupancy sensors

Install more efficient appliances or refrigeration

Install a more efficient water heating system

Install a more efficient mechanical and/or HVAC system

Install a reflective / cool roof

Add a renewable energy generation system

Add insulation, air sealing or ductwork

Add an energy management system or controls to make the facility more energy efficient

9%

14%

16%

17%

24%

27%

29%

29%

32%

Q18b - Does your primary facility need any of these improvements? Q18c - Does your organiza-tion plan to do this in the next 12 months?

Need to do

n=200

3%

12%

7%

5%

6%

4%

4%

4%

2%

Plan to do

Most likely activity


Motivators/Drivers


Spending less on energy and saving money are the top reasons cited for improvements.

To help offset future rate increases

To reduce greenhouse gas emissions

To satisfy customer or market expectations

Some other reason

To protect the environment and save natural resources

To accomplish a corporate objective or directive

To protect our nation's economy and reduce dependence on foreign oil

To make the facility more comfortable

To get more control over energy usage and costs

To reduce energy waste

To save money

To spend less on energy and more on other priorities

1%

2%

2%

2%

2%

3%

4%

6%

7%

7%

28%

39%

Q17 - What would be your one top reason for your organization to participate in energy-related improvements?

n=200

Facilities that were 20+ years old were less likely to select “save money” than were newer facilities (22% vs. 39%).

Regionally, organizations in West TN (42%) and Middle TN (31%) were more likely to select “save money” than those in East TN(19%).

The focus is on “other priorities”


Top drivers/motivators by industry:Focus on spending less and saving money

Industry Sector (n size) Most frequently mentioned

Automotive (6) Spend less on energy/more on other priorities (67%)

Real estate (8) Spend less on energy/more on other priorities (50%)

Retail (30) Spend less on energy/more on other priorities (47%)

Private education (30) Spend less on energy/more on other priorities (40%)

Business services (26) Spend less on energy/more on other priorities (42%)

Healthcare (30) Spend less on energy/more on other priorities (43%)

Technology and electronics (10) Spend less on energy/more on other priorities (40%)

Chemicals and plastics (10)Spend less on energy/more on other priorities (30%), save money (30%)

Hotels and motels (7)Spend less on energy/more on other priorities (29%), save money (29%)

Food manufacturing (5) Save money (80%)

Restaurants (3) Save money (67%)

Transportation and logistics (15) Save money (47%)

Wholesale distribution (20) Save money (35%)

Spendless on energy/ more on other priorities

SaveMoney


Challenges/Barriers


Lack of funding and other priorities top the list of challenges/barriers.

Your organization isn't sure what to do to save more energy.

The payback period on energy-related improvements is too long.

Your organization believes it has done all the energy-related improvements possible.

Lack of time/too busy/other priorities

Lack of budget/funds

23%

24%

26%

40%

50%

Q12 - What would you say are the key challenges or barriers your organization faces in making energy-related improvements?

n=200

Facilities that were under 50k square footage were more likely to say that they were uncertain what to do than larger facilities (30% vs. 8%).


Lesser challenges/barriers.

Some other reason

Not applicable/lease improvements not allowed or very unlikely

You don't plan to be in the facility very long.

Decision makers haven't considered it or don't believe it would really help much.

Implementing energy-related improvements is too complicated, inconvenient and/or too disruptive.

6%

6%

9%

17%

18%

Q12 - What would you say are the key challenges or barriers your or-ganization faces in making energy-related improvements?

n=200

Influencers were more likely to say that implementing improvements is disruptive than were decision makers (23% vs. 12%).


Reaction to Financing Options


37% of TN organizations would be more likely to complete facility improvements if they were offered this program.

I don't know and am still undecided about improvement plans.

It does not impact my plans at all. I'm still unlikely to undertake improvements.

It makes me somewhat more likely to go ahead with improvements in the next 12 months.

It makes me very likely to go ahead with improvements this year.

24%

40%

25%

12%

Q19 - If there were a program that offered 5-year loans with a 2% interest rate for energy-related improvements and retrofit projects ranging from $20,000 to $5 million, how would this impact your plans for facility improvement? (n=200)

37%

More realistic market estimate: Using half of those who are very likely and one fourth of those who are somewhat likely - 12%.


Over one-fourth of organizations would be more likely to install solar if this program was offered to them.

I don't know and am undecided about solar generation systems.

It does not impact my plans at all. I'm unlikely to install a solar generation system.

It makes me somewhat more likely to install a solar generation system in the next 12 months.

It makes me very likely to install a solar generation system this year.

23%

52%

18%

8%

Q20 - If there were a program that offered 10-year loans with a 5% interest rate for solar generation systems, how would this impact your plans for installing

such a system? (n=200)

26%

More realistic market estimate: 9%.


Sector Profiles


Industry Sector Groupings

Due to relatively small sample sizes, sectors were grouped as follows for these industry profiles:

1. Manufacturing and Distribution (56) - Automotive (6), Chemicals (10), Food (5), Transportation and logistics (15), Wholesale distribution (20)

2. Hospitality and Shopping (40) - Hotels (7), Restaurants (3), Retail (30)

3. Business Services (44) - Real estate (8), Business Services*(26), Technology^(10)

4. Healthcare (30)

5. Education (30)


Sector Prioritization

• Developed a scoring that considers:

– # companies / with 10+ employees

– % with multiple facilities / facilities with 50k+ sq. ft.

– % owned vs. leased

– Avg. number of completed and likely improvements

– % perceived inefficient

– % likely to act with financing


Sector Prioritization

Industry SectorTotal

Companies* % w/10+

Employees* % w/Facility 50K+ sq. ft.

% w/Multiple Facilities

% w/Facilities 20+ Yrs Old

% Owned Facility

% Perceived Inefficient

Avg. # Completed

Improvements

Avg. # Likely Improvements

% Very Likely to Act

w/Financing

Score

Manuf. & Dist. 29,542 29% 41% 45% 59% 79% 11% 3.4 0.59 20% 66

Private Education 6,959 41% 40% 40% 77% 80% 20% 4.3 0.50 13% 62

Hosp. & Shopping

57,476 29% 25% 38% 65% 73% 18% 3.0 0.42 10% 50

Business Services

37,084 15% 27% 34% 64% 64% 14% 3.1 0.39 5% 41

Healthcare 22,473 17% 23% 60% 50% 53% 3% 3.1 0.27 10% 39

Score based on rankings for each category, with additional weighting: Total companies (x3); 50k+ sq. ft. facilities (x3); Multiple facilities (x3); Owned facility (x2):

* Based on market data rather than survey data.


Messaging Effectively: Leveraging Motivators/Drivers to Address Challenges/Barriers by Industry

Industry Sector (n size)

Motivators/Drivers Challenges/BarriersSpend

Less/More on other Priorities Save Money

Lack of Budget/Funds

Payback Period Other

Retail (30)

Private education (30)

Business Services (26)

Healthcare (30)

Automotive (6)

Chemicals and plastics (10)

Food manufacturing (5)

Restaurants (3)

Transportation and logistics (15)

Technology and electronics (10)

Real estate (8)

Hotels and motels (7)

Wholesale distribution (20)


Conclusions/Recommendations


Prioritizing Targets: Region

• Tennessee has experienced stronger economic growth in the Middle and Eastern regions in recent years. In general, facilities are newer there.

• In addition, organizations in East TN (75%) and Middle TN (63%) were more likely to consider their facilities energy efficient than those in West TN (51%).

RECOMMENDATION:

Regionally, the strongest opportunities for energy-related improvements are likely to be:

1) West, 2) Middle, then 3) East


Prioritizing Targets: Age of Facility

• Organizations in newer facilities are generally more efficient. Older facilities (20+ years) offer greater opportunities for energy-related improvements.

RECOMMENDATIONS:• For newer facilities, focus on energy

management and PC power management solutions.

• Older facilities offer opportunities for a broader range of energy-relatedimprovements.


Prioritizing Targets: Industry Sector

RECOMMENDATIONS:

1. Manufacturing & Distribution

2. Education

3. Hospitality* & Shopping

4. Business Services

5. Healthcare

*Prioritize locally-owned independent or franchised hotels with local decision-making power.


Moving TN Organizations Down the Path

The easiest path to encourage improvements should start with/parallel industry priorities:

• Energy-related priorities

– 11 of the 13 industries surveyed consider lighting a top priority for their company.

– 7 of the 13 consider HVAC a top priority.

• Facility improvements

– 76% have already improved the lighting while 56% have improved the HVAC.


Moving TN Organizations Down the Path

RECOMMENDATION:

For companies new to energy improvements, emphasize most common first steps (already perceived needs): lighting and HVAC.

For those who are further along the path and have already integrated these improvements, focus on “gaps” that companies recognized as needing to improve: energy management (32%), insulation (29%)


Packaging/Bundling Opportunity

• While more than one-third of the organizations surveyed considered energy/PC management as a top priority and 32% recognize a need to do this improvement, only 3% plan to make this improvement.

RECOMMENDATION:

• Consider packaging or bundling funding for energy/PC power management improvements with lighting, HVAC and insulation projects to speed adoption of these systems which will increase behavior change and compound impact.

• Track Impact. Demonstrate the effectiveness of bundling these systems with improvements with stats on increased savings/higher ROI and shorter payback period.


Encourage interest in renewable energy29% say they think they need a renewable generation system and it’s a higher priority initiative (7% likely) than many others.

26% said they would likely undertake a renewable energy project with financing, as described.

RECOMMENDATION:

Prioritize solar and other renewable energy project messaging and include information on state tax incentives for renewable energy systems.


Questions?Thank you!

Lee Ann Head, VP [email protected]

706.331.8027

the market opportunity for energy improvements

Technology

facilities energy efficient

energy priority

energy related improvements

renewable energy

energy management

sustainable advantage1313

newer facilities

facilities inefficient