April 27, 2008
by: Paul Carton
There's a new standing order in corporate America and it goes almost exactly like this:
Be much more efficient in your energy usage.
A sea change is occurring in the way U.S. businesses view energy consumption, according to a March 24-28 ChangeWave survey of 1,400 respondents knowledgeable about their company's energy spending.
Nearly three-in-five respondents (57%) say their company is concerned about reducing energy usage, and these heightened concerns are leading to a transformational shift in corporate energy consumption - with an extraordinary 26% of respondents saying their company has used Less energy than normal during the past six months.
In comparison, only 16% of respondents say they've used More energy over this time period.
In a related finding, nearly one-in-four respondents (23%) report their company's spending on energy efficient products and technologies will Increase over the next six months - three-times the percentage that see a Decrease (8%).
"The perfect storm of rising energy costs and concern over global climate disruption is forcing companies to rethink the most basic ways they use energy," said ChangeWave analyst Joshua Levine. "A tremendous shift in corporate perception is occurring and it's going to impact virtually all industries and create investment opportunities in the process."
To track the corporate race towards greater energy efficiency, we asked respondents which technologies and products their company is actually using. Two technologies - solar power and LED lighting - stand out above the rest.
Alternative Technologies - Here Comes the Sun
Corporate use of "off-the-grid" energy technologies is gaining momentum, with 8% of respondents saying they currently use alternative sources to generate power. Going forward, better than one-in-five (21%) say they'll install and make use of alternative energy sources within the next five years.
The shift to alternative energy is great news for solar power, which dominates the landscape.
As the above chart shows, solar is far ahead of other alternative energy options, both in terms of current corporate usage (51%) and future planned users (72%). Wind Power is relegated to a distant second for current (24%) and future users (19%).
According to the survey, an unattractive payback period (24%) still ranks as one of the big barriers to corporate use of alternative power technologies, second only to initial capital investment (39%). And when asked how long they think it will take to achieve a payback for their current solar energy investments, the consensus estimate among respondents is seven years (for future solar energy investments it's 6.4 years).
But despite this, with crude oil prices hitting new all-time highs the solar industry clearly has momentum and is helping bring about a transformational shift in corporate energy use.
"Solar's rapid expansion on the corporate energy efficiency front is good news for companies in the solar food chain," says Josh Levine. "Polysilicon producers, solar cell manufacturers and solar installation firms are all likely beneficiaries of the trend toward the sun."
Adding to solar's attraction is the near certainty of continued tax credits.
U.S. lawmakers appear likely to pass an extension of a key solar industry tax credit. The bill, if passed, would extend the 30% commercial tax credit by eight years, the residential credit by one year and would remove a $2,000 cap on residential systems. Importantly, utilities would be able to take advantage of the credit for the first time.
According to Levine, the companies best positioned to ride this solar wave are the major photovoltaics manufacturers like First Solar (FSLR ), SunPower Corp. (SPWR) and Suntech Power Holdings (STP) - each of which are leading the solar energy industry ever closer to the "Holy Grail" of alternative energy economics - grid price parity.
LED Lights Up
Along with solar power, the survey shows LED lighting is another standout in the corporate race towards energy efficiency.
Overall, lighting is the single easiest area for businesses to reduce their energy usage.
It is little wonder then, that energy efficient lighting is the top product/technology companies will be purchasing over the next six months to improve energy efficiency.
And while Compact and Regular Florescent Lighting maintain the greatest market share in terms of corporate purchasing over the past six months - LED Lighting (21%; up 7-pts) is the clear momentum leader going forward.
One big obstacle to the wider adoption of LED lighting technology is cost, according to survey respondents. Nearly three-in-four respondents (74%) say their company would only consider replacing all of its lighting with LED if the cost were less than $5 per bulb. But despite pricing issues, the survey shows that LED lighting is rapidly being adopted by U.S. companies.
This bodes well for major lighting companies like Philips Electronics (PHG) and General Electric (GE), who are the top LED manufacturers and distributors. However, Levine says it is the smaller pure-plays in LED lighting technology that are set to be the biggest winners in this market.
"Among the handful of innovators that have developed LED technologies, Cree Inc. (CREE) stands out as a likely candidate to be eventually acquired by a lighting giant," says Levine. "The light fixture market is a 2.5 billion unit market worldwide, and Cree's technologies are clearly addressing this enormous opportunity".
Back in a February ChangeWave report we named 2008 "The Year of Solar Power." The current survey shows the transformation in the way companies view energy consumption continues to represent a giant opportunity for investors, particularly within the solar and LED markets.
Jim Woods co-wrote this article.
This article summarizes the results of a recent ChangeWave Alliance survey. The Alliance is a research network of 15,000 business, technology and medical professionals who spend their everyday lives working on the front line of technological change. For more info on ChangeWave, or to sign up for real-time alerts email on the hottest technologies and companies, click here.
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