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ChangeWave survey shows major corporate shift to energy alternatives
By Jim Woods and Paul Carton
There's a new standing order in corporate America and it goes like this: Be much more efficient with your energy usage.
A change is occurring in the way U.S. businesses view energy consumption, according to ChangeWave's March survey of 1,400 respondents knowledgeable about their company's energy spending.
Twenty-two percent of respondents reported that their company is very concerned about reducing its energy usage and 35% said they are somewhat concerned.
These elevated levels of regard are leading to a transformational shift in U.S. corporate energy usage. An extraordinary 26% of respondents reported that their company has used less energy than usual during the past six months.
By comparison, only 16% of respondents said that they've used more energy during this time period.
In a related finding, 23% of respondents reported that their company's spending on energy-efficient products and technologies will increase during the next six months. This is three times the percentage of those who said they 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 toward greater energy efficiency, we asked respondents which technologies and products their company is actually using. Two technologies stand out above the rest: solar power and LED lighting.
Here Comes the Sun
Corporate use of "off-the-grid" energy technologies is gaining momentum -- 8% of respondents said they currently use alternative sources to generate power. Going forward, 21% reported they'll install and make use of alternative energy sources within the next five years.
This shift to alternative energy is great news for solar power, which dominates the landscape.
As demonstrated in the chart above, solar is far ahead of other alternative energy options, both in terms of current corporate usage and future planned users, while wind power is relegated to a distant second for current.
Solar Flares
According to the survey, an unattractive payback period (24%) still ranks as one of the big barriers regarding corporate use of alternative power technologies, second only to initial capital investment (39%).
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. The consensus estimate is 6.4 years for future solar energy investments.
Despite these projections, the solar industry clearly has momentum and is helping bring about a transformational shift in corporate energy use, especially with crude oil prices hitting new all-time highs.
"Solar's rapid expansion on the corporate energy efficiency front is good news for companies in the solar food chain," said 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 and the residential credit by one year, and would remove the $2,000 cap on residential systems. Furthermore, utility companies would be able to take advantage of the credit for the first time.
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According to Levine, the companies best-positioned to ride this solar wave are the major photovoltaics manufacturers such as First Solar (FSLR), SunPower Corp. (SPWR) and Suntech Power Holdings (STP) -- each of which is leading the solar energy industry ever closer to the holy grail of alternative energy economics: grid price parity (the point at which the total cost of solar is on par with fossil fuel energy).
LEDs Light Up
Along with solar power, the survey shows LED lighting is another standout in the corporate race toward energy efficiency.
Overall, lighting is the single-easiest area in which businesses can reduce their energy usage.
It is little wonder that energy-efficient lighting is the top technology companies will be purchasing during the next six months to improve energy efficiency.
While compact and standard florescent lighting maintain the greatest market share in terms of corporate purchasing during the past six months, LED lighting is the clear momentum leader going forward, up seven points to 21%.
According to those surveyed, one big obstacle hindering wider adoption of LED lighting technology is cost. Seventy-four percent of respondents said their company would only consider replacing all of its lighting with LED bulbs if the cost was less than $5 per bulb.
Despite pricing issues, our survey showed 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), which are the top LED manufacturers and distributors. However, Levine said 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 (CREE) stands out as a likely candidate to be acquired by a lighting giant," said Levine. "The light fixture market is a 2.5 billion unit market worldwide, and Cree's technologies are clearly addressing this enormous opportunity."
In February, we released a ChangeWave report called "2008: The Year of Solar." Our current survey shows the transformation in the way companies view energy consumption, and how alternative energy continues to represent a giant opportunity for investors, particularly within the solar and LED markets.
Paul Carton is the Research Director of the ChangeWave Alliance. Jim Woods is ChangeWave's Senior Editor. The Alliance is a network of 15,000 highly-qualified business, technology and medical professionals in leading companies of select industries. The Alliance is surveyed weekly on a wide range of business and investment research and intelligence topics.
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