One company that clearly demonstrates the appeal of energy-efficiency businesses is EnerNOC, based in Boston. Its revenues increased from $60 million to $100 million last year, and it expects 60 to 70 percent growth this year. The company’s main business is basically a way to decrease peak demand for electricity, such as occurs in the afternoon on hot days. The company has created a network of electricity customers who allow their electricity use to be reduced, in response to a request from a utility, in return for discounts. As a result, utilities don’t have to build expensive new power plants to meet peak demands. The company also uses information from building management systems to detect “leakages, energy waste,” and other ways to reduce energy consumption. In one case, at Western Connecticut State University, electricity use was reduced up to 18 percent. Because the savings were “consistent and permanent,” local regulators granted the school the same renewable-energy credits that it would have received from installing solar panels or wind turbines.
In general, however, investors are concerned that profits from energy efficiency will be limited without regulatory changes. Aside from avoiding building new power plants by reducing peak demand, utilities have little incentive to reduce energy consumption: the more power used, the more money they make. Decoupling profits from power consumption could help, but this will be a challenge because of a patchwork of varying regulations across the country.
While low-capital ventures such as those that target energy efficiency are attractive, some high-capital businesses are still having success, particularly if they can attract foreign funding. Great Point Energy, based in Cambridge, MA, has developed a process for converting coal into natural gas. Its planned plants could cost as much as $1 billion each. Funding for such projects isn’t available in the United States, says Andrew Perlman, CEO of Great Point. But the company is drawing up plans for an approximately $100 million plant in China that will be funded by a power utility there. “We have a long way to go,” Perlman says. But once the first plant is built and the technology proven, the next plant will be much easier to finance, he says.