Energy and utilities spark alternative opportunities

As the one sector that literally fuels the world’s economic engine, the energy market has seen an increased level of attention in recent years and rightfully so. After all, regardless of what market sectors are hot at any given point, one constant remains there will always be a need for energy. To this point, Framingham, Mass.-based Energy Insights recently released its top 10 predictions for North American utilities in 2008, which has unearthed true areas of need and potential opportunity for MWBE engagement.

According to this new study, climatefocused energy policies, consumers and businesses concerned with climate change, and investors’ increasing attention in sustainability will drive energy companies to increase their investments in a range of energy and information technologies including systems to measure and manage a company’s carbon footprint, software applications to enable participation in carbon trading markets and renewable energy technologies (especially wind, but also central solar as well as in-home displays that enable energy-efficient programs).

Green machine

The trend of going green is one of the most pressing on the energy market worldwide. As part of the highly publicized green movement, sustainable communities and businesses are going to rapidly become the standard, and energy utilities have a large role to play in making this happen, explained Luisa Freeman, a managing consultant in PA Consulting Group’s International and Development Services team. It’s not a matter of whether people and institutions are going to become more energy efficient or resource sensitive, but how quickly. Utilities were once active players in providing technical knowledge, consumer programs, financing and other tools for helping improve the way people use their products, Freeman said. Now they are cranking up these programs and services again, but are having to scramble to find people with the necessary skills and knowledge to implement the programs.

Jewel Smith, supplier diversity manager of Houston-based CenterPoint Energy and Edison Electric Institute chair, agreed, adding that this also represents challenges as utilities look to build generation systems capable of supplying the growing needs of today’s consumer.

Today’s consumer has embraced more technology, which means we need to provide higher levels of demand. But at the same time, we are dealing with aging facilities which present real challenges, especially considering that success of many of the renewable routes depends heavily on geographic limitations, she said. For instance, in Texas we have some areas where wind works, but this is not the case across the state. Ultimately, the solution is to embrace a combination of generation sources and innovative technologies while also strongly promoting conservation.

While everyday needs will continue to exist, Smith explained that the biggest future opportunities will come to firms addressing clean generation, improved transmission infrastructure as well as actually providing solutions touching the consumer. We need to focus on having less of an energy drain, and this starts with addressing consumer needs, she said. Suppliers who are creative, innovative and flexible while also paying close attention to the issue impacting utilities are the most attractive partners as we see an ever-changing working climate. With this knowledge, suppliers can better understand how to shape their offerings, which makes them more competitive and realistic.

Increased demand

The emergence of new sustainable markets, including China and India, has not only opened the door for diverse firms like Dallas-based Petron Energy Inc., which focuses on finding and capitalizing on low-risk drilling opportunities, but also presents excellent opportunities for long-term growth within a booming market. The difference in today’s market is that unlike past peeks in oil and gas prices, there are true drivers beyond overseas threats, explained Petron President Floyd Smith. As a result, supply versus demand kicks in and firms have the opportunity to remain strategic. Plus, we can afford to take on slightly lower-end producers because the higher costs mean we can wait longer to realize our returns.

According to Floyd Smith, firms who want to succeed within the energy market need to look for creative ways to help meet the market demand. Both domestically and globally, there is an insatiable appetite for oil and natural gas products, he said. The challenge remains finding ways to economically take advantage of the nuances of technology by developing and embracing innovative ways to get natural gas and oil out of the ground. Smith told Minority Business News the trend will only increase as people continue focusing on green efforts. Natural gas has the potential to be one of the solutions, but being conscientious of our environment plays a big role in finding technological solutions. We need to find better ways to cut down on emissions as well as extraction of natural gases, which could be an area of true opportunity for innovative firms willing to invest in the future. We do not want to create problems for our environment.

Considering the unavoidable need to invest in research, the most success will undoubtedly come from MBEs partnering with investors and large firms. However, Smith advised being careful before leaping into any arrangements. There needs to be a focus on solid long-term arrangements that are mutually beneficial, he pointed out. This is crucial because as the industry gets advantageous, there tend to be some unsavory people entering into the business. Partnering is an excellent angle, but due diligence is a must.

Race for human capital

It may seem like a broken record, but the impact of retiring baby boomers is sure to have a huge impact on how the industry behaves, especially over the next two decades. Understanding the technologies involved and the typical ages of technicians, the energy-based utility market is not exempt. In fact, human resource requirements in the industry are at an all-time high both in technical know-how and consumer relations. The loss of institutional knowledge with the coming departure of the baby boomers is the last gasp of a huge brain drain that started in the utility industry in the 1990s.

With deregulation on the horizon, many utilities shifted their human resource investments away from the long tradition of engineering expertise toward economists and marketing professionals, Freeman said. The engineers of old had extensive street smarts regarding customer energy use, emerging technologies, and the function and application of products that use electricity and natural gas. These technical field representatives were the pride of the industry in the decades that preceded competition. But once competition hit, utilities sent them out the door. Now, with the refocus on the customer again, utilities badly need people who have practical knowledge and credibility with the trades and large energy-using industries. According to Floyd Smith, a direct result of the labor shortage means firms capable of providing geological and petro-engineering services stand an excellent chance of providing contracted services.