An Introduction to the Energy Services Industry

Abstract

In the late 1970s, a small company in Texas was marketing one of
the many devices that had been developed as a response to the decade’s
dramatic rise in energy costs. In essence, the device automated the task
of turning lights and similar equipment on and off at appropriate times
to save energy—a time clock. The concept was simple; the savings were
compelling. In spite of the obvious savings, marketing the device was
difficult because many simply doubted that the savings would actually
be realized. As an innovative approach to selling the device, the presi-
dent of the company began to make a different kind of offer to prospec-
tive customers. Instead of asking them to pay for the time clock up front,
he asked instead that they simply give him a percentage of the measured
savings achieved. Suddenly, sales accelerated and, the company that had
had difficulty selling the device for $1,000 had no trouble at all persuad-
ing people to commit to pay cash amounts which were worth five times
that much.
Such was one of the early experiences in the energy performance
contracting or energy services (ESCO) industry in the United States.
Time Energy went on to achieve rapid and spectacular growth, but like
many young companies in an emerging field, declined almost as precipi-
tously shortly after going public.