A product image problem, aggressive competition from natural gas providers, and price volatility are “daunting challenges” facing the heating oil industry, Michael Trunzo said as he presided over the New England Fuel Institute's 34th North American Heating and Energy Expo, the first since he was named president and chief executive officer of NEFI earlier this year.
How to meet those challenges?
“If you can’t beat them, join them” seemed to be the message from a number of speakers, as they urged fuel oil dealers to diversify their business lines, to be “fuel neutral” or “BTU neutral,” and to train technicians and call them “home performance contractors” or “energy conservation specialists” who perform “whole house energy assessments.”
Gault Energy, Westport, Conn., is doing all that, and more.
Sam Gault, president, and Megan Smith, marketing director, described the transformation of Gault Energy, a 150-year-old heating oil company, into a fuel neutral energy company through expansion into propane, natural gas service and selling electricity – “Gault Power by Verde Energy USA.” The company ventured into the electricity business following deregulation in Connecticut. It has somewhere between 2,500 and 3,000 electricity customers so far, Sam Gault said.
Delivering the most gallons possible is a typical goal of many fuel oil dealers, Gault and Smith noted in a session titled, “Strategies for Growth In a Competitive Market.” Instead, they urged an emphasis on customer service. For example, they said the company expanded into propane because its customers said they wanted it. Further, providing a range of fuels and services supports a move into whole house energy assessments, they said, the idea being to “own the house from a systems standpoint,” and provide highly efficient heating and air conditioning. “Less gallons, more customers,” was the overall message from the Gault executives: “People like it when you save them money,” they said.
Attendees and more than 200 exhibitors spent much of the two-day event, June 7-8 at John B. Hynes Memorial Convention Center in Boston, talking about ways to improve the image of fuel oil, maintain its competitive viability, and expand into related profit-producing business lines.
Becoming a home performance contractor is “the only silver bullet I see,” Craig Snyder, president of Wesson Energy, Waterbury, Conn., said before he delivered a presentation to NEFI Energy Summit attendees. In that presentation, “Using Energy Audits to Increase Core Revenue,” Snyder described how Wesson Energy doubled equipment sales and tripled its employee base within two years of beginning to offer home energy audits. Training technicians “to look at the whole house” and instilling them with the sales and marketing code have been critical to that success, Snyder said.
Eric Slifka, the president of Global Partners LP, Waltham, Mass., a wholesaler that handled 3.7 billion gallons of fuel last year, said, “For the New England oil heat industry to flourish, we must embrace new products and technologies as a unified organization, and do so proactively.” Slifka’s remark, made during the Grande Convention Luncheon, harked back to the comments of Tom Butcher of Brookhaven National Laboratory, who said in the opening key note session that advances in equipment efficiency can help the industry make a case for itself in fuel-saving and environmental terms.
“We can achieve efficiency levels over 90 percent without having to go in condensing mode” based on research and the work of manufacturers, Butcher said in an interview with Fuel Oil News after the NEFI show. Further, Butcher said, “If we go to condensing, we can easily hit 95 to 98 percent efficiency” with both boilers and furnaces. Controls offer a near-term opportunity for efficiency gains, he added.
“Some manufacturers feel that the best product for the market is a high-efficiency non-condensing boiler with clever controls,” Butcher said. “Others feel that they want to go fully to condensing and get every bit of efficiency they can. There’s a place for both of them.
“We have an opportunity to really do a lot better in terms of equipment efficiency,” Butcher said, and manufacturers are making progress on that front. In some cases NORA has supported development of equipment, such as the Peerless Pinnacle, Butcher noted.
Looking ahead, there are concepts that are not market-ready, Butcher said, “but they could move the efficiency levels way higher. They could include fuel-fired heat pumps, for example. Stay tuned for that in the future.”
Amid the urgings to diversify into more forms of energy and more services, NEFI and representatives of kindred associations addressed ongoing concerns, including implementation of commodities market reforms, and reauthorization for the National Oilheat Research Alliance (NORA).
NEFI adopted a new strategic plan last year that calls for increased advocacy efforts in Washington, D.C., in order to meet the challenges of utility competition, price volatility and uncertainty in the commodities markets, and changes in regional and federal energy and environmental policies. The plan identified enhanced government relations and public policy advocacy as primary goals. An even closer working partnership with the Petroleum Marketers Association of America (PMAA), and lobbying Congress for reauthorization of NORA are critical elements of the plan.
The lead sponsor of the NORA Reauthorization bill in the House of Representatives, Congressman Charles Bass of New Hampshire, spoke at the NEFI Annual Meeting on June 8 and asserted his confidence in the Oilheat industry's viability and strong future, as well as the need for NORA.
"I believe it's important for the energy delivery business to have a mechanism to raise funds where you can ensure adequate safety and research and development, along with conservation and education," the congressman said.
Bass emphasized the value of personally speaking with congressmen to support the NORA bill. “I look forward to vigorously supporting this bill,” he said. “I can’t emphasize how important it is to receive calls from constituents.”
Regarding futures markets reforms that were passed last year, Dan Gilligan, president of PMAA, said in the key note session, “Now the new law must be converted to regulation by the Commodities Futures Trading Commission – and the investment banks are using every political tactic to delay or weaken the impact of the law.
“We will not get everything we want,” once the reforms are defined and implemented, Gilligan said, “but we will get a lot of what we need. We are very focused on getting new regulations in place and getting funding for CFTC operations. We need more cops on the beat.”
Gilligan also discussed what he called “the CO2 obsession” and the role that biodiesel, marketed as Bioheat, could play in addressing it.
“By reducing sulfur and increasing biodiesel content, the oilheat industry can demonstrate to those who worry about CO2 that the oilheat industry can do its part,” Gilligan said. PMAA and NEFI “would love to see the biodiesel industry quadruple production,” he said. “I wish we had four billion gallons of affordable biodiesel to blend with low sulfur heating oil,” he said.
“I want to stress the term affordable,” Gilligan said. “Everyone in this room fully comprehends the need for affordability. I am very worried that the $1 per gallon tax credit for biodiesel will not be renewed for 2012 and supplies of affordable biodiesel will not be adequate. Not only is biodiesel an important source of supply, we need bioheat to ease the CO2 concerns of powerful politicians.
“Of course the RINS available from blending biodiesel remain quite valuable and those could help keep biodiesel more affordable,” Gilligan said. (Renewable Identification Numbers, known as RINs, are the basic currency for the Renewable Fuel Standard’s program for credits, trading, and use by obligated parties and renewable fuel exporters to demonstrate compliance. They are also used to track renewable fuels.)
Gilligan noted that the EPA also is moving forward to limit U.S. refinery output “for the sole purpose of limiting CO2 emissions” and that the effect of such a move would be to “force the U.S. to become more dependent on offshore refineries that EPA cannot regulate.”
PMAA is supporting legislation to delay such regulations “until Congress considers a comprehensive energy policy,” Gilligan said.
In any case, “The oilheat industry has a great opportunity to enhance its options with Bioheat and ultra low sulfur heating oil,” Gilligan said.
(NORA and the National Biodiesel Board use the term Bioheat fuels to describe a mixture of heating oil and biodiesel. The goal is a uniform name that consumers understand and recognize. The National Biodiesel Board has licensed the trademark to NORA, so that NORA can make it available to retail and wholesale oil dealers. This licensing is to ensure that the trademark is protected and that consumers get a quality biofuel blend.)
News & Notes
Townsend receives Charles H. Burkhardt Award
The 2011 Energy Expo brought back the NEFI Grande Convention Luncheon. On June 8 the Charles H. Burkhardt Award was presented to Jim Townsend of Townsend Oil & Propane in Danvers, Mass., for his years of service to a variety of industry associations.
ICPCA develops marketing tips for members
The fuel oil industry needs rebranding, including development of “a new professionalism in technicians,” Gene Guilford, president of the Independent Connecticut Petroleum Association, said during the group’s board meeting the day before the NEFI show opened in Boston.
“We want our technicians to be involved in every element of energy,” Guilford said. The association has developed marketing guidelines for its members, urging them to turn “everyday technicians into Energy Conservation Specialists” by sending them to classes at the association’s education center.
Cullen is new chairman of OMA
Peter Cullen, chief operating officer of Wohler USA, Danvers, Mass., is the new chairman of the Oilheat Manufacturers Association (OMA). His two-year term began simultaneously with the NEFI show. “My first priority is going to be to get more manufacturers on board,” Cullen said. “It’s a great group, and it does a lot of good for the industry, but we need more manufacturers joining.”