POWER—Products That Save Electricity Are a Big Hit

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For years, executives at Culver City-based Bristol Park Industries had seen relatively modest gains in sales of their chief product: a transformer designed to reduce the amount of electricity needed to power interior building lights.

But this summer, the number of inquiries for Bristol Park’s custom-made transformers has tripled over last summer. In fact, the inquiries are coming in so fast that the company now has its biggest backlog ever.

The reason? Soaring electricity prices in Southern California have increased interest in once-obscure products like these voltage-reducing transformers. And that’s providing a welcome boost to the fortunes of companies like Bristol Park that have long toiled in the energy-efficiency market.

“This has been a huge windfall for us,” said Bristol Park Marketing Director Tim Walcott. “We’ve received two dozen inquiries from government and private industry down in San Diego just in the last four weeks, which is far above what we ordinarily get, even in summer.”

Bristol Park is not alone. Across the region, companies that make products that reduce electricity consumption or increase the reliability of power supplies have seen similar increases in inquiries, as big and small power users alike look for ways to keep costs down.

Traditionally, many electric power consumers including businesses tended to dismiss such power-saving equipment, because with relatively low electricity rates, they figured it wouldn’t be a worthwhile investment. But as bills have doubled or even tripled, that appears to be changing.

“This business has always been dominated by one key principle: payback, or how long will it take to save enough on your power bill to offset the up-front cost of putting in this power-saving equipment,” said Arthur O’Donnell, editor and associate publisher of the Bay Area-based California Energy Market Newsletter. “And by and large, the payback period has been too long for most companies.”

And especially for those with their eye on the next quarterly earnings statement. But now the payback period has suddenly become much shorter.

Investing to save money

“What once took three years to pay back now takes two years or even less, and that’s something that people are more willing to consider,” said Kris Kimble, business development manager for Costa Mesa-based Lighting Technology Services.

The company is essentially an energy-efficiency contractor: It conducts energy audits for owners and managers of buildings, two-thirds of which are in L.A. County. Then it obtains electricity-saving devices from various manufacturers including low-power lighting, voltage regulators, energy-efficient air conditioning chillers and variable-speed motors and installs them in the buildings.

So far, Kimble said the number of projects in the company’s pipeline is running between two and three times last summer’s level. Because the work often takes six months or more to complete, Kimble said, actual sales increases from this summer’s higher workload won’t register until late this year or early next year.

Major businesses that have started installing such devices in Los Angeles facilities include New York-based Starwood Hotels & Resorts Worldwide Inc., which owns the Westin and Sheraton hotel chains. In the last two months it has begun retrofitting lighting systems and installing new energy-efficient air conditioning chillers and variable-speed motors at its hotels in Southern California and New York state.

“These two areas have seen the highest electricity price hikes this summer, so that’s why we’re targeting them first,” said John Lembo, Starwood’s director of energy operations for the North American region.

As more and more companies like Starwood begin to review their energy consumption, more inquiries are coming in to those companies that make power-saving products.

Another such firm is Torrance-based LEDtronics Inc., where inquiries have more than doubled this summer. LEDtronics makes “light emitting diode,” or LED, bulbs that use only about 10 percent of the electricity of standard bulbs.

“The increase is primarily because of the high power bills, not just in Southern California but also in other parts of the country,” said LEDtronics President Pervaiz Lodhie, who added that the size of the increase in inquiries is unparalleled in the company’s 16-year history. “The payback period is now much faster; for many companies we deal with, it’s gone from something like seven years down to two or three years because the electricity prices are so high.”

Success stories

Like many other executives with energy-efficiency firms, Lodhie said the increase in inquiries over the summer has only now begun to yield actual sales.

However, the sales impact has been more immediate for Simi Valley-based Premium Quality Lighting, which makes energy-efficient light bulbs for such clients as Staples Center and Burger King Corp.’s Southern California restaurants. President Andy Sreden said the firm’s sales have increased 39 percent since the first quarter, with most of that increase coming in the last two months. He said the increase this year has far outstripped the slight increase last year.

“The companies coming to us now really want to achieve savings on their power bills,” Sreden said.

And it’s not just energy-efficient light bulb makers or distributors who are benefiting from the skyrocketing energy costs. Chatsworth-based Capstone Turbine Corp. has seen a five-fold increase in the number of inquiries between early June and early September. Capstone makes small turbines that companies can install on site to reduce the need to rely on the overall power grid; not only does this increase the reliability of a company’s power supply, it also reduces the need to purchase power from the grid at high peak-usage-level prices.

“In the San Diego area, the number of inquiries we’re getting is magnitudes of order greater than anything we received last year,” said Capstone spokesman Keith Field. “There’s no question that many of these inquiries are being driven by high power bills.”

Some of those inquiries at Capstone have already translated into sales. The company has sold 339 units so far this year, compared to 220 for all of last year.

But while interest in Capstone and other energy-efficient firms has skyrocketed this summer, the challenge is going to be to keep that interest high and translate it into a steady stream of orders, especially if power prices drop.

“It all hinges on whether these high power prices continue,” O’Donnell said. “So far, the price spike hasn’t lasted long enough for most companies to change the way they consume electric power. That really won’t kick in unless we see several more months of this, or a repeat next summer.”

And it’s hard to predict what will happen next summer.

“Right now, we’re seeing a trend toward price caps. If regulators continue to resort to these price caps next summer, you may not see such high power bills and companies might not be as driven to make these investments,” O’Donnell said. “But on the other hand, it may bring us to a brink of a reliability crisis. At that point, a whole new set of market dynamics kicks in.”

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