As homeowners embrace energy efficiency and reduce their dependence on fossil fuels for heating their homes, heating fuel dealers have an opportunity to move to a new, more profitable business model . This new model is designed to offset lower heating fuel revenues by offering new efficiency services and products.
According to statistics compiled by the Thermal Efficiency Task Force , heating oil usage in the average Vermont home has declined from a high of 1,400 gallons per year in 1973 to a low of 764 gallons per year in 2011. We see a similar trend with Energy Co-op members. After allowing for changes in winter weather, our members and customers have cut their oil use by an average 23% over the past 13 years. Good for the planet, not necessarily good for business.
What are the key steps that fuel dealers must take to capture the opportunity within this shrinking market? The new model builds on the trust that fuel dealers have established by providing their customers with reliable fuel deliveries and 24/7 service for their heating equipment. This gives fuel dealers a competitive advantage for offering new services, provided some key strategies are in place:
Partnerships are key
The Vermont Public Service Department has supported the creation of the Efficiency Excellence Network (EEN) which encourages strategic partnerships between members of the Vermont Fuel Dealers Association, Efficiency Vermont, and Home Performance Contractors. The Efficiency Excellence Network is designed to encourage fuel dealers and home performance contractors to work together to promote energy efficient equipment, energy audits and home energy upgrades.
As a founding member of EEN, the Energy Co-op now partners with several home performance contractors to make efficiency improvements in members’ homes.
To promote these partnerships, the Vermont Public Service Department worked with CEDF (Clean Energy Development Fund) and VLITE (Vermont Low Income Trust for Electricity) to create the Heat Savers program to provide funds to support up to $7 million in low-interest financing of clean energy measures. The Heat savers program is available only to EEN members working with Opportunities Credit Union and VSECU to offer attractive loans to their customers.
Opportunities and challenges for the new fuel dealer business model.
Changing consumer behavior is never an easy task. Neither is it easy to change the way fuel dealers do business. But both are critically important to grow the home performance and energy efficiency sectors of the Vermont economy and cut our carbon emissions.
Fuel dealers must find innovative ways to expand their offerings in a wider competitive environment that includes electricians and HVAC contractors.
According to the Vermont Fuel Dealers Association, only 28 of the 47 home heating fuel dealers within a 50 mile radius of Burlington offer heating system service and installation. This is clearly points to the opportunity for expansion.
Roadmap to new business model
We are fortunate that Vermont’s policies and programs provide support to utilities and fuel dealers that want to innovate. To capture new business opportunities fuel dealers should:
- Create or build service departments that serve as a resource (consultant/coach) for questions about heating system efficiency. Be sure that the people staffing this department are not just reacting to problems, but are also recommending pro-active solutions.
- Use National Oil Heat Research Association (NORA) certification to support service technician training and build consumer confidence.
- Create working partnerships to finance and install energy efficiency improvements. For example, the Energy Co-op of Vermont has completed 40 energy audits since the spring, resulting in home energy upgrades for 17 customers. It’s a modest but important beginning.
- Offer high-value incremental services such as heat pump installations, BioHeat deliveries, pellet heating equipment, solar hot water heaters, and other clean technologies.
- Provide easy-to-access information (across multiple communication channels) for turn-key financing options, rebates and incentives.
The Energy Co-op of Vermont has embraced many aspects of this new business model since its founding in 2001, combining our role as a fuel supplier with a sustained campaign to educate our members and build their understanding of the value of all kinds of energy efficiency services. We realize that the ability to offer effective, comprehensive solutions will depend on maintaining strong partnerships, providing great service and continuing to earn the trust and confidence of our members.