Nobody knows the alternative energy landscape better than Clint Wheelock, whose firm, Pike Research, generates in-depth research on everything from smart meters to carbon capture and sequestration.
Now here’s a forecast deserving of far wider attention than it has so far received: by 2020 total revenue generated by energy services companies (ESCOs) could hit $37.7 billion, up a monstrous 573% over 2009’s $5.6 billion. At a minimum, Wheelock expects ESCOs’ revenue to hit $19.9 billion by 2020, a 255% increase.
In an exclusive interview last week, Wheelock explained that as much as demand is already growing for services that cut a commercial building’s energy and operating costs, he’s starting to see what he called a “shift in mindset” by building owners that promises to send ESCO demand into the stratosphere.
Building owners are starting to “see energy as an asset to be managed, not as a cost,” Wheelock said. They’re starting to realize that improving lighting, HVAC and other energy-consuming building systems both decreases operating costs and, in an ever more eco-conscious society, increases the value of the building. “A big difference,” Wheelock added, is that building owners are increasingly willing to accept a two-to-three-year payback on their efficiency investments, compared with only 12 to 18 months previously.
To be sure, Wheelock’s 573% ESCO revenue growth forecast comes with caveats, most notably that the still-nascent trend of counties and other government entities selling bonds that help pay for energy-efficiency improvements in buildings catches on, which he thinks will happen over the next few years. Right now, he said, ESCO demand is concentrated in single-tenant buildings owned by government, educational institutions, etc. With so-called PACE financing (short for property-assessed clean energy), Wheelock sees ESCO demand spreading throughout the commercial sector and even penetrating the residential sector.
And so we come to the drum roll: if Clint’s new forecast is spot on, which companies could give investors the most bang for their buck?
He agreed with me on the usual suspects, namely: Johnson Controls (Symbol JCI), Honeywell International (Symbol HON) and Siemens (Symbol SI). (Click here for more on Siemens)
Then, citing the growing interconnect between energy efficiency and information and communications technology, Wheelock offered up three untraditional “green” choices: Cisco Systems (Symbol CSCO), IBM (Symbol IBM), and General Electric (Symbol GE).
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Bill Paul is Managing Editor of EnergyTechStocks.com.