For the conscientious MBE, energy and utilities spark alternative opportunities

As the one sector that literally fuels the world’s economic engine, the energy market has seen an increased level of attention in recent years - and rightfully so. After all, regardless of what market sectors are hot at any given point, one constant remains - there will always be a need for energy. To this point, Framingham, Mass.-based Energy Insights recently released its top 10 predictions for North American utilities in 2008, which has unearthed true areas of need and potential opportunityfor engagement of minority- and women-owned business enterprises.

According to this new study, climate-focused energy policies, consumers and businesses concerned with climate change, and investors’increasing attention in sustainability will drive energy companies to increase their investments in a range of energy and information technologies - including systems to measure and manage a company’s carbon footprint, software applications to enable participation in carbontrading markets and renewable energy technologies (especially wind, but also central solar as well as in-home displays that enable energy-efficient programs).

Behind the results

While surveys provide some true insight into trends, the key to longevity rests with ability of MWBEs to find equitable opportunities by applying the results to their business models. What these trends tell Sonja Ebron, CEO of Atlanta-based blackEnergy, is that as conventional energy resources become scarcer and more expensive, minority-owned companies should focus on helping utilities and other energy producers streamline their operations and cut costs.

“Those companies with existing industry relationships should seekto expand them through taking on outsourced functions related to thework they already perform. Firms that can help the industry navigate thetwin perils of energy deregulation and the growth in raw materials costs will be well rewarded,” she said. “In addition, suppliers should broadentheir view of the industry beyond utilities and oil refining operations to include those providing alternative and renewable energy sources.

African Americans, in particular, should also look for opportunitiesto partner with African firms as the continent looks to expand itsenergy infrastructure.”

Green machine

The trend of going green is one of the most pressing on the energy market worldwide. As part of the highly publicized green movement, sustainable communities and businesses are going to rapidly becomethe standard, and energy utilities have a large role to play in making this happen, explained Luisa Freeman, a managing consultant in PA Consulting Group’s International and Development Services team. “It’s not a matter of whether people and institutions are going to become more energy efficient or resource sensitive, but how quickly.

Utilities were once active players in providing technical knowledge, consumer programs, financing and other tools for helping improve the way people use their products,” Freeman said. “Now they are cranking up these programs and services again, but are having to scramble to find people with the necessary skills and knowledge to implement the programs.”

According to Bill Mills, managing partner of Highland GoodSteward Management, in light of the increased green focus, it is crucialto separate true opportunities from noise. “Environmental issues areextremely important today in society. It is important to stake out a specialty or a competence which may differentiate you and focus [on] that,” he said. “Energy will remain popular and important because of current social circumstances. Yet, it is important to specifically identify a trait that differentiates one in this larger group.”

Mills further recommended that minority firms watch for those that have been successful moving against this broader trend or in a subsetof this trend. “These trends could impact a diverse supplier relative to their ability to sort out the noise from realistic potential, which is compatible with their own capabilities,” he said. “Energy issues and, in particular, ecological and conservation issues are at the top of everybody’s task list. All talk and no impact brings out the cynics, and there are always cynics. Accept the noise as indication of sincere interest but move along the stream with a clear competency in mind, a competency that is clear enough and focused enough show actual results.”

Increased demand

The emergence of new growth markets, like China and India, has not only opened thedoor for diverse firms like Dallas-based Petron Energy Inc., which focuses on finding and capitalizing on low-risk drilling opportunitiesin the United States, but also presents excellentopportunities for long-term growth within ourbooming energy market.

“The difference in today’s market, unlike past peeks in oil and gas prices, [is that] thereare true drivers behind the current escalatingoil and gas prices,” explained Petron PresidentFloyd Smith. “As a result, when there is moredemand and limited supply, firms have the opportunity to broaden their strategic planning.For example, [if] we can take on stripperproducing assets coupled with higher energy pricing, we realize good returns sooner fromthese assets, however with lower pricing thesesame assets would not be economically viableto pursue.”

According to Smith, firms who want tosucceed within the energy market need to look for creative ways to help meet market demand.”Both domestically and globally, there is an insatiable appetite for oil and natural gasproducts,” he said. “The challenge remainsfinding ways to economically take advantageof nuances in technology by developing andembracing innovative ways to get natural gasand oil out of the ground.”

Smith told MBN USA the trend will onlyincrease as people continue focusing on greenefforts.

“Natural gas is one of the solutions, butbeing conscientious of our environment playsa big role in finding technological solutions.

We need to find better ways to cut down on emissions, as well as improve natural gasproduction, which could be an area of true opportunity for innovative firms willing to invest in the future. We do not want to create problems for our environment, only solutions.”

The United States must continue to find energy solutions at home, which lessen its dependency on foreign imports. Smith believesmost of the industry’s success will undoubtedly come from MBEs partnering with private investors and large firms. However, Smith advised MBEs to be careful before leaping into any arrangements.”There needs to be a focus on solid long-term arrangements that are mutually beneficial,” he pointed out. “This is crucial because as industry pricing becomes morefavorable, it tends to attract some unsavorypeople into the industry. Partnering is an excellent angle, but due diligence is a must.”

Embracing demand

Jewel Smith, supplier diversity managerof Houston-based CenterPoint Energy and chair of the Edison Electric Supplier DiversityExecutive Committee adds that as utilities look to build generation systems capableof supplying the growing needs of today’s consumer, opportunities and challenges alike will continue surfacing. “Today’s consumer has embraced more technology, which means we need to provide higher levels of demand.But at the same time, we are dealing withaging facilities, which present real challenges,especially considering that success of manyof the renewable routes depends heavily on geographic limitations,” she said.Smith explained that the biggest areas of future opportunity will come to firms addressing clean generation, improvedtransmission infrastructure as well as actually providing solutions touching theconsumer. “We need to focus on having less of an energy drain and this starts with addressing consumer needs,” she said.”Suppliers who are creative, innovative and flexible while also paying close attention to the issue impacting utilities arethe most attractive partners as we see anever-changing working climate. With this knowledge suppliers can better understandhow to shape their offerings, which makes them more competitive and realistic.”

Race for human capital

It may seem like a broken record, but the impact of retiring baby boomers is sure to have a huge impact on how the industrybehaves, especially over the next two decades.Understanding the technologies involved andthe typical ages of technicians, the energy-based utility market is not exempt. In fact,human resource requirements in the industryare at an all-time high - both in technicalknow-how and consumer relations. The loss of institutional knowledge with the comingdeparture of the baby boomers is the last gaspof a huge brain drain that started in the utilityindustry in the 1990s.

“With deregulation on the horizon, many utilities shifted their human resourceinvestments away from the long tradition ofengineering expertise [and] toward economistsand marketing professionals,” Freeman said.”The engineers of [the past] had extensivestreet smarts regarding customer energy uses, emerging technologies and the function and application of products that use electricityand natural gas. These technical field representatives were the pride of the industryin the decades that preceded competition. Butonce competition hit, utilities sent them out thedoor. Now, with the refocus on the customer again, utilities badly need people who havepractical knowledge and credibility with thetrades and large energy-using industries.”

According to Floyd Smith, a direct result of shortages in experienced technical personnel means firms capable of providing geological, geophysical and petroleum engineeringservices stand an excellent chance of providingcontracted services.