AD exec says members’ sales in clean energy likely to grow exponentially in 2012

Part one in a three part series

By Joe Salimando

Affiliated Distributors (AD) initiated its clean energy effort in July 2010. In a recent interview with tedmag.com, David Oldfather, president of AD’s electrical divisions, said the group’s participating members (102 of the 150 AD electrical distributors in the United States and Canada) had “double-digits” in 2011 clean energy sales.

The inference is that total 2011 clean energy sales for these AD affiliates came in between $10 million and $99 million.

 “We think it’s likely that the sales will increase by a factor of five or six in 2012,” Oldfather said.

His remark came in a phone interview that included Christian Siebens, the director of clean energy for AD.

“We needed to focus on (energy solution sales) to make an impact,” Siebens explained.

Right now, the targets for electrical distributors are greater sales in energy efficiency, penetrating markets for renewables—solar and small wind, and the smart grid.

According to Siebens, the group’s future expansion will include areas such as solar thermal, geothermal and fuel cells. “As interest and demand increase, we’ll include other AD distributors—those in the other AD divisions,” he said.

Increasing Energy Efficiency sales

Most distributors are involved, to some extent, in selling products used in energy efficiency projects, especially including lighting retrofits. What does AD’s program add to these ongoing efforts? Among other things, it is helping distributors focus on projects instead of components.

“There is a lot of opportunity there,” Siebens answered. “Our role has been to show our affiliates how to add ROI to a given project by adding multiple solutions. The ROI for many of these improvements is great—it can be a pretty simple sale.”

“You want to get out of the scenario where a customer comes to you with, ‘I need X, what’s your price?’ If you come to the customer with a proposal, you end up taking your pitch to the C-level executives,” Siebens said.

“When you sell a component, you’ve got plenty of competition,” Siebens continued. “Everyone has a price for those products. But if you sell clean energy solutions—with a breadth and depth of sales and technology—you are providing a value to the customer. You should and will get better margins on the sale.”

Above: Home page at http://adcleanenergy.com

Overcoming a longer sales cycle

Many distributors who have ventured into approaching customers directly with energy efficiency projects have lamented the longer sales cycle. It’s hard to get executive and sales personnel to propose projects that can take upwards of 12 to 18 months to win approval.

“Yes, the sale cycle tends to be fairly long,” Oldfather agreed. “But this tends to work in favor of the distributor who is pursuing both energy and maintenance with a given customer. You go in with a lighting control project, let’s say, and you end up with sales (to that customer) of miscellaneous materials. It’s fairly profitable, when you look at the whole picture.”

Part of the success so far, Oldfather explained, has been in helping distributors move to this “projects not components” approach. In some cases, he said, Siebens has gone out to work with affiliates to make presentations to those C-level execs.

That 5-6 times increase in sales, Oldfather said, is a conservative estimate. “On a solar project, let’s say, we are counting sales of products like modules, inverters and racking in those numbers. But there are sales of additional products for a solar job that are considered balance of system, which are not included in the totals.”

Networking inside the companies

Additionally, the clean energy format asks each distributor to identify a “Clean Energy Champion” inside its company. Siebens explained, “This is a person in the company responsible for selling energy solutions. Sometimes it’s one person. Sometimes you have several.”

Training programs for these “champions” have been held for 183 participants thus far, he added (again, in 102 companies). Another result—“We have a ‘clean energy council’ and we hold quarterly (phone conference) meetings with them. Set up much like our electrical division board and supplier advisory council, this group of affiliates is the governing body for AD clean energy.”

There is also an annual Clean Energy Summit (to be held July 23-25 in Chicago), to which the champions and distributor owners and managers are invited. This event includes a product expo, one-on-one sessions between clean energy suppliers and affiliates, as well as training opportunities.

Financing, too

AD’s clean energy program has a financing component, something vital for renewable energy sales, the AD executives maintained.

In the solar business, Siebens said, “some 70% of all systems are leased.”

Why? “Most corporate facilities don’t want to take on a long-term cost,” Siebens explained. “It’s possible, with our leasing program, to help the facility get a net positive cash flow from a leased installation.”

Additionally, financing is available for energy efficiency projects. “We look at making a given building more energy efficient as the first step,” Siebens said. “For every dollar you can save in energy efficiency in a building, the renewable energy system’s cost can go down by as much as three dollars.  Once our distributors, who are already very energy efficiency-savvy, understood the two-step process to reduce the need for watts and then follow up with a renewable solution, the clean energy path became very clear.”

As a result, distributors working with the AD Clean Energy program can fashion a project that involves an energy efficient retrofit and a renewables installation, and offer various forms of leases to the customer as well.

Overcoming hurdles

Obviously, selling sophisticated multi-pronged energy efficient-plus-renewables projects to C-level executives isn’t easy—even for ESCOs. The first hurdle AD’s Clean Energy program has had to overcome is internal—inside the distribution industry and within each affiliate company.

Siebens is keenly aware of this. In fact, he’s blogged on the subject on the Clean Energy website. His undated piece began as follows (bolding in original):

“In our sales training, we’ve been stressing how the great sales people of the future will be ‘Experts in Clean Energy – Champions.’ And while the message is catching on, marginally, most sales people are scared to death of it.  This is a sales strategy we must embrace in 2012. I thought it best to talk about the ‘inner game’ of becoming a Clean Energy expert.”

Oldfather said, “Christian has helped our affiliates understand the opportunity. In reality, once we are able to show one of our affiliates’ customers what he is saving by reducing his energy footprint, we are in a fairly good position to show him that the renewable energy portion of the project is actually much less expensive than it would have been otherwise! You have to get the customer to look at the savings when he’s looking at a proposal.”

In part two: Some solar and renewables suppliers that avoided taking on one distributor at a time seem to like dealing with 100 at one stroke.