Assessment of the Market for Compressed Air Efficiency Services

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THE SUPPLY SIDE OF THE MARKETRevenue. Annual revenues in 1998 varied between $500,000 and$35 million, with a mean of $7.3 million, and a median of $5 million.This finding indicates that most distributorships are small businesses.Distributors were then asked to break out their revenues for differentcompressed air products and services. Table 3-1 displays the meanvalue, weighted by annual revenue, and maximum value for each category.Given the large difference between the mean and maximumvalues, it is apparent that different shops focus on different areas in thecompressed air market.Sales of compressed air parts and equipment comprise 59% totalrevenue for a typical distributor. Servicing equipment represents another19%, while all other services, including design and efficiency services,comprise only 16%. Efficiency services, such as leak detection andsystem audits, appear to play a very minor role in overall business,accounting for only 4% of total revenue. The types of services offeredunder the category “other compressed air related services” include thesale and rental of various equipment, such as pumps, blowers, and dryers.None of the vendors derived more than 40% of revenues from servicesother than equipment sales, parts sales, and equipment service.Efficiency Service OfferingsCurrent Status. Table 3-2 displays the percent of vendors who reportedoffering particular efficiency services and the pricing structure or formatunder which they were offered. The 3 choices in format include: as partof a service contract, as part of equipment sales, or as a freestandingengineering service. Seventy-eight percent of the distributors interviewedreported that they deliver system efficiency assessments; 75% offermeasurements of system flow and pressure. Surprisingly, over one-halfof the vendors reported that they offer ultrasonic leak detection services,a fairly new technology. Table 3-2 also suggests that distributors frequentlypackage energy efficiency services with more traditional lines of business,such as equipment sales and service. It appears that the 2 systemefficiency services, efficiency assessment and measurement, and theEfficiency services,such as leak detectionand system auditsaccount for only 4%of total revenue.TABLE 3-1: Reported Sources of Business RevenuesSERVICEPERCENT OF 1998 REVENUESMeanMaximumCompressed air equipment sales 37% 75%Compressed air parts sales 22% 50%Compressed air equipment service 19% 70%Compressed air system design 5% 30%Compressed air efficiency services 1 4% 16%Other compressed air related services 9% 45%1 Compressed air efficiency services were enumerated in the assessment form as measurement of system flow and pressure, assessmentof system efficiency, leak management services, ultrasonic leak detection, and analysis of end-use reduction opportunities.U.S. DEPARTMENT OF ENERGY33
TABLE 3-2: Efficiency Services OfferedCompressed Air Market AssessmentSERVICE FORMAT OF SERVICEOffer Equipment Service FreestandingSales Contract EngineeringServiceAssessment of system efficiency 78% 50% 31% 46%Measurement of system flow and pressure 73% 55% 34% 46%Analysis of end-use reduction opportunities 63% 39% 25% 41%Leak management service 60% 26% 40% 39%Ultrasonic leak detection 54% 24% 29% 33%Other 5% 4% 2% 2%TABLE 3-3: Dates When Efficiency Services Were First OfferedSERVICE YEAR FIRST OFFEREDSince 1995 Since 1990 TotalAssessment of system efficiency 25% 51% 78%Measurement of system flow and pressure 26% 49% 73%Analysis of end-use reduction opportunities 30% 53% 60%Leak management service 35% 53% 54%Ultrasonic leak detection 32% 51% 63%TABLE 3-4: Frequency of Compressed Air Needs Assessmentsas Part of Equipment Sales EffortsFrequency of Compressed Air Needs AssessmentsPercent of DistributorsIn all sales situations 10%In most sales situations 29%In some sales situations 47%In only a few sales situations 14%TABLE 3-5: Customer Objections to Efficiency Service OffersObjectionsPercentCustomer is skeptical about savings 75%Customer thinks the service costs too much 72%Customer believes internal staff already performs service 45%34U.S. DEPARTMENT OF ENERGYOther 10%
Page 2 and 3: Prepared forOak Ridge National Labo
Page 4 and 5: TABLE OF CONTENTSEXECUTIVE SUMMARYO
Page 6 and 7: TABLESTABLES1-1: Compressed Air Sys
Page 8 and 9: EXECUTIVE SUMMARYOVERVIEWThe Assess
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Page 16 and 17: INTRODUCTIONTABLE 1-2: Percent of M
Page 18 and 19: INTRODUCTIONOVERVIEW OF THE PROJECT
Page 20 and 21: SECTION 2: THE DEMAND SIDE OF THE M
Page 22 and 23: THE DEMAND SIDE OF THE MARKETTABLE
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