Energy Savings with no Upfront Investment

For one local company in Monterrey, the near constant use of air conditioning and subsequent crippling energy bills translated into a business opportunity. ESM Industries partnered up with counterparts in the US to seek ways to save power and lower electricity costs. This quest brought the ESM team to realize that the same issue plagues street lights, compressed air tanks and other systems. The company opened up a niche in the market for themselves, working on generation and cogeneration. “Since 1990, the cost of electric energy has risen over 1,000%. The current view that saving even a kilowatt also helps the environment is really motivating,” says Manuel Buxadé Hernandez, Director General of ESM Industries.

CFE wants energy consumption to drop because its mission, to distribute electricity to all Mexicans, is becoming increasingly difficult and expensive to accomplish. ESM has a circular business model: consumers pay less, CFE saves energy, and ESM makes a sale. In developing this model, ESM hit upon a simple yet effective sales strategy. ESM representatives approach governments and private businesses and explain that the company will provide them with a complete solution. “We take the last one or two years into account as a reference for the solution we provide, and we charge our clients according to the results. If we reduce their costs, they pay us. If we do not reduce their costs, they do not have to pay. This means clients do not have to make an upfront investment, and they are able to net savings from the very first month onwards. ESM gets a cut of whatever the client saves. After some time, ESM withdraws from the operation and the client maintains the long-term benefits. ESM has measured the risk over a 20-year period to ensure the continued viability of this hallmark business model. From the results we have seen, our clients are in for a pleasant surprise,” says Buxadé Hernandez.

One challenge is that potential customers seem to be resisting new energy models. “People are skeptical, and for some reason do not want to take part in this strategy,” says Buxadé Hernandez. The fact that people are not interested in saving money and power demonstrates the need for greater promotion of an energy-saving culture in Mexico. In contrast, the US has appreciated how vital energy is to its society since the energy crisis of the 1970s. ESM has ties to the California Energy Commission, which manages the inspection of buildings to ensure that they comply with norms and levies fines if they do not. In the US the rules are enforced, meaning that people comply. To Buxadé Hernandez’s mind, policies like this could shift Mexico towards a more energy saving, sustainable approach. Children’s education in Mexico has played an important role in shaping perspectives on energy saving, recycling and sustainability, which is likely to make these types of projects more popular in a few years. But currently, Buxadé Hernandez believes that the average Mexican’s way of thinking does not take sustainability into account. In order to learn more about these attitudes, as well as increase sales, ESM plans to enter the American market in 2014.

ESM takes Motorola’s Six Sigma approach to improving processes where anything that does not add real value gets eliminated or reduced. This approach has reduced energy consumption by 50-60% for some companies, without requiring any initial investment. Once energy consumption levels are at their lowest point, it is possible to move to a cogeneration system, or even solar and wind energy sources. Efficiency is about taking advantage of existing resources and situations and putting them to work. “Clients in hotels and hospitals have told me that they want to install solarpowered water heaters. I have told them that they are already expelling heat into the atmosphere. Air conditioners heat up, and we can use that heat because it is available and free,” explains Buxadé Hernandez.

“Producing 1MW costs an average of US$1 million for a hydroelectric plant, which is the cheapest energy producing source. For solar energy, the cost is about US$3.5 million per MW. These costs highlight the importance of energy efficiency. For instance, several countries, such as the US, use motion sensors to turn electricity systems off when no one is around. These societies have a deep-seated notion of energy efficiency. Energy is very expensive in Europe because they do not have oil reserves like we do. For this reason, you can see a lot of solar and wind energy projects in Europe, they are thinking about the future,” says Buxadé Hernandez.