CUED

South Shore Energy Store:
Market Feasibility and Organizational Alternatives

It became clear through our research that the market for energy saving products and services in South Shore does not presently justify a for-profit energy center. This market is divided into two sectors one demanding standard energy conservation products and services (such as storm windows and insulation), the other demanding more sophisticated new items (such as system retrofits, and water saving products). The first sector is served mostly by local hardware stores and construction firms; the second, representing a smaller and more occasional demand, by the metropolitan rather than the neighborhood market. Within the total market there are two different types of clients: owners and managers of large (over six units) rental structures and owners of smaller dwellings (six or fewer units). The first clientele is approached continuously by suppliers of all types who provide information about the products and services available and make every effort to win their business; the second clientele goes unattended most of the time because it represents a smaller market, reaching it is relatively costly and its spending capacity does not guarantee a sizable profit. As a result, while the former sector is over served, the latter is under served. However, the smaller owners do not provide sufficient demand for an energy center while the larger owners and managers could be attracted only at a high price.

Moreover, the local market for energy products and services is small in absolute terms and does not appear to have an adequate amount of the right clientele for a local energy center. Standard energy saving products and services constitute a small proportion of the total sales of local hardware and construction firms, and a for-profit energy center would be competing with other local firms for a very limited market. With respect to more sophisticated products and services, limited local demand does not offer any better prospects.

As a result of these findings it became evident that an energy center of the type described above would not presently be feasible in South Shore. For such a center to succeed, either the market boundaries would have to be extended much beyond the South Shore area or the scope of the project would have to be changed.

Accepting this initial finding, TNI reaffirmed its commitment to an operation that would help in the revitalization of South Shore by providing energy saving products and services to the area on a self-supporting basis and, eventually, becoming profitable. At this point the study turned to a search for alternatives, some of which were suggested by the interviews we conducted.

Owners of smaller dwellings expressed much concern about escalating energy bills and were willing to participate in an affordable neighborhood program that would help solve this growing problem. Owners and managers of larger structures also expressed interest in a local effort to increase investment in energy conservation and requested special assistance in the evaluation and financing of energy saving products. Various data showed a definite need for energy saving investments in South Shore. But they also showed that problems of information, income and financing prevented this need from being expressed as a steady, increasing demand.

Based on these requests and needs we propose a series of measures aimed at activating the market and serving it on a more realistic basis than would the originally projected for-profit energy center. The alternative we have selected envisions a twofold effort: on the one hand, the establishment of a not-fireproofed energy center to provide local people with information and advice on energy conservation; on the other hand, the organization of a small scale for-profit operation starting with weatherization crews, which would expand as demand increases and move into more sophisticated services and more comprehensive solutions to the energy problem as market growth warrants. Both entities would pay special attention to training in house doctoring and energy saving installations and would provide financing according to need. Both would be strongly committed to organizing, educating and training people in energy conservation. By doing so, the project would decrease energy bills in a significant way, thus contributing to the revitalization of the community.

Besides evaluating this last possibility, other alternatives are included for consideration. Their pros and cons are examined and their potential impact is assessed.

The next step is for TNI to select an alternative, make the basic organizational decisions related to it, and put together a business plan delineating the details of the operation.

This website is maintained by Cedric Williams, Manager System Services,
UIC-Center for Urban Economic Development