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ENERGY EFFICIENCY

THE POTENTIAL OF ENERGY EFFICIENCY

Increasing the efficiency of energy that is being used for heating, transportation and electricity is some of the lowest hanging fruit in the effort to reduce dependence on foreign oil and to curtail pollution. Because of this reality, an array of federal and state programs have focus on increasing energy efficiency.  Companies have responded by expanding their programs and developing new technologies that will address the need to improve the efficiency of energy users large and small. Energy efficiency is a focus that involves home building and home upgrades, business offices and factories, government programs and facilities, and the automotive industry.

BIG INVESTMENTS IN ENERGY EFFICIENCY

One of the largest areas of energy efficiency growth involves building of new homes and business facilities, and upgrading existing homes and businesses. A new federal initiative focuses on encouraging builders to reduce home energy consumption by 40%. This program, called Building America, was put forward by the United States Department of Energy and has stated that, “Building America forms research partnerships with all facets of the residential building industry to improve the quality and energy efficiency of homes. The goal is to develop cost-effective solutions that dramatically reduce the average energy use of housing while improving comfort and quality”[1]

This initiative comes out of the revelation that, “Buildings in the United States are responsible for 39% of CO2 emissions, 40% of energy consumption, 13% water consumption and 15% of GDP per year, making green building a source of significant economic and environmental opportunity. Greater building efficiency can meet 85% of future U.S. demand for energy, and a national commitment to green building has the potential to generate 2.5 million American job.”[2] At the Roen Financial Report website, we strive to bring you these type of media updates that may affect the growth of your investments.

ENERGY EFFICIENCY IN THE PARADIGM PORTFOLIO

Energy Efficiency is continually gaining importance for building of all types of products. For both economic and environmental concerns, companies are continuing to focus on energy efficiency for the possible savings that energy efficiency can provide. Four companies of interest at the Roen Financial Report website include Tetra Tech (TTEK), General Electric Co (GE), Siemens AG (SI), and Johnson Controls Inc. (JCI)

Tetra Tech (TTEK)

Companies like Tetra Tech (TTEK), who are providing consulting and building optimization management[3], have propelled the development of energy efficient homes and businesses forward. This has proven to be a highly profitable endeavor as companies and individuals are looking to increase their energy efficiency in order to cut down costs. According to the US Green Building Council, this optimization can on average decrease operating costs 8-9 percent, increase the value of the building by 7.5 percent, increase ROI by 6.6 percent, and increase occupancy ratios by 3.5 percent. Additionally, “There are also tax credits, deductions, grants, exemptions and accelerated depreciation schedules, which can be coupled with other financing options and traditional tax credits to maximize your financial benefits.”[4]

Tetra Tech also helps their clients work towards LEED certification[5]. LEED certification is the international certification for Leadership in Energy and Environmental Design. According to the governing body for LEED certification, “LEED is an internationally recognized green building certification system, providing third-party verification that a building or community was designed and built using strategies aimed at improving performance across all the metrics that matter most: energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, and stewardship of resources and sensitivity to their impacts.”[6]

This certification has impacted how private homes and international corporations are constructing new buildings. It has also provided companies like Tetra Tech and private consulting firms like the Farnsworth Group, with room for significant growth. Despite the recession, this dynamic company has had increasing sales every year since 2005, making it a key player at the Roen Financial Report website.

General Electric (GE)

General Electric (GE) is also leader in providing products like improvement in air flow controllers and green lighting options that can aid in LEED certification, [7]

Different GE departments provide products that will lead to points that go to LEED certification. On their website, General Electric Lighting Systems suggests that with new products from their department consumers could, “Minimize light trespass from the building and site, reduce sky-glow to increase night sky access, improve nighttime visibility through glare reduction and reduce development impact from lighting on nocturnal environments.” [8]

Siemens AG (SI)

However, GE is not alone. Other international firms are working to develop products that work to improve building’s energy efficiency. Siemens AG (SI) has developed new products like air control systems that have allowed Siemens to benefit their clients by, “enabl[ing] seamless communication between various disciplines like heating, cooling, control of lights and blinds as well as low-voltage energy distribution, making your facilities true high-performance energy-efficient buildings.”[9] Other Siemens products, like their variable speed drives for HVAC (Heating, Ventilation and Air Conditioning) equipment works to minimize operating costs while maximizing energy savings. Siemens innovation makes it a key player at the Roen Financial Report website.

Johnson Controls Inc (JCI)

JCI’s building efficiency business focuses on commercial structures in a comprehensive manner. Products and services include design, production, marketing instillation and technical services. They also provide residential air and heat systems. Net sales from this segment accounted for 44% of JCI’s income in 2009, and that percentage has been steadily growing

Johnson Controls has also taken a leadership role in promoting energy efficiency. In June of 2010, corporate leaders met in Wisconsin at a retreat hosted by Johnson Controls to discuss energy efficiency indicators. Industry leaders were polled at this conference and when asked about why they were investing in energy efficiency technologies, “97 percent of all respondents pointed to cost savings as the most important driver for the investments.” [10] This poll comes after Johnson Control (JCI) announced the results of another survey in April 22 wherein despite uncertainty in the economy, “Sixty-five percent of the respondents said they are paying more attention to energy efficiency this year than last year, and 85 percent say energy efficiency is a priority for new construction and retrofit projects.”[11]

RECOMMENDATIONS

Almost half of the +/- 40 companies recommended in the Paradigm Portfolio listed on the Roen Financial Report website are involved in energy efficiency. As fuel prices continue to rise, these efforts will only increase in importance, adding to the business opportunities these companies are already engaged in.

IMPORTANT INFORMATION

Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article.

It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice.  Individuals should seek advice from their investment professional before making any important financial decisions.

REFERENCES


[1] http://www1.eere.energy.gov/buildings/building_america/

[2] http://www.usgbc.org/DisplayPage.aspx?CMSPageID=124

[3] http://www.tetratech.com/tetratech/energy-efficiency.html

[4] http://www.sbnonline.com/Local/Article/18933/447/180/Going_green.aspx

[5] http://www.tetratech.com/tetratech/energy-efficiency.html

[6] http://www.leed.us/DisplayPage.aspx?CMSPageID=1988

[7] http://www.geconsumerandindustrial.com/environmentalinfo/regulations_resources/leed_points.htm

[8] http://www.geconsumerandindustrial.com/environmentalinfo/regulations_resources/leed_points.htm

[9] http://www.buildingtechnologies.siemens.com/bt/global/en/energy-efficiency/Pages/Energy-efficiency.aspx

[10] http://www.greenbiz.com/news/2010/06/03/johnson-controls-energy-efficiency-indicator-goes-global

[11] http://www.greenbiz.com/news/2010/04/22/new-study-predicts-rebound-energy-efficiency-spending/?src=int

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Energy Eff. Returns
Ticker Day Week Qtr Year
A 2.4% 0.2% -30.3% -29.7%
ACPW 3.4% 2.2% -7.5% -38.3%
ADSK 4.3% 1.1% 6.7% 23.2%
AIXG 2.5% 1.7% -13.4% -17.5%
AMRC 0.3% 0.7% 1.1% -17.0%
ANSS 2.1% 2.1% 3.9% -3.7%
AOS 1.7% 1.6% 10.3% 2.2%
ARCI 4.9% 6.1% -7.3% -7.9%
ASYS 0.0% 6.0% -26.6% 17.3%
AVX 2.5% 0.0% 6.1% 6.4%
AYI 3.2% 4.1% 9.2% 28.3%
BWA 2.2% 0.4% -8.1% -4.0%
CREE 2.5% 1.9% -28.5% -46.8%
CSL 1.5% 4.0% 8.5% 16.4%
CTRL -1.5% -2.5% 9.3% -6.3%
DGII 2.5% 7.6% 3.8% -28.8%
EEI -2.9% -0.3% -12.4% -21.7%
EFOI 0.8% -5.5% -21.4% 8.1%
ENOC 0.9% 2.1% -19.3% -10.7%
ETN 4.0% 0.9% 1.3% -10.1%
GE 2.9% -1.1% -4.1% -8.3%
HASI 1.4% 1.5% 1.0% 9.7%
HON 3.0% 2.8% 4.4% 13.8%
HXL 2.3% 0.7% 2.6% -4.6%
IRF 0.3% 0.3% 0.8% 57.3%
IXYS 0.1% -6.8% 5.1% -2.4%
JCI 3.3% -0.2% 1.4% -8.1%
KYO 2.0% 1.7% 1.1% -7.0%
LEDS 3.8% 29.7% 66.0% -17.0%
LIME 6.8% -16.7% -25.0% -22.0%
LLTC 0.8% 1.3% 0.5% 2.3%
LPL 1.4% 1.2% -6.2% 31.7%
LPT % % % %
LYTS -0.2% -2.3% 0.8% -26.3%
MG 3.1% 7.0% -18.1% -12.2%
MIXT 2.5% -0.6% -34.0% -45.3%
OIIM -1.8% -3.5% -21.3% -22.7%
OLED 4.1% 2.3% -24.9% -20.1%
ONNN 3.9% 2.8% 2.0% 29.5%
OPWR % % % %
PLCM 2.1% 3.6% 1.9% 25.0%
POWI 1.5% 1.4% -8.0% -4.1%
POWR 1.6% 4.4% 6.8% -35.2%
RBCN 0.0% -13.0% -22.9% -55.4%
ROK 3.3% 4.3% -5.3% -1.5%
ROP 3.7% 3.0% 4.9% 18.2%
RVLT 3.1% 5.6% -26.4% -58.0%
SCTY 6.7% 5.6% -18.5% 1.8%
SHCAY -1.8% -3.5% -26.4% -30.8%
TKR 3.2% 2.0% -6.0% 22.1%
TTEK 2.4% -0.1% 0.7% -3.6%
VECO 0.5% -7.0% -5.0% 8.3%
WBC 2.6% 1.9% 12.0% 14.3%
WWD 1.7% -0.2% -3.5% 12.3%
ZOLT 0.0% 0.0% 0.0% -0.1%
Average 2.0% 1.2% -4.9% -5.3%
Data as of: 12/19/2014
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