Sign In
Upcoming Event
Free Newsletter
Sycom Grows by Saving Energy
Listen to this articleDate: February 7, 1996
location: South Plainfield
Title: Sycom Grows by Saving Energy
Author: Paul Fiorilla
Subject: Sycom has built its business around helping companies cut their energy costs. Can it sustain its momentum after deregulation unleashes new competition?
At the height of the oil crisis in 1973, S. Lynn Sutcliffe worked as a lawyer for the U.S. Senate Commerce Committee, where he helped craft energy legislation. In 1977, he and three other attorneys founded a law firm in Washington, D.C. specializing in energy matters. While writing speeches for a friend who was running for political office that year, however, Sutcliffe got an idea that got him all fired up. He realized that saving a unit of energy had the same effect as creating a new unit. If more energy could be saved, it could create jobs, improve the environment, and reduce the country”s reliance on foreign oil.
Sutcliffe went on to turn that idea into a business. He is chief executive of Sycom, a South Plainfield company that helps businesses and governmental agencies save money by installing energy efficiency measures. When a company becomes more energy efficient, Sutcliffe maintains, it can improve its bottom line as well as the environment. “You have a chance for customers to win, for society to win, and, if you do your job right, for you to win,” he says.
Sycom–an acronym for “save your company money”–performs energy audits and arranges for installation and financing capital improvements that the company may require. The work is financed through performance-based incentive rebates paid by utilities to users who reduce energy usage. A 1991 regulation of the Board of Public Utilities requires utilities to have a rebate program for customers who save energy.
Mona Mosser, head of the energy conservation review program for the BPU, estimates that Public Service Electricity and Gas (PSE&G), the state”s largest utility, has saved 170 mW of energy over the past three years through energy efficiency programs. Since a typical power plant produces 50 mW to 200 mW of energy a year, the emphasis on energy efficiency has prevented the need for PSE&G to build a power plant. “I think up to this point, it”s been quite effective,” Mosser said. “The whole purpose is to avoid building new power plants.”
On the other side of the ledger, energy efficiency saves money for businesses and taxpayers. The Mercer County Improvement Authority in 1995 authorized a $10 million bond issue that provides financing for any governmental entity within the county to install energy-efficient equipment. Mercer County”s program with Sycom–the first of its kind in the country–allows it to bank emission reductions with the state Department of Environmental Protection. The credits are used to foster economic development elsewhere in the county, according to Mercer County Executive Robert Prunetti. “It”s an innovative way to get people to conserve energy and save money,” Prunetti says. He estimates that government agencies in Mercer County will slash energy costs by $15 million over the next 10 years.
Energy efficiency wasn”t always in vogue. Before the 1970s, many large buildings, especially public facilities, paid little attention to conserving energy. But that all changed with the Arab oil embargoes of the 1970s. The first national legislation that provided tax incentives for the installation of energy saving equipment was signed by then-president Jimmy Carter in 1980. Sutcliffe says, however, that in the past many companies in the energy services field were “charlatans” whose aim was to take advantage of tax shelters. In 1986, the federal tax code was changed to require companies that claimed a tax deduction for energy savings to monitor the amount of energy saved.
Sutcliffe launched Sycom in 1986 in the wake of these changes. He says the company, then based in Washington, D.C., took a long time to take off. Sycom moved to New Jersey in 1989, when it won a contract from PSE&G and Jersey Central Power and Light, utilities that service more than 90% of the state “We had to go out and market customers,” Sutcliffe recalls. “We created a whole new business in the energy-efficiency field.”
In 1992, PSE&G started its Standard Offer program, in which the utility pays customers a fixed amount for each kW-hour of energy saved. “If you produce 100 kW of energy and need to produce 120 kW, you can either build a 20-kW power plant or save 20 units and use the saved energy. It”s obvious what”s better for society,” Sutcliffe says.
Sycom begins an energy audit by inspecting a company”s lighting, heating, ventilation, and air-conditioning systems; the energy management systems; boiler and domestic hot water controls; waste heat recovery controls; and manufacturing and process equipment. Project engineers then analyze utility rebates or performance programs to qualify the project for incentives. The company also performs a financial analysis of the energy-conservation opportunities, prices the capital improvements, arranges financing for the project, and monitors the energy savings.
Sycom”s customer list includes various Johnson & Johnson facilities, Ortho-McNeil Pharmaceutical of Raritan, and Wyeth-Ayerst in Monmouth Junction. State-owned facilities include the New Jersey Sports and Exposition Authority in East Rutherford and several state office buildings in Trenton.
Most of Sycom”s clients are businesses with 30 employees or more, says Rick Wright, the company”s treasurer. Economies of scale make it difficult for Sycom to work for smaller companies, he adds, recommending that small businesses go directly to utilities for energy audits.
Sycom”s clients seem pleased with its services. Ricoh, for example, revamped lighting fixtures at its 140,000-sq.-ft. North American headquarters building in West Caldwell. Joseph Andolino, the maintenance supervisor, says the company is saving between $5,000 and $6,000 a month because of the overhaul. “The project went exactly as planned and we saved to the penny what Sycom”s engineers anticipated,” he says.
Sutcliffe estimates the amount of energy saved annually by his clients is in the neighborhood of the energy produced by a small power plant. He says Sycom was responsible for more than $50 million in project development in 1995, and expects that number to double in 1996. Sycom employs 35 full-time workers and several dozen subcontractors out of its headquarters in South Plainfield. The firm”s other offices are in Washington, D.C. and Santa Barbara, Calif. Sutcliffe says the company plans to expand overseas in the future.
Mosser estimates about a dozen energy services companies have sprung up in New Jersey. Sycom, having had a head start over rivals, is several steps ahead. The state attorney general”s office issued an opinion last year that made Sycom the only energy services company in New Jersey that can enter into government contracts without public bidding.
Even so, Sycom faces challenges thrown up by deregulation in the energy services field. In December 1995 PSE&G negotiated a 30% reduction in the incentive payments. JCP&L spokeswoman Donna Rovins says the utility will continue to work with firms like Sycom, but will move away from rebate-based programs beginning in 1997. Mosser anticipates that deregulation of energy production sources soon will give customers a choice of energy suppliers. As a result, she says, utilities may be hesitant to enter into long-range rebate contracts with customers.
Sutcliffe says his company is planning ways to help customers through these shifts in energy delivery. He notes, however, that no matter who provides the energy, customers will always want to lower their bills. “The smart utility will continue to provide ways to help keep bills lower,” he says. And as long as that happens, Sycom”s services should continue to be in demand.
