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Gregg Walker
Propane Education & Research Council

The Outlook for Propane and PERC in 2012

 January 20, 2012

Roy Willis, president and CEO of the Propane Education & Research Council, sat down recently with The PERC Update to talk about the challenges and opportunities confronting propane and the priorities for PERC in 2012. Willis also offered an update on re-engineering PERC to better focus on the commercialization of propane products, staff changes, and operating in a tough economy.

What are PERC’s top priorities for 2012?

PERC’s top priority is to support growth in the safe, efficient use of propane in the United States. We have a great sense of urgency about that. Our strategic approach is to do all we can to help manufacturers commercialize new equipment, appliances, and vehicles to create demand for propane. The industry’s core residential demand was especially hard hit by the prolonged recession, and now by slow economic recovery and anemic new home construction.  Add to that the mild winter so far, and everyone in this industry, including PERC, has a sense of urgency to do all we can to boost demand.

Do see opportunities for increased demand? If so, where?

There is some — albeit modest — improvement in home construction in some regions, and we want to take advantage of that with a more targeted program. On the propane autogas front, we see an opportunity for growth, even if federal incentives are not reinstated, driven by the economic and environmental benefits of propane compared with gasoline and diesel. In addition to vehicles that run on propane autogas, there are several new pieces of equipment — stationary engines, construction equipment, off-road vehicles, etc. — coming to market that promise to create additional demand. It is important that PERC help both the industry and prospective customers better understand the potential these technologies have to meet energy needs, reduce pollutants, and improve business outcomes.

With the election of new officers last July, PERC began a re-engineering effort. What can you tell us about that process and the timetable for completing it?

Re-engineering is about structuring PERC to better execute on our commercialization strategy. PERC was originally organized primarily to carry out a consumer education program. Although we’ve always had strong safety, training, and research programs, the priority was consumer education, and now we cannot legally do that because of the restriction of our consumer education function. Re-engineering PERC aims to better align operations and personnel, both staff and volunteers, to better accomplish the unrestricted research, training, and safety functions in a way that helps grow propane demand.

The timetable is progressing, and I expect to have the fundamental restructuring in place in the next 90 to 120 days. During that time, the Council will revisit its strategic plan, the new advisory committee and working groups will take on oversight of our programs and projects, a lead communications firm will be selected, and the staff transition will be completed. By the time the Council holds its first 2012 in-person meeting in April, we will be ready to kick in the after-burners.

What has been the biggest challenge in this re-engineering effort?

Without question, it’s continuity of service. The CEO of a large propane company who led a re-engineering of his business described the process to me as like changing a flat tire on a bicycle while still riding it down the road. That’s a vivid way of saying you have to implement big changes while continuing to deliver the services that your organization is expected to provide.

What are the key aspects of the organization that are being addressed by re-engineering?

A key objective is to reduce overlaps in effort by structuring the PERC staff and volunteers along functional lines. So rather than having several staff members and advisory committees all performing similar functions in each market, we have specialists performing those functions for all key markets. For example, we had three groups — R&D, Engine Fuel, and Agriculture — all working on research programs. Now, the staff and the new advisory committee will bring together the industry’s technical expertise to oversee all research projects. Similarly, rather than having three or four groups of staff and volunteers carrying out consumer training, demonstration programs, and other market outreach activities, we bring them together into a single unit. That should result in better coordination of efforts, eliminate duplication, and reduce costs.

Where do you see costs being reduced?

Costs are being cut in several areas. Communications support is a major expenditure and, thus, the primary target. First, rather than outsourcing basic communications support we’ve consolidated that role within the staff, and Gregg Walker is leading that team. Secondly, we have issued a request for proposals for communications services; more than a dozen firms responded and finalists will be evaluated by a task force of Council members, advisory committee members, and staff. Our objective is to replace the four firms that provided those services in individual market segments with a single firm capable of supporting PERC’s commercialization and market development roles in residential, commercial, agricultural, fleet, and other markets. In addition, we are reviewing all services provided by contractors and consultants and benchmarking those expenditures with current market rates with the goal of reducing the use of and the expenditures for contractors. These savings will enable PERC to put more funds into projects and programs.

You mentioned the transition in the PERC staff. How is that going?

Finding the right people is important and takes time, but we’re making progress. We’ve brought on Alan McEwan to manage the technical side of our engine fuel program, and he’s hit the ground running. We’ve also had several staff members leave since we kicked off the re-engineering effort. We’ve redesigned those job descriptions, and now have a search under way to fill senior staff positions for business development, industry programs, and residential and commercial market programs. I expect to fill those positions and begin training before the Council’s meeting in April. Meanwhile, I have been very gratified and encouraged by the way our existing staff has stepped up to ensure continuity of services to the industry. 

You seem hopeful about the outlook for propane markets. Why is that?

I am hopeful, but cautiously so. Three factors weigh on my thinking — the overall economy, rising oil prices, and tight credit. Those factors make me cautious. I am hopeful because propane is an excellent energy resource that has application in many markets. Also, we have a full range of new technologies available that offer sound business cases in a number of key market sectors. But businesses must be willing and able to invest in new equipment. For example, landscape companies like propane mowers, but they have difficulty getting the business loans to buy new equipment. For similar reasons, fleets are hanging onto their vehicles longer; farmers are slower to replace irrigation engines, and so on. I hope that will change in 2012. If it does, propane is well positioned to take advantage of an improving economy. That’s a macro view of priorities. Of course, PERC has a number of specific priorities for this year in each area of work, as well.

Can you give us an example of a specific priority?

Sure, take forklifts, for example. PERC has two specific objectives. First, we need to begin work on the next generation of forklift engines, and second, we want to do a full life cycle economic analysis of propane forklifts to better support the business case for using propane equipment. In a totally separate area — training — we have a specific priority to expand the availability of instructional material for mechanics and service technicians to repair and maintain the growing population of propane engines.

Thank you for your time. Before we wrap up, do you have any additional items we haven’t covered?

I do want to wish everyone all the best for the new year.