The Outlook for Propane and PERC in 2011
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 2011.
Roy, as you consider the New Year, what are your thoughts about the year ahead?
I'm optimistic about the future. As a nation, we've got big challenges in front us, but as an American I have faith and hope that the new Congress and the President will do what the American people want done -- growing the economy. The fate of propane is tied up with the overall economy. So if the national economy starts growing just a little stronger, I'm optimistic that propane will do well. After all, propane is well positioned for growth on both the supply and demand side, and that's where you want to be in a recovering economy.
How is propane positioned for growth in both supply and demand?
On the supply side, two factors related to natural gas are driving up propane supply. First, domestic production of America's massive natural gas shale resources is providing vast quantities of propane as well. Second, expanding world trade in liquefied natural gas, or LNG, is putting hundreds of millions of tons of propane into global markets. Also, development of North American oil shale and oil sands is increasing domestic propane supply. Any way you look at it, propane supply is growing, and the U.S. has the capability and thus the opportunity to benefit from growing propane supplies locally and globally.
On the demand side, propane is holding its share in residential construction and renovation. That market is much smaller than it was just a few years ago, but once it rebounds — and it will, albeit slowly — propane demand will grow along with it. Residential demand is vital to propane businesses, and the slowdown has hurt, along with conservation and efficiency gains. Fortunately, there are emerging areas of demand that can improve the overall efficiency of the industry and add new consumers. For instance, there are new propane-consuming products available — and more coming soon — to serve commercial, agricultural, propane autogas, and off-road energy needs. Many of the industry's leading companies are pursuing those opportunities. So I'm optimistic about the future.
PERC has focused increasingly on research since the restriction took effect in the summer of 2009.
Actually, since 2007 PERC has continually increased its research budget. Our 2011 research budget is 55 percent of program funding. In fact, over its first 10 years of operation, PERC had revenues of about $350 million, and during that time nearly $200 million was invested by PERC and its partners on research projects. Research has always been a big part of what PERC does.
Where is that research money going?
Our innovation plan focuses research funding on propane utilization equipment that has the potential to improve environmental performance and energy efficiency. PERC also funds integration of safety and training components that are so important to successfully launching a new product and sustaining growth in the demand it creates. Generally speaking, the money is going to support emerging areas of demand in commercial, agricultural, propane autogas, and off-road markets.
Specifically, which research projects are PERC's highest priorities?
PERC has at least one priority research project and an accompanying attack plan in the commercial, agricultural, propane autogas, and off-road areas of concentration. The priority commercial application is combined heat and power; there PERC is collaborating with Yanmar and others on a key pilot project. Our agriculture challenge is maintaining propane's efficiency edge, and we're working with a leading grain dryer manufacturer to do just that. In a cross-cutting project for the propane autogas and off-road markets, our priority efforts are based on applications for the GM 8-liter engine. We're working with Freightliner and many others on a research partnership that will produce cleaner, more efficient propane vehicles that will include bobtails, school buses, off-road equipment, and irrigation pumps. Off-road engine research funding includes commercial mowing and golf industry applications. Those are top priorities, but there are many other projects in our research portfolio. And more to come when we launch our Propane Challenge in late spring.
What is the Propane Challenge?
We'll be talking more about the details of the Propane Challenge over the next few months, but basically it is a broad outreach to universities, national and private laboratories, engineering firms, and others to gather innovation ideas and proposals for PERC's research program. Its primary purpose is to inform and stimulate new research on propane utilization equipment that improves environmental performance and energy efficiency. I'm excited and encouraged by the potential of this initiative.
How can marketers help make the industry’s investment in research pay off?
We expect new propane appliances, equipment, and vehicles to drive significant growth in propane demand. But that will happen only if marketers get behind them. That means showing customers how the products can improve their lives, answering questions about their operation and safety, and helping customers find the best refueling solution. The market research reports that are available on our websites can help marketers identify growth opportunities, and the PERC Marketer Technology Training program can provide them with tools and information they can use to help customers adopt propane-fueled products. Hundreds of marketers have taken the training since April of last year. We look forward to working with our state and regional partners to bring it to many hundreds more in 2011.
January 3, 2011