Monday, January 7, 2019
Meeting in Savannah, Ga. last November, the 21-member Propane Education & Research Council (PERC) gathered to discuss many ongoing PERC initiatives, the market outlook for propane, and plans for moving ahead in 2019 with numerous outreach programs to boost propane sales in multiple areas. 
On the first day of the two-day meeting, councilors heard from Ashley Petersen of Stratas Advisors, an advisory and consulting firm, who shared a wide range of data on market trends and how they will likely affect propane demand levels in the future. In a look at details regarding the residential sector, it was noted that younger home buyers are postponing home purchases. “Millennials have a homeownership rate of 37% versus 45% for Gen Xers at the same age,” Petersen said.
“The likely best target for residential propane demand is the age 53 to 62 buyer,” Petersen explained. “In this group, 39% rank heating and cooling costs as ‘very important,’ the highest rate nationally. Of this age group, 15% buy homes in rural areas, the highest rate nationally.” She noted the expected tenure in the home is 20 years, again the highest rate; and the median home purchase price at $249,200 is the second-highest nationally. “Also, 18% purchased a new home rather than previously owned, the second-highest nationally,” she said. “Older homeowners will account for two-thirds of spending growth and discretionary projects are expected to be the main driver of growth.”
The natural gas share of residential space heating will continue to expand through 2030, although shifting price differentials are expected to slow the pace of growth after 2024. Propane’s market share loss is expected to be slowed by favorable pricing differentials. Stratas Advisors reported that propane competes well against other fuels in today’s market for a variety of reasons, including:
• Environmental friendliness — It qualifies for state credits and can function as a selling point for large companies seeking to manage their environmental impact.
• Aligns with consumer trends — Organic food sales are growing nearly six times faster than the overall food market and outdoor living is popular among millennials.
It was noted that challenges do persist. “Efficiency gains and urbanization will be a headwind for growth in the residential sector,” Petersen said. “It is expected that an overall market decline of 3.2% will occur as advances in efficiency will outpace growth in users.” The consulting firm recommended taking advantage of sector level trends to reduce overall decline in volumes.
In the commercial sector, energy demand is linked to both GDP and heating degree days. “Propane is expected to keep pace with propane demand growing 90 million gallons by 2030,” Petersen said. “In addition to the continued conversion of [fuel oil] customers to propane, the popularity of tankless water heating is expected to boost the commercial sector.”
Next, councilors had a presentation from Rinnai COO Frank Windsor. In his introduction of Rinnai, based in Nagoya, Japan, Windsor shared the company vision: Enhancing lives by changing the way water is heated.
“Tankless share continues to grow,” Windsor said, noting that propane models make up a significant share of Rinnai’s water heater sales. He said the areas of focus that will drive Rinnai growth are residential replacement; new single-family and multi-family construction; commercial applications; valued engineered applications; emergency replacement; and energy segment.
“Propane and hot water are a perfect match,” said Tucker Perkins, PERC president and CEO, highlighting partnerships with companies like Rinnai as crucial to success for the propane industry. He outlined plans for a summit for builders and virtual webinars for HVAC professionals and plumbers. In addition, Perkins gave an update on the overall digital transformation at PERC, saying the new propane.com will be ready for the launch of the Propane Can Do That campaign in January. While the campaign will have multiple digital engagement metrics, a key metric will be driving prospective consumers to find a propane retailer through the new Where to Buy feature leveraging Google My Business. (For more details on Perkins’ thoughts on 2019 priorities, see BPN, Dec. 2018, p. 23.)
Presentations were given and discussed regarding many dockets for 2019. The following dockets were presented and approved: Docket 21769: National Builder Incentive Program, $1.2 million; Docket 21768: 2019 Agriculture Outreach, $950,000; Docket 21765: 2019 Autogas Market Outreach, $1.2 million; Docket 21763: 2019 Material Handling Market Outreach Program, $980,000; Docket 21764: 2019 Outdoor Power Equipment Market Outreach, $1.2 million; Docket 21770: 2019 Residential & Commercial Market Outreach, $2.82 million; Docket 21663: Residential Gas Heat Pump Water Heater, $200,000; Docket 21761: Briggs & Stratton/PPS Propane EFI Engine Development Program, $90,000; Docket 21670: 2019 Mower Incentive Program, $375,000; Docket 21752: John Deere Gator TX Propane Development (Phase 2), $90,000; Docket 21740: 2019 Workforce Recruitment Pilot, $500,000; Docket 21792: North Carolina Training and Education Center, $250,000; Docket 21723: 2019 Industry Engagement, $505,500; and Docket 21725: 2019 Partnership with States, $1 million.
The Council will meet next on Feb. 13 via conference call. —Pat Thornton
On the first day of the two-day meeting, councilors heard from Ashley Petersen of Stratas Advisors, an advisory and consulting firm, who shared a wide range of data on market trends and how they will likely affect propane demand levels in the future. In a look at details regarding the residential sector, it was noted that younger home buyers are postponing home purchases. “Millennials have a homeownership rate of 37% versus 45% for Gen Xers at the same age,” Petersen said.
“The likely best target for residential propane demand is the age 53 to 62 buyer,” Petersen explained. “In this group, 39% rank heating and cooling costs as ‘very important,’ the highest rate nationally. Of this age group, 15% buy homes in rural areas, the highest rate nationally.” She noted the expected tenure in the home is 20 years, again the highest rate; and the median home purchase price at $249,200 is the second-highest nationally. “Also, 18% purchased a new home rather than previously owned, the second-highest nationally,” she said. “Older homeowners will account for two-thirds of spending growth and discretionary projects are expected to be the main driver of growth.”
The natural gas share of residential space heating will continue to expand through 2030, although shifting price differentials are expected to slow the pace of growth after 2024. Propane’s market share loss is expected to be slowed by favorable pricing differentials. Stratas Advisors reported that propane competes well against other fuels in today’s market for a variety of reasons, including:
• Environmental friendliness — It qualifies for state credits and can function as a selling point for large companies seeking to manage their environmental impact.
• Aligns with consumer trends — Organic food sales are growing nearly six times faster than the overall food market and outdoor living is popular among millennials.
It was noted that challenges do persist. “Efficiency gains and urbanization will be a headwind for growth in the residential sector,” Petersen said. “It is expected that an overall market decline of 3.2% will occur as advances in efficiency will outpace growth in users.” The consulting firm recommended taking advantage of sector level trends to reduce overall decline in volumes.
In the commercial sector, energy demand is linked to both GDP and heating degree days. “Propane is expected to keep pace with propane demand growing 90 million gallons by 2030,” Petersen said. “In addition to the continued conversion of [fuel oil] customers to propane, the popularity of tankless water heating is expected to boost the commercial sector.”
Next, councilors had a presentation from Rinnai COO Frank Windsor. In his introduction of Rinnai, based in Nagoya, Japan, Windsor shared the company vision: Enhancing lives by changing the way water is heated.
“Tankless share continues to grow,” Windsor said, noting that propane models make up a significant share of Rinnai’s water heater sales. He said the areas of focus that will drive Rinnai growth are residential replacement; new single-family and multi-family construction; commercial applications; valued engineered applications; emergency replacement; and energy segment.
“Propane and hot water are a perfect match,” said Tucker Perkins, PERC president and CEO, highlighting partnerships with companies like Rinnai as crucial to success for the propane industry. He outlined plans for a summit for builders and virtual webinars for HVAC professionals and plumbers. In addition, Perkins gave an update on the overall digital transformation at PERC, saying the new propane.com will be ready for the launch of the Propane Can Do That campaign in January. While the campaign will have multiple digital engagement metrics, a key metric will be driving prospective consumers to find a propane retailer through the new Where to Buy feature leveraging Google My Business. (For more details on Perkins’ thoughts on 2019 priorities, see BPN, Dec. 2018, p. 23.)
Presentations were given and discussed regarding many dockets for 2019. The following dockets were presented and approved: Docket 21769: National Builder Incentive Program, $1.2 million; Docket 21768: 2019 Agriculture Outreach, $950,000; Docket 21765: 2019 Autogas Market Outreach, $1.2 million; Docket 21763: 2019 Material Handling Market Outreach Program, $980,000; Docket 21764: 2019 Outdoor Power Equipment Market Outreach, $1.2 million; Docket 21770: 2019 Residential & Commercial Market Outreach, $2.82 million; Docket 21663: Residential Gas Heat Pump Water Heater, $200,000; Docket 21761: Briggs & Stratton/PPS Propane EFI Engine Development Program, $90,000; Docket 21670: 2019 Mower Incentive Program, $375,000; Docket 21752: John Deere Gator TX Propane Development (Phase 2), $90,000; Docket 21740: 2019 Workforce Recruitment Pilot, $500,000; Docket 21792: North Carolina Training and Education Center, $250,000; Docket 21723: 2019 Industry Engagement, $505,500; and Docket 21725: 2019 Partnership with States, $1 million.
The Council will meet next on Feb. 13 via conference call. —Pat Thornton
