Lessons From the Green Gold Rush
In the fall of 1978, with the pain of the energy crisis still fresh, mechanical engineer John Marran sat in gnarled traffic on New York's Long Island Expressway and experienced what his family calls "the epiphany." His brother Bill, who ran the family's heating-oil business, had been tracking how homes of similar size, construction and number of inhabitants consumed vastly different quantities of fuel. The difference: the heating equipment.
"Everyone says their equipment is best," Bill had told John. "But it's not true." Then he issued a challenge to his brother: "I bet if you put your mind to it, you could come up with something better."
And so as the two-hour drive stretched out, the 44-year-old John mentally sketched a boiler where the burner's flame would fire inside a spiral-shaped heat exchanger. Such a design, he envisioned, would allow for a more efficient transfer of heat to the water, which then circulated through a home's baseboards or radiators to provide warmth. Not only would the unit itself be smaller, consuming less materials, but it would also require less water and use less fuel.
By the time Mr. Marran arrived home in New Jersey, he was so excited, he turned around at 4 a.m. and drove back to Long Island where he created a prototype in the Marran Oil yard, coiling pieces of steel around the hose reel of a delivery truck.
"Engineers hate waste," says John Marran's widow, Lorraine Marran, whose husband died in 2007. "He wanted to use resources more wisely."
Today the epiphany has morphed into the backbone of Energy Kinetics Inc., a Lebanon, N.J., company with $20 million-plus in annual sales. The company's core product is a yellow boiler dubbed the System 2000, based on John Marran's highway vision. Mr. Marran's 43-year-old son, Roger Marran, also a mechanical engineer, is now at the company's helm. The unit qualifies for the federal government's Energy Star efficiency stamp. And more design tweaks, including a high-performance domestic hot-water tank system and a digital "brain" that squeezes additional energy from the boiler, have earned the System 2000 a cult following in the Northeast and mid-Atlantic.
"In my opinion it is the most proven and energy-efficient oil-fired boiler on the market," says Joseph Malcarne, founder of Malcarne Contracting Inc. in Rheinbeck, N.Y., certified by the U.S. Green Building Council.
Energy Kinetics also stands out for surviving more than 30 years in the so-called green space, a still ill-defined marketplace littered with failed small businesses that fell victim to fluctuating energy prices, erratic government incentive programs and, especially lately, the country's shifting mood on climate change. The green marketplace took off in the 2000s, as entrepreneurs saw the niche as one filled with money and promise. Market-research firm Mintel International Group Ltd. estimates that the green economy grew 41% to annual sales of $722 billion in current dollars between 2004 and 2009. Mintel predicts it will grow 28% more by 2014.
Still, the dangers and challenges Energy Kinetics has faced are probably here to stay. And the many entrepreneurs now flocking to this market, from grocers to building-supply makers, would do well to look at some of the principles that have gotten the company this far.
Don't Be Too Green
Perhaps the most important lesson is, "You cannot be tied to a single 'green' message," says Scott Edward Anderson, founder of Philadelphia-based clean-tech consultants VerdeStrategy and blogger of thegreenskeptic.com. "I've seen a lot of companies and projects in alternative energy—solar, wind—just evaporate when oil prices dropped."
Indeed, a key to Energy Kinetics' longevity is that helping the environment was never its rallying cry. When oil prices were high, says Roger Marran, the System 2000 was promoted as a way to trim energy bills. In the mid-1980s, when fuel prices fell, the company emphasized comfort: The boiler's extra insulation meant the unit was "quiet" while other efficiencies translated into "longer showers." A sticker reading "Hand crafted by Americans for American homes" is affixed on each unit, which helped sales spike after Sept. 11, 2001, even when energy was cheap.
It's a dance familiar to other green pioneers. "We've engaged in constant reinvention," says Maria Rodale, chief executive of Rodale Inc. in Emmaus, Pa., and author of "Organic Manifesto." During the 1970s, the company's Organic Gardening magazine ran articles on wood stoves and living off the grid. In the '80s, it became a glossy with celebrities on the cover. Says Ms. Rodale: "You have to be true to your mission, and then just change your method for accomplishing the mission."
Avoid Incentive Traps
Another challenge: government programs to juice green sales. Such incentives can be a blessing and a curse. A 1980 grant from the Energy Department helped Energy Kinetics make an advanced prototype boiler. Occasional state and federal rebate programs have provided short-term boosts since. But Mr. Marran says his family is leery of such aid. "If something can't pay for itself without some external stimulus, you need better technology," he says.
Mr. Anderson adds: "I've seen how reliance on government subsidies can make you feel more secure, but at the same time you aren't as scrappy and reliant on your own ingenuity as you might be."
Case in point: Last year, Energy Kinetics was excluded from a two-year federal tax credit for consumers who buy certain efficient heating equipment. To decide which equipment qualified, the government used a standard called Annual Fuel Utilization Efficiency, or AFUE, which dates from the 1980s and doesn't take into account key design factors in the System 2000, Mr. Marran says. The digital "brain," for example, keeps hot water circulating and heat distributing to the house and hot-water tank even after the boiler stops firing.
To stay competitive, the firm communicated even more with its dealers—typically plumbers and local sellers of heating equipment or fuel. It launched Webinars on talking to customers about the tax credit. Among the talking points: AFUE's failure to recognize System 2000 benefits, and the foreign pedigrees of many boilers that qualified.
Stay Close
It helped that the company had been nurturing its dealer ties for years. Many installers trek to its headquarters for annual classes, and Energy Kinetics technicians hit the road to assist those in far-flung territories. Some elements of System 2000's design—such as a compact, stackable model—came from dealer suggestions.
"I don't know anyone who does the kind of training they do," says Mr. Malcarne, the contractor. And it has paid off. After several years of record sales, Mr. Marran says, Energy Kinetics saw only a "moderate" slide in 2009 despite the recession and the tax-credit disadvantage. Sales in 2009 still outpaced 2007 sales, he says.
Don't Stand Still
Looking forward, Energy Kinetics is taking pains to incorporate new technology. It sells solar hot-water equipment with the System 2000. Mr. Marran also is ensuring the System 2000 can fire with biofuels as they become more common.
"In the next decade, we are going to see a mash-up of energy, building and vehicle technology that will transform how we do things as much as the Internet has," says Joel Makower, chairman of Greener World Media Inc., an Oakland, Calif., media company that covers sustainability issues.
Says Mr. Makower: "People will want to make the green choice if it comes from a brand they know and trust, if it works just like the one they already know works, if it's priced ideally and if it has some other benefit besides being green."
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