We have a dilemma in our area.  Much of our competition is the local utilities, government programs and non-profit organizations.  We have tried to align ourselves to be part of their programs where possible but they offer services for free that we absolutly cannot do.  Services like duct testing which can have a relatively high profit margin - they are doing for free?  We are hoping their funding dries up soon but given the current politics we cannot hold our breathe waiting for that to happen!  How to compete or partner up? We have done the free audits with the intent of upselling but that has been a bust.  Trying now to offer low cost audits but with virtually no success... Has anyone been up against this and found solutions?

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No one works for free, not even utility personnel.  The work they do is heavily subsidized, ultimately, by the rate payers.  Around here, they talk about $35 audits because that's what the utility charges the customer.  That drove me nuts for a while until I started doing audits for the utility.  Believe me, they pay me more than $35 for an "audit". ( Not an extremely thorough audit, but it does have some value.)  Make sure that in every conversation about "free" audits you drive home the point that they are not free - they are subsidized - by YOU - the rate payer.  And see if you can get some work from the utility doing their audits.  You will give the customer a better product than the utility guy with no training.
You are right, there are no free audits (unless you are"income qualified" - i.e. some organization or govt agency pays your bills).  Those "free audits" given by the utilities are not actual testing type, only script based recommendations.  Our local utilities contract with local BPI certified auditors to do actual audits for their customers.  The customer pays markret price and gets a rebate from the utility.  Almost all the companies on their lists are also in the HVAC, insulation or fuel oil/propane business and use their access to utility customers as a way to market their services. I am purely an energy efficiency consultant, we do not sell or install products.  On one of the local utiliy sites it seems I am the only independent energy auditing company and I have done about 1/3 of all the audits (+/- 250) reported in the past 10 months.  It appears a lot of people do want an honest evaluation.  We are also diversified into all the local programs.  We do the local home builders shows, remodeling shows, Green building shows - anything to get out in front of the public and talk about energy efficiency.  Often there are all those "free audits" people there, along with those "amazing new energy saving products developed by NASA and used in space",  or some other wonder product.  You just have to tell the truth, some get it, some  get taken for a ride looking for a "good deal".  We stay busy and get word of mouth advertizing.  You have to get out and talk to people if you want to make a living in this business.

Kent;

I started performing home energy audits one year ago at the utility I work for.  Prior to that our utility did not offer audits, even though the natural gas provider in our town does.  The gas provider does "free" audits through a third-party contractor whose personnel are very qualified, but their free audit does not include thermography or blower door testing.

 

When we decided to begin offering audits, we decided that we would NOT offer them for free, and that we would use thermography and blower door testing to do a more complete assessment.  Under our model, we charge the customer $100 for the audit, but we give them the opportunity to receive a refund of that fee IF they take actions on the recommendations in the audit report.  We only performed around 30 audits last year (year 1), but about 2/3rds of the customers actually implemented the recommendations and receive a refund of the audit fee.

 

The reason many utilities offer "free" or reduced cost audits is because they are an effective way to identify energy savings, and almost all utilities are under mandates to use energy efficiency to reduce consumption.  Obviously doing an audit does not mean any energy savings...that only comes from homeowner action.  That's why we charge for them, but dangle the "carrot" of a refund.

 

In our case, we tried to identify a certified home energy professional or firm that could perform the audits on our behalf (for pay, of course), but there weren't any that were interested, so we decided to do it ourselves.

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